Volkswagen AG

Situation AnalysisEBA 605, Dr. J. ColemanSaturday, March 11, 2006Team Maxxim presents

Volkswagen AG

Project Goals & ObjectivesHighlight trends in the automobile industry

Analyze and critique Volkswagen recent decisions

Discuss where and why VW went wrong

Offer potential solutions as an objective outsider

Volkswagen AG

Volkswagen AG

Presentation OverviewCompany Overview Brand PortfolioCurrent SituationThe VW Customer Competitive AnalysisFinancialsSWOT AnalysisQuestions

Volkswagen AG

Volkswagen AG

Corporate OverviewHQ: Wolfsburg, GermanyUS Operations: Auburn Hills, MIEuropes #1 automobile manufacturerTraditional Brands: Jetta, Passat, Touareg, Phaeton, Fox and AudiInternational Brands: SEAT and SKODAAnnual production: 5M vehiclesAnnual sales: $121,345/ 10.9 YOY growthEmployees: 342,502 worldwide

Volkswagen AG

Key Milestones

Volkswagen AG

Volkswagen Group Brand Portfolioemotionfunctionalitysophistication

Volkswagen AG

Current Situation Project BasisPorsche increase stake in VWRecently hired Wolfgang Bernhard to head VW groupLaunched Moonraker projectLoosing share in China marketPulled out US luxury marketVW to cut 20,000 jobsFerdinand Piech steps down as Chairman***Triple threat: high costs inflated sticker pricequestionable quality

HIGHSLOWS*** Some may say this is a high given that he engaged VW inHigh risk, high reward strategies

Volkswagen AG

The VW CustomerPositioning Statement: For the cost conscience buyer, Volkswagen offers reliability and value.

Value Proposition:Target Market: Cost conscience buyer (parents, females, young adults)Benefits offered: German technologyRelative price: Affordable, reliable

Volkswagen AG

The VW Customer

YoungFemaleAge 19-32College-EducatedParentsAspirational valueGlobal ReachUSA, FranceSpain, UK GermanyItaly, China

Value conscience

Volkswagen AG

Volkswagen Global Marketing Mix234 Brand portfolio Volkswagen Audi Seat koda Bugatti Bentley Lamborghini Commercial vehicles1 Unique brand identity for each nameplate Complete product range Mostly standardized products with minor adaptations

Setting prices with regard to competitors Price discrimination across regions No price competition in emerging markets Strict cost controlling Glocalized communication Emphasis on the European market Brand advertising Emotionalization Development of distribution partners Separated distribution channels for each brand International standardization of dealersGlobal Marketing Mix

Volkswagen AG

VW Competitive AnalysisVolkswagen AGGolfJettaNew BeetlePassatPhaetonTouareg*Numbers based on 2004 Marke tshare

Volkswagen AG

Operating MarginNet Profits

Volkswagen AG

5 Year Sales Trend (in billions)Sales increased by 4.9% in 2004Shareholders net profitsSubstantial decrease 00 to 01

Volkswagen AG

Return on Equity Return on Assets5-year periodReduction in ROE & ROA

Volkswagen AG

SWOT ANALYSIS

STRENGTHSMarket LeadersHigh Brand EquityFocus on InnovationOPPORTUNITIESNew market to explore (India)Auto sales up 30%2010 India will have 36x more carsIncrease disposable incomeLaunch new modelsWEAKNESSSlow revenue growthLow presence in SUV marketRising admin expensesTHREATSFierce competitionIncreasing steel pricesDecline car sales in U.S.Low consumer spending in Germany

Volkswagen AG

Challenges and Risks* Costs Revenue and PerformancefuturecurrentIncreasing product costsHigh investmentsFurther price pressuresChinese operationsUS operations-luxury market$/ Exchange ratesPrice pressureWeak economy

DepreciationLegislationInvestments in future marketsRaw material pricesLabor costs

*Volkswagen AG 2005 Strategy Meeting

Volkswagen AG

Thank you!

Volkswagen AG

ReferencesCulp, Eric, VW in Fresh Trouble as it Withdraws US Model, Knight Ridder Tribune Business News, 11/05, pg 1Flint, Jerry, The Fast and the Furious, www.forbesauto.com, 01/06Fondon, Daren, A Pitch to the Rich, Times Online, 11/03Hoovers Company Information, Hoovers, Inc., 2006Landler, Mark, Volkswagen Chairman Step Down, New York Times, 01/06Landler, Mark, Porsche to Build a 20% Stake in VW, Detroit News Auto Insider/New York Times News Service, 09/05Power, Stephen, Once Hot Volkswagen Attempts to Reverse U.S. Sales Decline, Wallstreet Journal (Eastern Edition), New York, 09/05, pg A3Rancanelli, Vito J., Turn Around Ahead at Volkswagen, Barrons, 05/05, Vol. 85, Issue 20, pg 26Thomas, Chad & Archey, Sheenagh, Porsche Buys 20% in the VWs Share to Prevent Takeover, Bloomberg News, http://quote.bloomberg.com/apps/news, 09/205

Volkswagen AG

Volkswagen AG

ReferencesBrodrick, Sean. Set Your Sights On Asias Sleeping Elephant. http://www.escapeartist.com/efam/70/Invest_In_India.htmlwww.datamonitor.com

We need to have the competitive information for this chart.Volkswagen is a global manufacturer of passenger automobiles and commercialvehicles. The company is the number one car manufacturer in Europe. The group haspresence in 11 European countries and seven countries in the Americas, Asia andAfrica. The company has a 12.1% share of the worldwide new passenger car market.The company holds a leading market position through all its brands.Volkswagen is a powerful multi-brand group. It has earned the reputation of being anestablished automobile manufacturer, with several well-known brands. Thecompanys brands enjoy high brand equity globally. Some of the companys popularbrands include Passat/Santana, Golf, Beetle, Parati, Skoda, Octavia, Bentley, Rolls-Royce, Bugatti, Audi and Lamborghini. All of these hold the top positions in theirrespective market segments.Volkswagen has a strategy of extending its product range and broadening its marketcoverage through innovation. In view of the rising rate of innovation in the automotivesector, Volkswagen has been able to innovate effectively to ward off competition. Thecompanys innovations include the Caddy delivery van, the Golf GTI, Golf Plus, Golf4MOTION, Jetta, Passat B6, Polo FUN and the Fox. The company innovates boththrough new models and technology. The sporty flair of the Golf, the Audi A3 and theAudi TT is enhanced by the combination of the new dual clutch DSG (direct shiftgearbox) with the powerful 3.2 l VR6 engine. The Volkswagen Group aims to expandits product spectrum with innovations aimed at penetrating niche markets andunexploited market segments.