Volkswagen Group consists of the automobile division and the financial services division. The automobile division is the one for which Volkswagen is known for. The VW group comprises of Volkswagen, Audi, Skoda, Bentley, Bugatti, SEAT, Scania and Lamborghini forming a glorious portfolio. The thing that mostly impresses me is that the company strives very hard to do justice to their name “Volkswagen” meaning people’s car. Volkswagen believes in excellence and manufactures high quality products (car) for consumers. Their philosophy has always been that there should be an overall development of the company as well as an individual. Volkswagen (VW) has developed a strategy of becoming the world’s leading car maker. VW calls it ‘strategy for 2018’ which strongly puts emphases on increasing their market share. In words their goal is very simple but to turn it into reality will take strong dedication and systematic planning and strategizing.
Volkswagen has been able to formulate such a futuristic strategy based on their past success.
Volkswagen knew that to capture the world market they needed to change their focus from the markets of North America and Europe towards markets where there was growth potential. They targeted Latin America, China and India. Firstly VW entered the Latin American and the Chinese markets in around 1980’s because of favourable and liberal laws. Soon VW established a strong hold in Latin America and China. Volkswagen started local production of cars in China due their Open-Gate policy. VW entered China by establishing joint venture with Shanghai Automotive Industry Corporation and other with First Automobile Works.
Then later in 2001 VW entered the Indian market by introducing Skoda. Soon they found growth opportunity and they introduced their other brands like Audi and Volkswagen in the market. Just within few years VW after their entry found that there is an increase in number of imports of their luxury cars like Audi, Bentley and Bugatti. So now they needed to formulate strategies which will cater to both luxury car market as well as entry-level market. VW faced many difficulties in developing their markets like service which was the main reason many customers were refraining from buying the car, other problems was not many dealers, competition from already established car companies, one of the major problems was market segmentation and also understanding the taste and requirements of Indian consumers.
The first step was to start the production/manufacturing of the cars within India because previously the cars were imported which added to the cost of the car. Volkswagen setup a plant in Chakan near Pune. Volkswagen knew that to sustain growth and develop brand loyalty they need a well-connected dealer network. So, Volkswagen also opened many dealerships and showrooms in different part of India to solve the problem of after sale service.
Soon, VW introduced many new cars under different brand name in the Indian market. This raised a new problem for the company i.e. product differentiation. Volkswagen group under its different names launched cars having the same features and almost identical pricing thus creating a problem. For example, Audi A4, VW Passat and Skoda Superb having a same price range above rs25lakhs (approx. $48077) but the flip side of this product range is that it caters to the increasing demand for cars. The different cars of same price range can act as a replacement of the one currently not available. Since the Indian buyer buys VW cars to be able to enjoy luxury without being to flashy.
The company now had cars available to customers in every range and thus started serving customer needs better but more the products more is the competition. In every type of car (model), VW faced competition in both entry level as well as luxury end. So to deal with the situation, VW bifurcated…