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 - – cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
wage bills are increasing, geopolitical disruptions, 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 -
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.
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.
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.
High switching costs
– The high switching costs that Diesel Volkswagen has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
Low bargaining power of suppliers
– Suppliers of Diesel Volkswagen in the sector have low bargaining power. Volkswagen's Clean Diesel Dilemma has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Diesel Volkswagen to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
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.
Effective Research and Development (R&D)
– Diesel Volkswagen has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Volkswagen's Clean Diesel Dilemma - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 -
Need for greater diversity
– Diesel Volkswagen has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Volkswagen's Clean Diesel Dilemma, is just above the industry average. Diesel Volkswagen needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
Interest costs
– Compare to the competition, Diesel Volkswagen has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of Diesel Volkswagen products
– To increase the profitability and margins on the products, Diesel Volkswagen needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Products dominated business model
– Even though Diesel Volkswagen has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Volkswagen's Clean Diesel Dilemma should strive to include more intangible value offerings along with its core products and services.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Diesel Volkswagen supply chain. Even after few cautionary changes mentioned in the HBR case study - Volkswagen's Clean Diesel Dilemma, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Diesel Volkswagen vulnerable to further global disruptions in South East Asia.
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.
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.
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 -
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Diesel Volkswagen in the consumer business. Now Diesel Volkswagen can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Diesel Volkswagen to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Diesel Volkswagen to hire the very best people irrespective of their geographical location.
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.
Better consumer reach
– The expansion of the 5G network will help Diesel Volkswagen to increase its market reach. Diesel Volkswagen will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Diesel Volkswagen can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Diesel Volkswagen can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Diesel Volkswagen can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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 -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Diesel Volkswagen business can come under increasing regulations regarding data privacy, data security, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Volkswagen's Clean Diesel Dilemma, Diesel Volkswagen may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Diesel Volkswagen can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 .
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.
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.
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.
High dependence on third party suppliers
– Diesel Volkswagen high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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.