Volkswagen ST (VOWG) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Manufacturers
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Volkswagen ST (Germany)
Based on various researches at Oak Spring University , Volkswagen ST is operating in a macro-environment that has been destablized by – technology disruption, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, challanges to central banks by blockchain based private currencies,
increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Volkswagen ST can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Volkswagen ST, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Volkswagen ST 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 ST can be done for the following purposes –
1. Strategic planning of Volkswagen ST
2. Improving business portfolio management of Volkswagen ST
3. Assessing feasibility of the new initiative in Germany
4. Making a Auto & Truck Manufacturers sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Volkswagen ST
Strengths of Volkswagen ST | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Volkswagen ST are -
Organizational Resilience of Volkswagen ST
– The covid-19 pandemic has put organizational resilience at the centre of everthing Volkswagen ST does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Volkswagen ST comprises – understanding the underlying the factors in the Auto & Truck Manufacturers 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.
Effective Research and Development (R&D)
– Volkswagen ST has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Volkswagen ST staying ahead in the Auto & Truck Manufacturers industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Volkswagen ST is one of the most innovative firm in Auto & Truck Manufacturers sector.
Highly skilled collaborators
– Volkswagen ST has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Auto & Truck Manufacturers industry. Secondly the value chain collaborators of Volkswagen ST have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Volkswagen ST has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Volkswagen ST 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.
Sustainable margins compare to other players in Auto & Truck Manufacturers industry
– Volkswagen ST has clearly differentiated products in the market place. This has enabled Volkswagen ST to fetch slight price premium compare to the competitors in the Auto & Truck Manufacturers industry. The sustainable margins have also helped Volkswagen ST to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Volkswagen ST in the Consumer Cyclical sector have low bargaining power. Volkswagen ST has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Volkswagen ST to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Auto & Truck Manufacturers
– Volkswagen ST is one of the leading players in the Auto & Truck Manufacturers industry in Germany. Over the years it has not only transformed the business landscape in the Auto & Truck Manufacturers industry in Germany but also across the existing markets. The ability to lead change has enabled Volkswagen ST in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Volkswagen ST is present in almost all the verticals within the Auto & Truck Manufacturers industry. This has provided Volkswagen ST 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.
Strong track record of project management in the Auto & Truck Manufacturers industry
– Volkswagen ST is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Volkswagen ST is one of the leading players in the Auto & Truck Manufacturers industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Volkswagen ST | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Volkswagen ST are -
Slow to strategic competitive environment developments
– As Volkswagen ST is one of the leading players in the Auto & Truck Manufacturers industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Auto & Truck Manufacturers industry in last five years.
Compensation and incentives
– The revenue per employee of Volkswagen ST is just above the Auto & Truck Manufacturers industry average. It 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.
Increasing silos among functional specialists
– The organizational structure of Volkswagen ST is dominated by functional specialists. It is not different from other players in the Auto & Truck Manufacturers industry, but Volkswagen ST needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Volkswagen ST to focus more on services in the Auto & Truck Manufacturers industry rather than just following the product oriented approach.
Lack of clear differentiation of Volkswagen ST products
– To increase the profitability and margins on the products, Volkswagen ST needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Volkswagen ST has high operating costs in the Auto & Truck Manufacturers industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Volkswagen ST lucrative customers.
Skills based hiring in Auto & Truck Manufacturers industry
– The stress on hiring functional specialists at Volkswagen ST 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.
Low market penetration in new markets
– Outside its home market of Germany, Volkswagen ST needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Volkswagen ST has some of the most successful models in the Auto & Truck Manufacturers industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Volkswagen ST should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– From the 10K / annual statement of Volkswagen ST, it seems that company is thinking out the frontier risks that can impact Auto & Truck Manufacturers industry. 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.
Slow decision making process
– As mentioned earlier in the report, Volkswagen ST has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Auto & Truck Manufacturers industry over the last five years. Volkswagen ST 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.
Workers concerns about automation
– As automation is fast increasing in the Auto & Truck Manufacturers industry, Volkswagen ST 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.
Volkswagen ST Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Volkswagen ST are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Volkswagen ST 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 Volkswagen ST to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Volkswagen ST can improve the customer journey of consumers in the Auto & Truck Manufacturers industry by using analytics and artificial intelligence. It 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Volkswagen ST 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Volkswagen ST 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 Volkswagen ST to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Volkswagen ST can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Volkswagen ST has opened avenues for new revenue streams for the organization in Auto & Truck Manufacturers industry. This can help Volkswagen ST to build a more holistic ecosystem for Volkswagen ST products in the Auto & Truck Manufacturers industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Volkswagen ST can use these opportunities to build new business models that can help the communities that Volkswagen ST operates in. Secondly it can use opportunities from government spending in Auto & Truck Manufacturers sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Manufacturers industry, but it has also influenced the consumer preferences. Volkswagen ST can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Volkswagen ST 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.
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. Volkswagen ST can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Volkswagen ST can develop new processes and procedures in Auto & Truck Manufacturers 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.
Building a culture of innovation
– managers at Volkswagen ST 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 Auto & Truck Manufacturers industry.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Volkswagen ST in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Auto & Truck Manufacturers industry, and it will provide faster access to the consumers.
Threats Volkswagen ST External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Volkswagen ST are -
Increasing wage structure of Volkswagen ST
– 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 Volkswagen ST.
Regulatory challenges
– Volkswagen ST 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 Auto & Truck Manufacturers industry regulations.
Shortening product life cycle
– it is one of the major threat that Volkswagen ST is facing in Auto & Truck Manufacturers sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Volkswagen ST.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Volkswagen ST may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Auto & Truck Manufacturers sector.
Environmental challenges
– Volkswagen ST 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. Volkswagen ST can take advantage of this fund but it will also bring new competitors in the Auto & Truck Manufacturers industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Volkswagen ST in Auto & Truck Manufacturers industry. The Auto & Truck Manufacturers 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.
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 Volkswagen ST business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Auto & Truck Manufacturers industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Volkswagen ST can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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. Volkswagen ST 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.
High dependence on third party suppliers
– Volkswagen ST 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.
Consumer confidence and its impact on Volkswagen ST 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 Auto & Truck Manufacturers industry and other sectors.
Weighted SWOT Analysis of Volkswagen ST Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Volkswagen ST 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 Volkswagen ST 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 Volkswagen ST 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 ST 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 Volkswagen ST needs to make to build a sustainable competitive advantage.