FACULTY OF BUSINESS
GRADUATE SCHOOL OF BUSINESS
SCHOOL OF MANAGEMENT
Written Case Analysis
Case 8 Netflix versus Blockbuster versus Video-on-Demand
Completed as part of the requirements for Strategic Management (21715) Contents
Executive Summary p. 3
Introduction p. 4
Volkswagen AG Pre-1993p. 4
Issues facing the auto industry and Volkswagen AG in the 1990’sp. 5
Financial performance between 1993 and 2001p. 6
Labour policiesp. 7
Recommendations p. 9
With the autocratic management style of Ferdinand Piëch, VW was able to expand and grow during a time when there were increasing cost pressures on automakers world wide. Innovations in the manufacturing process through integration and redesign of the value chain helped VW group reduce set up costs, manufacturing costs and labour costs while significantly reducing development times and costs of new models. Although Piëch was basically a one man band having control of the R & D, Quality, Production and Purchasing departments, his direction has left the incoming CEO with a solid base to further develop and grow the VW group. His vision and drive have placed VW in the position of number one automaker in Europe with market share well ahead of the nearest competitor. He has also globalised the brand with construction of plants in Asia, South America and Eastern Europe. These strategies have helped reduce labour costs at home and develop a more flexible work force. In purchasing high profile, luxury brand car makers in Lamborghini, Bugatti and Bentley and turning around the fortunes of the lower end models in the group, Piëch has created a brand that is able to position itself in most markets and defend its territory from competitors by having the ability to be able to change the focus to these markets as required. This has been achieved through streamlining the VW groups manufacturing processes.
Volkswagen AG is about to begin the next chapter in its long history as a leading European auto maker as CEO Ferdinand Piëch prepares to stand aside after nine years and three months in office. It is agreed that during his tenure he turned VW around and made it one of the most innovative and productive manufacturers in Europe. As the new CEO prepares to step in he will be faced with new challenges and hurdles. This paper will offer some recommendations on what Piëch’s successor should be concerned about. In achieving this the Piëch years will be reviewed with the key success factors of his tenure highlighted. Volkswagen Pre-1993
In 1993 when Dr Ferdinand Piëch was named CEO of Volkswagen Group, he stepped in to a company in dire straits. Customers were unhappy with the automakers offerings and complained about high prices. Manufacturing costs were high and processes were inefficient, the main factory in Wolfsburg, Germany, was only breaking even at utilisation rates above 100 percent and there was an estimated 30,000 surplus staff. There was stiff competition from the Japanese competitors who enjoyed a cost advantage of up to E2,500 per car in their newly built plants in the UK. In addition to these, in 1992, profits were down 85 percent (Gamble, Strickland, Thompson, 2006: p. C-429). The root cause of Volkswagen’s problems can be traced back to a number of factors. Firstly, consumers at the time were increasingly influential on the market. They were ‘increasingly looking for innovation in products and processes. Customers were increasingly looking for lifestyle/niche models’ (Gamble, et. Al: p. C-430). From my analysis of this situation, it would seem that Volkswagen were out of touch with consumers. They were happy to continue with production of their successful Polo and Golf models and were not producing automobiles that...