Shanghai Volkswagen: Time for a Radical Shift of Gears SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Shanghai Volkswagen: Time for a Radical Shift of Gears
At the dawn of the 20th anniversary of its involvement in China's passenger car industry, Shanghai Volkswagen (SVW) found itself caught in changed external and internal environments, with factors critical to its past success gone or quickly diminishing. Although taking first-mover risks has rewarded Volkswagen with a dominant market position and high profitability, such dominance and profitability might not be sustained in the long run as the competitive landscape transforms. The test is whether SVW can quickly adapt to the new environment and establish a new set of competitive advantages that positions it favorably against its rivals.
Authors :: Ali Farhoomand, Zhigang Tao, Irene Wang, Lu Yi
Swot Analysis of "Shanghai Volkswagen: Time for a Radical Shift of Gears" written by Ali Farhoomand, Zhigang Tao, Irene Wang, Lu Yi includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Svw Volkswagen facing as an external strategic factors. Some of the topics covered in Shanghai Volkswagen: Time for a Radical Shift of Gears case study are - Strategic Management Strategies, Competition, Emerging markets, Growth strategy, Joint ventures and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Shanghai Volkswagen: Time for a Radical Shift of Gears casestudy better are - – supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, wage bills are increasing, geopolitical disruptions, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing transportation and logistics costs, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Shanghai Volkswagen: Time for a Radical Shift of Gears
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Shanghai Volkswagen: Time for a Radical Shift of Gears case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Svw Volkswagen, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Svw 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 Shanghai Volkswagen: Time for a Radical Shift of Gears can be done for the following purposes –
1. Strategic planning using facts provided in Shanghai Volkswagen: Time for a Radical Shift of Gears case study
2. Improving business portfolio management of Svw 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 Svw Volkswagen
Strengths Shanghai Volkswagen: Time for a Radical Shift of Gears | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Svw Volkswagen in Shanghai Volkswagen: Time for a Radical Shift of Gears Harvard Business Review case study are -
Learning organization
- Svw 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 Svw Volkswagen is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Shanghai Volkswagen: Time for a Radical Shift of Gears Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Svw 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 Shanghai Volkswagen: Time for a Radical Shift of Gears - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Svw Volkswagen
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Svw Volkswagen does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Svw 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 Shanghai Volkswagen: Time for a Radical Shift of Gears HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Svw Volkswagen is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Ali Farhoomand, Zhigang Tao, Irene Wang, Lu Yi can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy in the Shanghai Volkswagen: Time for a Radical Shift of Gears Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– Svw Volkswagen is one of the most innovative firm in sector. Manager in Shanghai Volkswagen: Time for a Radical Shift of Gears Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Svw Volkswagen has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Svw 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.
Low bargaining power of suppliers
– Suppliers of Svw Volkswagen in the sector have low bargaining power. Shanghai Volkswagen: Time for a Radical Shift of Gears has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Svw Volkswagen to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Svw 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 lead change in Strategy & Execution field
– Svw 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 Svw Volkswagen in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Svw Volkswagen has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Shanghai Volkswagen: Time for a Radical Shift of Gears 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.
Weaknesses Shanghai Volkswagen: Time for a Radical Shift of Gears | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shanghai Volkswagen: Time for a Radical Shift of Gears are -
Low market penetration in new markets
– Outside its home market of Svw Volkswagen, firm in the HBR case study Shanghai Volkswagen: Time for a Radical Shift of Gears needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Svw Volkswagen products
– To increase the profitability and margins on the products, Svw Volkswagen needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Svw 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. Svw 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Shanghai Volkswagen: Time for a Radical Shift of Gears, in the dynamic environment Svw Volkswagen has struggled to respond to the nimble upstart competition. Svw Volkswagen has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Svw Volkswagen supply chain. Even after few cautionary changes mentioned in the HBR case study - Shanghai Volkswagen: Time for a Radical Shift of Gears, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Svw Volkswagen vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Svw 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Ali Farhoomand, Zhigang Tao, Irene Wang, Lu Yi suggests that, Svw Volkswagen is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Shanghai Volkswagen: Time for a Radical Shift of Gears, is just above the industry average. Svw 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.
High cash cycle compare to competitors
Svw Volkswagen has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Svw Volkswagen is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Shanghai Volkswagen: Time for a Radical Shift of Gears 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 Shanghai Volkswagen: Time for a Radical Shift of Gears, 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.
Opportunities Shanghai Volkswagen: Time for a Radical Shift of Gears | 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 Shanghai Volkswagen: Time for a Radical Shift of Gears are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Svw Volkswagen can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Shanghai Volkswagen: Time for a Radical Shift of Gears, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Svw Volkswagen can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Shanghai Volkswagen: Time for a Radical Shift of Gears suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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. Svw 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. Svw 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.
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 Svw Volkswagen in the consumer business. Now Svw Volkswagen can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Svw 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Svw Volkswagen is facing challenges because of the dominance of functional experts in the organization. Shanghai Volkswagen: Time for a Radical Shift of Gears 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.
Better consumer reach
– The expansion of the 5G network will help Svw Volkswagen to increase its market reach. Svw 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Svw Volkswagen can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Svw 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.
Manufacturing automation
– Svw 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.
Using analytics as competitive advantage
– Svw 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 Shanghai Volkswagen: Time for a Radical Shift of Gears - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Svw 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
– Svw 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.
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 Svw 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.
Threats Shanghai Volkswagen: Time for a Radical Shift of Gears External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Shanghai Volkswagen: Time for a Radical Shift of Gears are -
Environmental challenges
– Svw 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. Svw Volkswagen can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Svw 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 Shanghai Volkswagen: Time for a Radical Shift of Gears .
Increasing wage structure of Svw 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 Svw Volkswagen.
Regulatory challenges
– Svw 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.
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. Svw Volkswagen can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Svw Volkswagen in the Strategy & Execution sector and impact the bottomline 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 Svw 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.
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. Svw 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.
Technology acceleration in Forth Industrial Revolution
– Svw Volkswagen has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Svw 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.
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 Svw Volkswagen.
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.
Stagnating economy with rate increase
– Svw 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.
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.
Weighted SWOT Analysis of Shanghai Volkswagen: Time for a Radical Shift of Gears 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 Shanghai Volkswagen: Time for a Radical Shift of Gears 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 Shanghai Volkswagen: Time for a Radical Shift of Gears 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 Shanghai Volkswagen: Time for a Radical Shift of Gears 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 Shanghai Volkswagen: Time for a Radical Shift of Gears 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 Svw Volkswagen needs to make to build a sustainable competitive advantage.