Case Study Description of Volkswagen's Clean Diesel Dilemma
Martin Winterkorn, CEO of Volkswagen Group, has just been notified that the U.S. Environmental Protection Agency and California Air Resource Board will begin investigating claims that some of the company's diesel engine vehicles have violated emissions standards. It seems that workers installed defeat devices on the vehicles, allowing them to pass emissions tests and meet the tough standards of the U.S. market. The questions students will need to answer are: Who is responsible? And Does Volkswagen take sustainability seriously or has it just been green-washing all along?
Swot Analysis of "Volkswagen's Clean Diesel Dilemma" written by Andrew Hoffman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Diesel Volkswagen facing as an external strategic factors. Some of the topics covered in Volkswagen's Clean Diesel Dilemma case study are - Strategic Management Strategies, Social responsibility and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Volkswagen's Clean Diesel Dilemma casestudy better are - – increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , technology disruption, increasing household debt because of falling income levels, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion,
talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Volkswagen's Clean Diesel Dilemma
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Volkswagen's Clean Diesel Dilemma case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Diesel Volkswagen, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Diesel Volkswagen operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Volkswagen's Clean Diesel Dilemma can be done for the following purposes –
1. Strategic planning using facts provided in Volkswagen's Clean Diesel Dilemma case study
2. Improving business portfolio management of Diesel Volkswagen
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Diesel Volkswagen
Strengths Volkswagen's Clean Diesel Dilemma | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Diesel Volkswagen in Volkswagen's Clean Diesel Dilemma Harvard Business Review case study are -
Successful track record of launching new products
– Diesel Volkswagen has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Diesel Volkswagen has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Diesel Volkswagen is present in almost all the verticals within the industry. This has provided firm in Volkswagen's Clean Diesel Dilemma case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Diesel Volkswagen has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Diesel Volkswagen to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Diesel Volkswagen are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to recruit top talent
– Diesel Volkswagen is one of the leading recruiters in the industry. Managers in the Volkswagen's Clean Diesel Dilemma are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Diesel Volkswagen has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Volkswagen's Clean Diesel Dilemma HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Diesel Volkswagen has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Volkswagen's Clean Diesel Dilemma Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of Diesel Volkswagen in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Diesel Volkswagen digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Diesel Volkswagen has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Innovation driven organization
– Diesel Volkswagen is one of the most innovative firm in sector. Manager in Volkswagen's Clean Diesel Dilemma Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Strategy & Execution field
– Diesel Volkswagen is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Diesel Volkswagen in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Diesel Volkswagen is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Diesel Volkswagen is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Volkswagen's Clean Diesel Dilemma Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Volkswagen's Clean Diesel Dilemma | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Volkswagen's Clean Diesel Dilemma are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Diesel Volkswagen is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Volkswagen's Clean Diesel Dilemma can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study Volkswagen's Clean Diesel Dilemma, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Aligning sales with marketing
– It come across in the case study Volkswagen's Clean Diesel Dilemma that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Volkswagen's Clean Diesel Dilemma can leverage the sales team experience to cultivate customer relationships as Diesel Volkswagen is planning to shift buying processes online.
High operating costs
– Compare to the competitors, firm in the HBR case study Volkswagen's Clean Diesel Dilemma has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Diesel Volkswagen 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Diesel Volkswagen, firm in the HBR case study Volkswagen's Clean Diesel Dilemma needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Diesel Volkswagen has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Diesel Volkswagen even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Volkswagen's Clean Diesel Dilemma, it seems that the employees of Diesel Volkswagen don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Capital Spending Reduction
– Even during the low interest decade, Diesel Volkswagen has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Workers concerns about automation
– As automation is fast increasing in the segment, Diesel Volkswagen needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Volkswagen's Clean Diesel Dilemma HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Diesel Volkswagen has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Diesel Volkswagen is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Diesel Volkswagen needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Diesel Volkswagen to focus more on services rather than just following the product oriented approach.
Opportunities Volkswagen's Clean Diesel Dilemma | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Volkswagen's Clean Diesel Dilemma are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Diesel Volkswagen can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Diesel Volkswagen can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Developing new processes and practices
– Diesel Volkswagen can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Diesel Volkswagen to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Loyalty marketing
– Diesel Volkswagen has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– Diesel Volkswagen can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Diesel Volkswagen can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Manufacturing automation
– Diesel Volkswagen can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Diesel Volkswagen is facing challenges because of the dominance of functional experts in the organization. Volkswagen's Clean Diesel Dilemma case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Diesel Volkswagen can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Diesel Volkswagen has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Volkswagen's Clean Diesel Dilemma - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Diesel Volkswagen to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Diesel Volkswagen can use these opportunities to build new business models that can help the communities that Diesel Volkswagen operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Creating value in data economy
– The success of analytics program of Diesel Volkswagen has opened avenues for new revenue streams for the organization in the industry. This can help Diesel Volkswagen to build a more holistic ecosystem as suggested in the Volkswagen's Clean Diesel Dilemma case study. Diesel Volkswagen can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Volkswagen's Clean Diesel Dilemma External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Volkswagen's Clean Diesel Dilemma are -
Regulatory challenges
– Diesel Volkswagen needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Diesel Volkswagen with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Diesel Volkswagen is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Diesel Volkswagen can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Volkswagen's Clean Diesel Dilemma .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Diesel Volkswagen.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Diesel Volkswagen in the Strategy & Execution sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Diesel Volkswagen can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing wage structure of Diesel Volkswagen
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Diesel Volkswagen.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Diesel Volkswagen will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Consumer confidence and its impact on Diesel Volkswagen demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Diesel Volkswagen has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Diesel Volkswagen needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Diesel Volkswagen in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Volkswagen's Clean Diesel Dilemma Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Volkswagen's Clean Diesel Dilemma needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Volkswagen's Clean Diesel Dilemma is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Volkswagen's Clean Diesel Dilemma is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Volkswagen's Clean Diesel Dilemma is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Diesel Volkswagen needs to make to build a sustainable competitive advantage.
