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 - – increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, there is backlash against globalization,
banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, 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 -
Sustainable margins compare to other players in Strategy & Execution industry
– Shanghai Volkswagen: Time for a Radical Shift of Gears firm has clearly differentiated products in the market place. This has enabled Svw Volkswagen to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Svw Volkswagen to invest into research and development (R&D) and innovation.
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.
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Svw Volkswagen in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Svw Volkswagen digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Svw 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.
High brand equity
– Svw Volkswagen has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Svw Volkswagen to keep acquiring new customers and building profitable relationship with both the new and loyal 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.
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.
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 -
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 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.
Aligning sales with marketing
– It come across in the case study Shanghai Volkswagen: Time for a Radical Shift of Gears 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 Shanghai Volkswagen: Time for a Radical Shift of Gears can leverage the sales team experience to cultivate customer relationships as Svw Volkswagen is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Shanghai Volkswagen: Time for a Radical Shift of Gears HBR case study mentions - Svw 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.
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.
Products dominated business model
– Even though Svw 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 - Shanghai Volkswagen: Time for a Radical Shift of Gears should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Svw Volkswagen is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Svw Volkswagen needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Svw Volkswagen to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Shanghai Volkswagen: Time for a Radical Shift of Gears 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 Svw Volkswagen 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Svw 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.
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.
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 -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Svw 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 Svw Volkswagen to hire the very best people irrespective of their geographical location.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Svw 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.
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.
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.
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.
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.
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.
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.
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.
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. Svw Volkswagen can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Svw Volkswagen with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Shanghai Volkswagen: Time for a Radical Shift of Gears, Svw 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 .
Consumer confidence and its impact on Svw 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.
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.
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. Svw Volkswagen needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
High dependence on third party suppliers
– Svw 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.
Shortening product life cycle
– it is one of the major threat that Svw Volkswagen is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Svw Volkswagen business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.