Welcome To Our Presentation

Prepared ByMd. Rajib MahmoodMd. Badsha FoysalFoysal Ahmed

Volkswagen AG is a major German automobile manufacturer and also a leading automakers in the

world. The company, along with its subsidiaries, is engaged in the development of vehicles and engines

along with the sale of commercial vehicles and passenger vehicles. It owns several other auto

companies, including Audi in Germany and SEAT in Spain and it also makes and markets cars with Fiat

of Italy and Skoda of the Czech Republic.

As an organization, they have the following mission statement: “It is the goal of the Group to offer

attractive, safe, and environmentally friendly vehicles which are competitive on an increasingly tough

market and which set world standards in their respective classes.”

In 2002, the Volkswagen Group achieved the second-highest profit before tax in the company’s history

at 4.0 billion and attained a global market share of 12.1 percent. The Group operates 44 production

plants in eleven European countries and seven countries in the Americas, Asia, and Africa. Around the

world more than 320,000 employees produce over 21,500 vehicles or are involved in vehicle- related

services. The Volkswagen Group sells its vehicles in More than 150 countries.

Volkswagen AG

Volkswagen Products Volkswagen, Polo, Passat, Santana, Golf, Bora, Skoda Auto, Bentley and Bugatti.

Low-consumption 3-liter vehicle to luxury class vehicles.

Types - Commercial vehicle, Passenger vehicle.

VW forged established themselves in China in 1985. Volkswagen realized the potential for the Chinese

market for automobiles some 19 years earlier and from this vision sought out to establish a joint venture that

would make them the first major foreign car company in China. Volkswagen has been able to position itself

as the primary brand in the passenger vehicle market. In 1999, it was believed that VW controlled 60%of the

passenger-car market. As recently as August 2003, Volkswagen was still recognized as China’s biggest

foreign automaker and currently holds a 37% market share in China. But VW has already established strong

local production and offers a wide range of models to the Chinese shoppers (currently offers 11 models with

an additional 4 planned to hit the market in 2004). The fact is that although many companies see the benefit

of entrance in the automotive market in China few have the same established brand, and brand equity that

VW has in the market.

Volkswagen in China

Chinese Automobile IndustryChina’s automobile industry has hit a ten-year record high for vehicle production. The 3.25 million

vehicles produced in 2002 represented a 38.5% increase over 2001. Sales reached 3.24 million that is

a 36.7% growth over 2001. The increasing demand for private cars has been the main factor that is

stimulating the growth. China’s GDP per capita reach $900 in 2002 and in some areas of the coastal

areas it topped $3,000. Due to huge potential opportunities, the world’s largest car makers, like – GM,

BMW, Ford, Nissan etc. are stepping up their efforts with new products and huge investment in china.

According to CSM Worldwide projections, there will be over 6.3 million vehicles produced in China by

the year 2007. That represents 133% growth over 2002.

Chinese government’s policy moves ranging from loosening its regulations pertaining to Wholly

Foreign Owned Enterprises selling their goods in China, to establishing Special Economic Zones,

which offer many incentives to foreign enterprises including tax benefits such as a 5-year gradual

taxation scale on profits.

VW’s Production VW has already established two, with plans to open a third facility to manufacture engines for

domestic use and export.

A Volkswagen official said the company plans on investing more than EURO 6 billion in China

region over the next five years.

VW and other foreign carmakers are being benefited by the low manufacturing cost.

VW’s two join ventures will turnout more then 400,000 Audi, Jetta, Passat, Santana and Polo.

VW’s Competition GM, BMW, Toyota, Honda, Ford and Nissan are the main competitor in Chinese market for

VW.

Joint ventures with Shanghai Automotive and First Automotive Works Corp.

Established ties with powerful local partners at a time.

Lobbing with local government.

Minimum production costs by producing 90% of its cars’ parts locally.

High quality products and good after sales service.

VW’s Entry Strategy

VW’s PricingFrom a pricing perspective, the combination of increased imports and increased localized production by

foreign carmakers is driving down prices. Manufacturers such as Volkswagen, GM, Honda and Dongfeng

Peugeot had to cut prices in 2003 due to the increasing supply of cars across all market segments.

VW has dropped the price on its upscale Passat as well as its mid-sized Bora. Overall, Chinese car prices

are expected to fall by an average of 8 to 10% by the end of 2003. With the current pricing strategy, VW is

attempting to address all the consumer markets in the China. The Golf and the economy versions of the

Polo are priced to attract the mass markets that aspire to own a car but can’t really afford to buy an

expensive car.

Santana is a taxi like car and the high end type is Passat; VW has targeted the niche fast growing luxury

car market who are the state-owned enterprises and the affluent class in China. The Volkswagen Group is

expected to withstand the market’s move to cut prices better than its competition. Overall, the pricing

strategies followed by VW are really incredible to compete any strong or big opponents in the fast growing

Chinese Market.

VW’s Distribution

VW’s PromotionThough the Chinese automobile industry is booming, most of the companies are not exercising too

much of promotional activities. VW is not different from the others in this respect of performing these

activities. Till now, VW has exercised all the effective strategies in case of their different products, low

and competitive price and very strong distribution system. These help VW to enter and stay in the

market, to compete the opponents and the sales growth as well. But the Volkswagen has suffered a

decreasing market share over the past few years though its sales have increased during that same time

period.

A major reason why VW has been able to dominate in China is due to their joint ventures established

with prominent players in Chinese automotive industry. VW co-owns Shanghai-VW with Shanghai

Automotive and FAW-VW with First Automotive Works Corp. VW established ties with powerful local

partners. These partnerships have allowed VW to creates a more efficient method of distribution. With

the best distribution strategy, VW can expect to remain the market leader in China for a few more years.

What Can VW Do Now…??

After analyzing the VW’s present condition in all aspects, a question comes to our mind that what

can VW do now to increase the overall market share though it has sufficient abilities to have this??

As we know that VW’s overall sales is growing up but the total market share is declining because of

the fierce competition in the industry. VW has taken the best action to re-assess their overall

marketing mix strategies and determine the lacking behind the present situation. To do that we have

done a SWOT Analysis on the basis of VW’s current landscape.

Internal Factors

STRENGTH WEAKNESS

1. It has vast product line.

2. Broad marketing coverage.

3. High brand equity.

4. Good customer service.

5. Manufacturing competence.

6. Good portfolio management skills.

7. Cost differentiation advantage.

8. Strong joint ventures partners.

9. Market leader.

10. Strong distribution channel.

11. Ability to manage strategic change.

12. Developed corporate strategies.

13. Good financial management.

1. Poor Promotional skills

2. Inadequate information system

3. Growth without direction

External Factors

OPPORTUNITIES THREATS

1. Increased market for business

2. Exploit new market segments

3. Apply R&D skills in new areas

4. Possibility of profitable new acquisition

5. Increasing disposable income in China

6. Apply brand name capital in new areas

7. Technology are been develop.

8. Very good potential consumer in China

1. Increasing competitors

2. Change in consumer taste

3. Rise in new substitute product

4. Bureaucratic govt. system

5. Greedy attitude of local partners.

VW’s SWOT Analysis

From the above SWOT matrix we have found that VW group has more strengths and

opportunities than the threats & weaknesses and its possibilities to increase the sales along

with putting a pause in the decline of market share. As we have found that a new and big

market segment has already been introduced to this industry which is actually booming the

total size of the market, there are some shortcomings too of VW like - poor promotional skills

and intense competition as a threat.

Findings

Action Plan1. Setting The Goals

Short term goal – 513,000 unit at 2002 and 600,000 unit for 2003)

Long Term (Retaining the existing market share at least 37%)

2. Conducting a marketing audit Marketing activities that have occurred in our operation over the past three years.

We did not find any significant promotional or advertising activities done by us through all the

possible ways.

3. Conducting market research The 3.25 million vehicles produced in 2002 represented a 38.5% growth over 2001 and sales

reached 3.24 million which is a 36.7% increase over 2001. According to CSM Worldwide projections,

there will be over 6.3 million vehicles produced in China by the year 2007. That represents 133%

growth over 2002.

5. Identifying target audiences

New consumers who are intend to use personal cars.

Existing consumers where reinforcement of past purchase experience work.

Niche Consumers for luxury items.

Small engine users.

6. Determining the budget

Nowadays, the promotional cost of any product is a very big challenge for any company in the

world. All the advertisers are paying millions of dollars for promoting their products. The budget

depends on how broadly our company wants to get in these activities. an example: “An

advertiser paid $38.5 million for a secured year long, daily 5 second billboard ad during the peak

hour to a TV channel called CCTV in China.”

4. Analyzing the research

A new and big market segment has already been introduced to this Industry

Shortcomings of VW like - poor promotional skills.

We should exercise the advertising, sales promotions and all possible incentives to communicate

the new expanding segment.

8. Developing an Implementation Schedule

9. Creating an Evaluation Process

We would then prepare an implementation schedule according to the budget and

depending on the basis of importance.

We will review our plan periodically (we recommend quarterly) by comparing our progress with

the implementation schedule.

we can measure the results of our progress: Consumer survey scores, referral sources,

increased income, increased new customers and decreased complaints.

7. Developing Marketing Strategies Use of innovative TV commercials for individual purchasers.

Use of direct marketing for niche segment.

Provide incentives to the distributors.

Provide sales promotion and bonuses to reinforce past purchase experience.

Use of event marketing.

Use of attractive billboard AD.

Recommendation

Need to use the mother language in case of advertising and promotions.

Has to have the ability to adapt new changes.

Use the integrated marketing communication (IMC) tools effectively and

efficiently.

Has to have the ability to handle uncertain situations.

Don’t be over confident in case of local associates. They are often greedy.

The government type is bureaucratic which may acts like controller or

influencers.

Has to have the ability to choose the right media.

That’s All About

Our presentation

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