VolkswagenAktiengesellschaft

The power of Volkswagen group

History & OverviewEstablished on 28th May, 1937.Founded by Nazi Deutsche Arbeitsfront (German

Labour Front).The first automobile manufactured was the Type 1.Headquarters in Wolfsburg,Germany.Production in 62 plants across 21 countries.Sales in 153 countries.Net revenue € 126.9 billion.37 aquisitions and 28 stakeholdings. TYPE 1

Owns 9 major automotive brands covering major segments.

Well positioned to take advantage of sector dynamics by leveraging scale across brand portfolio.

Industry leading R&D effort drives art and technological innovation.

Resilient business model with high profitability and strong financial profile.

Volkswagen-The Group

Since 1939

Before World War II

Post World War II

Current

Logology

Volkswagen-Evolution As brand

High process efficiency leading to high profitability.Differentiative brand promotion.Dissociative brand strategy.Focus on development of self image of all the brands.

Operating in all the segments i.e. Passenger, commercial and luxury vehicles.

Enters Market of different segments through its different brands.

Enjoys huge clientage.

Volkswagen- Brand Positioning

Volkswagen- Company Profile

• A positive cash flow from operating activities.

• A negative cash flow from investing activities(discussed later).

Volkswagen- sales and market division• Progressive increase in sales.

• Latest being 7.20 million

• Hand in hand with global automobile industry.

• High market share in western/Eastern Europe

• Growing markets in China and South America

• Upcoming market in Asia

Volkswagen- sales revenue

• A booming brand until 2009.

• 2009 recession.

• Strong recovery with more than 20% incremental revenues.

• Strong foundation for post recession period.

Volkswagen- Profits and EPS• Varying profits over the years.

• A downfall of over 70% in operating profits and over 80% in profits after tax.

• High rise in profits post recession.

• Major investors: Lower Saxony(govt.), Porsche and Piech family and gulf state of Qatar(17%)

• Fall of more than 80% in EPS during recession

• Approximately a 7 fold increase in EPS post recession.

Volkswagen- Investment trend

• Evident disinvestment to tackle recession• Various unknown reasons for disinvestment can be attributed to recession and

need for liquidity as this was the period company went into major acquisition that of Porsche AG.

Volkswagen- Customer deliveries• Comparative study between 2009

and 2010

• Asia pacific(exc. China) region and North America have high rise in sales.

• Data only for fully owned subsidiaries and not joint ventures.

• Volkswagen truly being “People’s Car”

• With maximum sales under Volkswagen AG umbrella.

• Most of the major brands show an increase in sales except SEAT with negligible fall and Lamborghini being unable to recover post recession with high competition from Ferrari and Aston Martin.

Competition Analysis

Toyota and General Motors are the major competitors on a global scale with Ford following closely.

Sales (as of 2009): Toyota – 7.3 million units General Motors – 6.5 million units Volkswagen – 6.29 million units. Ford – 5.73 million units

Major Markets: Toyota - Japan and North America General Motors – United States and China Volkswagen – Europe and China Ford – United States and Europe

Competition Analysis

Sales

Toyota 12%GM 11%Volkswagen 10%Ford 8%Others

Competition Analysis

2000 2005 20090

50

100

150

200

volkswagenGMFord

2000 2005 2009

-40-35-30-25-20-15-10-505

10

VolkswagenGMFord Motors

Revenue and Profit comparison

Iconic Brand portfolio, giving customers ample choice.

Self substitutes: Brands compete amongst themselves.

Technological leadership.(DSG Engines: sold over 3.5 million units)

Innovative designs and concept cars to satisfy tomorrows needs.

Competitive Advantage

Future Growth Drivers: Need to expand&

Market Analysis

Global overview and automotive market. Emerging Markets of Eastern Europe and India show promising business.

Future Growth Drivers: need to expand

Market Penetration

Product Developmen

t

Market Developmen

t

Diversification

Ansoff's Matrix

Existing market

New market

New Product

Existing Product

Product Development: Western Europe.

Market Development: India, Japan.

Growth market focus • Increased market penetration • Emerging markets expansion • Balanced global footprint

Market Analysis

Potential upside• Product portfolio extension• North American expansion andmarket recovery• Commercial vehicle strategyand market recovery• Financial Services – strengthen the automotive value chain

Markets: Strategy, mode of entry, major ventures and future plans.

Approach

Market

Mode of Entry

Y

X

• An analytical approach is adopted.

• International business market and expansion are being studied simultaneously through mode of entering into such markets.

• Competitive approach: holistic view of the organisation into new regions.

China: A Major Market

1984: Shanghai Volkswagen Automotive Co. (SVW) as a joint venture between Volkswagen and Shanghai Automotive Industrial Corporation (or SAIC) was founded.

Production milestone in November 2010 – 6 million cars. Volkswagen was the automotive pioneer in the modern Chinese

market. 1990: FAW-Volkswagen Automotive Co. Ltd. was set-up as second joint

venture in China. Production milestone in November 2010 – 4 million cars. Today: Volkswagen is represented by 16 companies in China. Total investment 1984 – 2010: € 9.5 billion Total deliveries (in 2010): 1.92 million units Employees (in 2010): 51,000

2 major ventures in China (i) Shanghai Volkswagen Automotive Company. Joint Venture for a period of 45 years expiring 2030. Produces cars under Volkswagen and Skoda brands.

China: Major Ventures

Founding year 1984Production commencement 1985

Mode of entry Joint Venture

Employees 22,000 (31.12.2010)

Equity HoldingVolkswagen AG(40%)Volkswagen China(10%)SAIC(50%)

(ii) First Automobile Works – Volkswagen Automotive Company(FAW) joint venture established in 1991 Funded by First Automobile Works, Volkswagen AG, Audi AG and Volkswagen (China) Investment Co., Ltd Manufactures cars under Volkswagen and Audi brand. High economies of scale (1st in China).

China: Major Ventures

Founding year 1990Production commencement 1991

Headquarters Changchun, Jilin Province

Mode of entry Joint Venture

employees 27,000 (31.12.2010)

Equity Holding

Volkswagen AG(20%)Volkswagen China inv.(10%)Audi AG (10%)FAW (60%)

China: Major Ventures(ii) First Automobile Works – Volkswagen Automotive Company(FAW)

China: Government PoliciesTariff control measures:

Tax policies and subsidies

Purchase Restriction• Additional car license limited to 240,000 for 2011• No limit for replacement vehicles

Use Restriction• Market growth lowered in 2011

Purchase tax: 2009 – 5%On passenger vehicles 2010 – 7.5% 2011 – 10%subsidies Subsidy on 2009 2010 2011

Commercial vehicle

3000 5000 4000

LMV Max. 4000 Max. 4000 No subsidy

(In RMB)

Simultaneous application of “Go WEST Strategy” and “Go SOUTH Strategy”Set up of 2 completely new plants and further production optimization of 2 plants.The investment strategy of Volkswagen Group China is self-funded from the Joint Ventures.Total Investment

China: Investment Strategy

BRIC: Markets and Volkswagen standings

Volkswagen owns 19.9% stake in Suzuki, which owns 54%stake in Maruti Suzuki

Mode of entry:China: Joint Ventures. Brazil: owned subsidiary and joint venture. Russia: owned subsidiaryIndia: owned subsidiary and strategic alliance

Founded in 1895, one of the oldest car makers in the world.

Derided for their unappealing looks and poor performance during the cold war period.

Government sought to a foreign partner for the company post Velvet Revolution.

In between 1991 and 2000 Volkswagen invested close to € 2.6 billion.

During the period revenues increased from 500 million to 3.7 billion.

As of 2009 its revenues are 7.1 billion

Skoda Acquisition

30%1991 60.5%1994 70%1995 100%2000

1991 1996 2000 2004 2009 20100

200

400

600

800

1000Sales

sales (in '000 units)

Skoda Acquisition: rising market• Skoda’s sales have risen almost 5 fold since the acquisition.

• From being a brand known for its “ugliness and poor performance” it now transformed into a car which is regarded as symbol of reliability.

• Expansion by manufacturing in Asian markets, that of China and India.

• Innovative use of marketing and media.

• Largest car maker in Eastern Europe.

• An opportunity to exploit emerging markets.

To enter the Low-end economical car market.

To attack Fiats position as the largest car maker in Europe.

To acquire a share in Eastern Europe’s car market, where Volkswagen was not as popular as in other European markets.

To gain access to wider consumer base in markets of China, western Europe and North America.

To reduce overdependence on their established brands in Western Europe and North America.

To gain entry into the emerging markets of India and Russia.

Economies of scale and optimization of production capacity in Eastern Europe.

Volkswagen: Reasons for Acquisitions

Cannibalism: a Multi-national acquires many brands, which compete with each other in the global market.

A cheap Volkswagen has become available in the West called Skoda.

It is not a decisive brand in western Europe.

However, in the rest of the world, it is a very close competitor to Volkswagen.

Superb to Passat Octavia to Jetta Fabia to Polo

Threatening to better Volkswagen’s performance in emerging markets.

Skoda: Cannibalism

“Central Europe is not an emerging market, its reemerging. And its companies are playing the game of catch-up incredibly fast.” - Justin Jenk, A Principal with McKinsey & Co. in Moscow, 1997

Eastern Europe: the promising market

Future prospects, suggestions and conclusions.

Objective: Ensuring profitable growth and creating sustainable value.

Focus: expansion of brand and product portfolio alongside increase in GLOBAL footprints and emerging market presence.

Capital targets: more than 16% ROI and 20% ROE(pre tax)

Plan 2018

Plan 2018: organisation driven by innovation.

Global reach and research centers across continents of various brands.Regional head offices at Shanghai, Chattanooga and Wolfsburg being the head quarters

Improve after sales services and customer relations.

Expand its clientele for commercial vehicles on the foot prints of passenger car segments, globally.

Exploit female consumer market.

Suggestions.

Conclusion.

Strong Brand portfolio

Platform leverage of core operations

Advanced technology

Efficient leadership

Position of financial strength

Excellent management model

Aggressive expansion prospects via adoption of various ways of entering markets such as fully owned subsidiaries, joint ventures and Strategic alliances.