Volkswagen Strategic Shift Analysis: Mini-Case Study

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Volkswagen Strategic Shift Analysis: Mini-Case Study
Volkswagen has set a bold goal of dethroning Toyota as the world’s largest auto maker. This goal includes significantly increasing the North American market share, as Volkswagen currently holds only 2.2 percent of the United States market. Volkswagen’s strategy includes cutting prices and tailoring its cars to better fit the American lifestyle and tastes. This includes increasing the size of its vehicles and modifying certain amenities, such as increasing the cup holder size to fit the larger sized beverages which Americans are known to drink. In order to become the world’s largest auto maker by 2018, Volkswagen’s management team has set a lofty goal of selling 800,000 vehicles per year in the United States, despite economic conditions and a declining US auto market.

The Board of Directors voiced four main concerns with the strategic plan presented by the Volkswagen management team. First, The Board raised concerns with the “price-slashing” approach proposed by management, as it could send a negative message to the consumer. In order to lower cost, the company would need to lower the cost of its product. Given the fact that one of Volkswagen’s weaknesses is the quality problems it experienced in the past, The Board did not feel this was the appropriate way to improve public perception. The Board felt the quality and value of the product should be emphasized rather than reducing the price. In addition, in order to improve public perception, The Board recommended extending the Volkswagen bumper-to-bumper warranty program. Volkswagen used to provide a four-year, 50,000 mile bumper-to-bumper warranty and a five-year, 60,000 mile power-train warranty, but in 2009, the bumper-to-bumper guarantee was shortened to a three-year, 36,000 mile coverage. While this brought Volkswagen more in line with its main competitors (Honda, Toyota, Mazda, Nissan, and Ford), the Board suggested that increasing the warranty would...
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