Effective Planning: Strategic Management

Discuss about the Effective Planning for Strategic Management.

 

 

Strategic management includes an effective planning, the execution of it and the ultimate process of monitoring the constant improvements and progress of a particular organisation. Volkswagen, a renowned company of automobile manufacturing industry has made it positive step in Malaysia in last decade. The management of Volkswagen encountered serious challenges from its competitor companies like Honda, Audi and Toyota at initial stage. However, the expert engaged in this company help to combat certain issues with effective strategy and Volkswagen enjoys minimum 64% market share in the automobile industry of Malaysia (Volkswagen.com.my 2016). Although Volkswagen is German company, however, the management has decided to open factories in Malaysia and other region of South-east Asia only because of business expansion.

The fundamental mission Volkswagen is to offer safe, eco-friendly and attractive vehicles that can compete with other existing companies in the automobile industry of Malaysia.    

The vision of Volkswagen is to hold the position of innovative automobile manufacturer, which is capable enough to offer best quality. Another important vision of this company is to power the regenerative electricity for the electric motors that are used by existing vehicles (Kumaraswamy et al. 2012).

The objective statement of Volkswagen is to ensure the constant profitable growth and to expand the product and brand portfolio for future success of the company. The mission, vision and objective statements help Volkswagen to decide the future strategies.

PESTEL analysis is appropriate to understand the environment and the major drivers of changing the environment of automobile industry in Malaysia.

Political	·         New regulations of Malaysian government have direct impact on the business process of Volkswagen. ·         Instability of the Malaysian government also influences the company.
Economical	·         The predictions of GDP forecast suggest 17% rapid growth in this continuing year (Pauwels et al. 2012). ·         The unemployment rate of Malaysia affects the business of Volkswagen. ·         Interest rates for importing cars are increasing day by day and it influences the strategy of Volkswagen. ·         Inflation rate has grown from 12% to 14.7% since few months. ·         The sudden increment of fuel price also affects the business of Volkswagen.
Social	·         The purchasing capacity of the inhabitants of Malaysia has been enhanced. ·         Customer loyalty towards the innovative product of Volkswagen helps to develop the strategy for capturing better position in the automobile industry of Malaysia (Lasserre 2012). ·         The constant growing population of Malaysia also has a huge impact on the business of Volkswagen.
Technological	·         Although the management of Volkswagen has incorporated effective technologies in the manufactured vehicles, still this particular company lacks behind from the other competitor companies.
Environmental	·         Volkswagen has revealed a serious level of concern for the various environmental issues that are rapidly growing in Malaysia. ·         The higher officials of Volkswagen are committed to manufacture environment friendly and safe vehicles for the customers (Wieland and Marcus Wallenburg 2012).
Legal	·         Government protection helps Volkswagen to continue its business in Malaysia in effective and adequate manner. ·         The revised new tariffs can influence the manufactured products of Volkswagen.

Table 1: PESTEL analysis

(Source: Ritala 2012)

PESTEL analysis is an effective and useful business tool to understand in critical manner the basic potentiality of specific business. The results of PESTEL analysis can help the management of Volkswagen to collect benefits and make strategies accordingly. The concerned expert of Volkswagen can monitor, evaluate and assess each factor, which is very much significant for curving out success in future for this particular company.

According to Ferrell and Hartline (2012) capability analysis in the context of the value chain includes the way of prosper and survival in a particular industry. Value chain analysis of Volkswagen suggests that this company is potential enough to meet the two key criteria of any organisation, such as to satisfy the customers and survive the competition. In Malaysian automobile manufacturing industry is very much competitive for Volkswagen because of the presence of Honda, Audi and Toyota. The value chain analysis involves the entire competitive advantages, which are derived from the basic differences in between the cost to make customer value and the core value it offers to the customers.

In order to detect every assigned activity in a proper systematic manner, value chain analysis will be apt for generating the ultimate advantages in differentiation and costs. Lee (2013) has mentioned that these aspects play an important role in today’s competitive business world. Therefore, the value chain analysis will not only concentrate on low costs, however, tries to provide developed vehicles in terms of design, quality, technology and innovation. The manufactured vehicles of Volkswagen have great attributes, which can perform as unique value to the customers in order to appreciate the willingness of payment with premium price. Value chain is appropriate capability analysis as it provides an established set of calculation to evaluate and assess the effectiveness of an organisation, which is capable enough to satisfy various requirements. The controlled chart of Volkswagen has reflected the fact that this company holds at least 39% market share in the automobile manufacturing industry of Malaysia (refer to Appendix 1). The vehicles of Volkswagen are essential rather than some effective steps within the value chain process. The value chain analysis of Volkswagen includes the internal cost analysis, internal differentiation evaluation and the monitoring procedures of vehicle linkage. This kind of analysis is not so much exclusive in collaborative manner (Kapferer 2012). However, it clearly determines the area of concentration in internal operations level in order to consider the competitive situation in the concerned industry. For identifying the value-creating way, Volkswagen de-emphasizes the core functional structure.

Strengths	Weaknesses
·         The major strength of Volkswagen is its global presence. ·         Volkswagen enjoys a string and matured brand portfolio. ·         Volkswagen has a strong existence in Malaysia. ·         The ultimate performance of this company is gradually increasing (Ramamurti 2012).	·         The primary weakness of Volkswagen is its not manufacturing passenger vehicles. ·         The manufactured vehicles of Volkswagen are not environment friendly.
Opportunities	Threats
·         The great opportunity of Volkswagen is its positive attitude towards manufacturing “green vehicles” in order to save the environment of Malaysia from pollution. ·          The basic growth by acquisition is another potential opportunities of Volkswagen.	·         Completely new standards of emission are an effective threat of Volkswagen in the automobile manufacturing industry of Malaysia. ·         The constant increments in the prices of raw materials are significant threat for Volkswagen. ·         The competitor companies manufacture more technologically advanced cars than Volkswagen.

Table 2: SWOT analysis

(Source: Loureiro et al. 2012)

From the abovementioned SWOT analysis, the management of Volkswagens is able to understand the existing strengths and weaknesses of the company that can be improved. However, from the detected possible threats and opportunities, Volkswagen should incorporate new strategies to combat with these issues. Volkswagen has adopted effective strategies, such as battery technology strategy for promoting the autonomous and digitisation driving process (Volkswagen.com.my 2016).

In order to combine the strengths and weaknesses (SW), opportunities and threats (OT) of Volkswagen, TOWS matrix would be perfect.

Opportunities	Threats
·         The changing preferences of customers are the great opportunity for Volkswagen. ·         Malaysian government support this company. ·         The market of automobile industry is rapidly growing in Malaysia.	·         Constant increment of costs and maintenance of manufactured products. ·         New laws regarding labour are potential threat for Volkswagen. ·         The automobile manufacturing market in Malaysia is unknown for Volkswagen (David and David 2016).
Strengths	Weaknesses
·         The durability, reliability and the quality of the cars of Volkswagen is major strength. ·         The management philosophy is very much strong. ·         Worker productivity is increasing is gradual manner.	·         Volkswagen lacks the capital for business expansion. ·         Volkswagen fails to retain its specialised workers in the competitive automobile market in Malaysia.

Table 3: TOWS matrix

(Source: Chesbrough et al. 2014)

After analysing and evaluating the strength, weakness, opportunities and threats, the management of Volkswagen has adopted few effective strategies such as “Together- strategy 2025”. This particular strategy focuses on changing the basic business after tapping effective new revenue streams. As opined by Hill et al. (2014) the adopted strategies are taken with proper following of Porter’s generic strategies, which clearly suggests the competition level of business in a particular market. Porter’s generic strategies involve the significant sources of competitive advantage, which involves cost leadership, focus, differentiation leadership and focus. Volkswagen even develops the strategies to make positive decision power as shareholders. These proposed strategies should counterbalance the core flaws in between the reduction cost and flexibility.

In order to evaluate the adopted strategies of Volkswagen SAF evaluation would be perfect for proposed strategies.

Suitability	Both the proposed strategies are potential enough to address the major opportunities and threats encountered by Volkswagen.
Acceptability	The proposed strategies fail to meet the expectation of stakeholders. However, the level of risks after incorporating these strategies is high within the organisation. There is a very low possibility of acceptance of stakeholders of these strategies. After adopting the proposed strategies, Volkswagen can expect its adequate sales revenue from the automobile industry of Malaysia.
Feasibility	The proposed strategy is very much applicable to make it in practice. The proposed strategies require more than finance budget than the discussion in general meeting of Volkswagen. The expert professionals are needed in order to incorporate the above-mentioned strategies.

Table 4: SAF evaluation

(Source: Chesbrough et al. 2014)

Volkswagen is famous automobile manufacturing company in Malaysia. However, in present times, this company faces serious level of competition from its competitor companies like Audi, Honda and Toyota. Therefore, the higher management of Volkswagen has decided to make some effective strategies in order to solve the issues regarding the competitiveness of automobile industry. Although the expert professionals of Volkswagen have proposed adequate strategies in order to capture at least 67% automobile market by the end of this present year, still there are some recommendations that can help Volkswagen to develop its current position and enjoy the highest position in the automobile manufacturing industry of Malaysia.

1. Volkswagen should incorporate completely new innovative equipments for the manufactured vehicles.

2. Volkswagen should share modules in between segments and VW brands.

3. This company should offer new range of vehicles in Malaysian market.

4. Volkswagen should focus on manufacturing more technologically advanced vehicles rather than its competitor companies like Toyota, Honda and Audi.

5. Volkswagen should create new way of more earning of sales revenue after the end of the annual year.

Chesbrough, H., Vanhaverbeke, W. and West, J. eds., 2014. New frontiers in open innovation. OUP Oxford.

David, F. and David, F.R., 2016. Strategic Management: A Competitive Advantage Approach, Concepts and Cases.

Ferrell, O.C. and Hartline, M., 2012. Marketing strategy, text and cases. Nelson Education.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Kapferer, J.N., 2012. The new strategic brand management: Advanced insights and strategic thinking. Kogan page publishers.

Kumaraswamy, A., Mudambi, R., Saranga, H. and Tripathy, A., 2012. Catch-up strategies in the Indian auto components industry: Domestic firms’ responses to market liberalization. Journal of International Business Studies,43(4), pp.368-395.

Lasserre, P., 2012. Global strategic management. Palgrave Macmillan.

Lee, K.H., 2013. Integrating carbon footprint into supply chain management: the case of Hyundai Motor Company (HMC) in the automobile industry.Journal of Cleaner Production, 19(11), pp.1216-1223.

Loureiro, S.M., Sardinha, I.M.D. and Reijnders, L., 2012. The effect of corporate social responsibility on consumer satisfaction and perceived value: the case of the automobile industry sector in Portugal. Journal of cleaner production, 37, pp.172-178.

Pauwels, K., Silva-Risso, J., Srinivasan, S. and Hanssens, D.M., 2014. New products, sales promotions, and firm value: The case of the automobile industry. Journal of marketing, 68(4), pp.142-156.

Ramamurti, R., 2012. What is really different about emerging market multinationals?. Global Strategy Journal, 2(1), pp.41-47.

Ritala, P., 2012. Coopetition strategy–when is it successful? Empirical evidence on innovation and market performance. British Journal of Management, 23(3), pp.307-324.

Volkswagen.com.my (2016) News Available at https://www.volkswagen.com.my/en/tools/navigation/meta/news.html [Accessed on Aug 10, 2016]

Wieland, A. and Marcus Wallenburg, C., 2012. Dealing with supply chain risks: Linking risk management practices and strategies to performance.International Journal of Physical Distribution & Logistics Management,42(10), pp.887-905.