Volkswagen de Mexico's North American Strategy (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study SWOT Analysis Solution
Case Study Description of Volkswagen de Mexico's North American Strategy (A)
In 1988, Volkswagen (VW) consolidated its North American operations in Puebla, Mexico, after shutting down its plant in Pennsylvania. Volkswagen de Mexico had been in operation since the 1960s, but produced almost exclusively for the Mexican market. In the late 1980s, VW began to restructure the Mexican plant to supply the United States and Canada (which had been importing from Germany) and to maintain its dominance of the Mexican market. The North American Free Trade Agreement put additional pressure on VW to start sourcing in North America. The case traces the history of VW in the United States and Mexico and the company's strategy in the context of Mexican government regulations, free trade, and a weak presence in the U.S. market. Ends in August 1992, after VW had just resolved an unexpected and bitter month-long labor dispute that delayed the introduction of new cars to the United States. A rewritten version of an earlier case.
Swot Analysis of "Volkswagen de Mexico's North American Strategy (A)" written by Helen Shapiro, Gordon Hanson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Vw Mexican facing as an external strategic factors. Some of the topics covered in Volkswagen de Mexico's North American Strategy (A) case study are - Strategic Management Strategies, Global strategy, Globalization, Labor, Operations management and Global Business.
Some of the macro environment factors that can be used to understand the Volkswagen de Mexico's North American Strategy (A) casestudy better are - – challanges to central banks by blockchain based private currencies, there is backlash against globalization, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%,
increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Volkswagen de Mexico's North American Strategy (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Volkswagen de Mexico's North American Strategy (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vw Mexican, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vw Mexican 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 de Mexico's North American Strategy (A) can be done for the following purposes –
1. Strategic planning using facts provided in Volkswagen de Mexico's North American Strategy (A) case study
2. Improving business portfolio management of Vw Mexican
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Vw Mexican
Strengths Volkswagen de Mexico's North American Strategy (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Vw Mexican in Volkswagen de Mexico's North American Strategy (A) Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Volkswagen de Mexico's North American Strategy (A) 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.
Diverse revenue streams
– Vw Mexican is present in almost all the verticals within the industry. This has provided firm in Volkswagen de Mexico's North American Strategy (A) 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.
Innovation driven organization
– Vw Mexican is one of the most innovative firm in sector. Manager in Volkswagen de Mexico's North American Strategy (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Vw Mexican 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
– Vw Mexican is one of the leading recruiters in the industry. Managers in the Volkswagen de Mexico's North American Strategy (A) 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 Vw Mexican in the sector have low bargaining power. Volkswagen de Mexico's North American Strategy (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Vw Mexican to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Global Business industry
– Volkswagen de Mexico's North American Strategy (A) firm has clearly differentiated products in the market place. This has enabled Vw Mexican to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Vw Mexican to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Vw Mexican 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.
Superior customer experience
– The customer experience strategy of Vw Mexican in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Vw Mexican 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 Helen Shapiro, Gordon Hanson 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.
Strong track record of project management
– Vw Mexican is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Vw Mexican 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 Vw Mexican is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Volkswagen de Mexico's North American Strategy (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Volkswagen de Mexico's North American Strategy (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Volkswagen de Mexico's North American Strategy (A) are -
Slow to strategic competitive environment developments
– As Volkswagen de Mexico's North American Strategy (A) HBR case study mentions - Vw Mexican 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Volkswagen de Mexico's North American Strategy (A), is just above the industry average. Vw Mexican 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Vw Mexican 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.
Low market penetration in new markets
– Outside its home market of Vw Mexican, firm in the HBR case study Volkswagen de Mexico's North American Strategy (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Volkswagen de Mexico's North American Strategy (A), it seems that the employees of Vw Mexican don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Products dominated business model
– Even though Vw Mexican 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 de Mexico's North American Strategy (A) should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study Volkswagen de Mexico's North American Strategy (A) 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 de Mexico's North American Strategy (A) can leverage the sales team experience to cultivate customer relationships as Vw Mexican is planning to shift buying processes online.
High cash cycle compare to competitors
Vw Mexican 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.
Lack of clear differentiation of Vw Mexican products
– To increase the profitability and margins on the products, Vw Mexican needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Vw Mexican 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.
Skills based hiring
– The stress on hiring functional specialists at Vw Mexican 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.
Opportunities Volkswagen de Mexico's North American Strategy (A) | 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 de Mexico's North American Strategy (A) are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Vw Mexican 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 Vw Mexican to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Vw Mexican can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Vw Mexican to increase its market reach. Vw Mexican 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Vw Mexican can use these opportunities to build new business models that can help the communities that Vw Mexican operates in. Secondly it can use opportunities from government spending in Global Business sector.
Learning at scale
– Online learning technologies has now opened space for Vw Mexican 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Vw Mexican can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Vw Mexican 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.
Buying journey improvements
– Vw Mexican can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Volkswagen de Mexico's North American Strategy (A) 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.
Manufacturing automation
– Vw Mexican can use the latest technology developments to improve its manufacturing and designing process in Global Business 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 Vw Mexican in the consumer business. Now Vw Mexican can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Vw Mexican can develop new processes and procedures in Global Business 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.
Creating value in data economy
– The success of analytics program of Vw Mexican has opened avenues for new revenue streams for the organization in the industry. This can help Vw Mexican to build a more holistic ecosystem as suggested in the Volkswagen de Mexico's North American Strategy (A) case study. Vw Mexican can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Vw Mexican 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.
Threats Volkswagen de Mexico's North American Strategy (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Volkswagen de Mexico's North American Strategy (A) are -
Regulatory challenges
– Vw Mexican 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 Global Business industry regulations.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Vw Mexican can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Vw Mexican in the Global Business industry. The Global Business 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Vw Mexican 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 de Mexico's North American Strategy (A) .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Vw Mexican with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Vw Mexican needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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 Vw Mexican.
Increasing wage structure of Vw Mexican
– 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 Vw Mexican.
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 Vw Mexican in the Global Business sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Vw Mexican 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.
Shortening product life cycle
– it is one of the major threat that Vw Mexican is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Vw Mexican 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.
Weighted SWOT Analysis of Volkswagen de Mexico's North American Strategy (A) 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 de Mexico's North American Strategy (A) 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 de Mexico's North American Strategy (A) 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 de Mexico's North American Strategy (A) 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 de Mexico's North American Strategy (A) 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 Vw Mexican needs to make to build a sustainable competitive advantage.
