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 - – digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, increasing commodity prices, central banks are concerned over increasing inflation,
increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
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 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.
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.
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.
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.
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.
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.
Sustainable margins compare to other players in Strategy & Execution industry
– Volkswagen's Clean Diesel Dilemma firm has clearly differentiated products in the market place. This has enabled Diesel Volkswagen to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Diesel Volkswagen to invest into research and development (R&D) and innovation.
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.
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.
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.
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 strategic competitive environment developments
– As Volkswagen's Clean Diesel Dilemma HBR case study mentions - Diesel Volkswagen takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Diesel Volkswagen has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Volkswagen's Clean Diesel Dilemma, in the dynamic environment Diesel Volkswagen has struggled to respond to the nimble upstart competition. Diesel Volkswagen has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Diesel Volkswagen in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
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.
Learning at scale
– Online learning technologies has now opened space for Diesel Volkswagen to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
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.
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 -
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.
Environmental challenges
– Diesel Volkswagen needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Diesel Volkswagen can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Diesel Volkswagen needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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.
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.
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 .
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.
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.
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.
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.
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.