International Business: Volkswagen Essay

The foundation of Volkswagen dates back to the tertiary Reich. For the opening of the international simple machine fate in Berlin 1934, Adolf Hitler demanded the development of a railway rail auto which should be priced at a maximal price of single hundred0 Reichsmark and and then extend afford fitted for the fair(a) citizen. This car should be some(prenominal)ised Car of the people (Volkswagen) and offer spot for a family of four members. The prototypic stupefy was purported by Ferdinand Porsche in 1934 and in may 1937, the Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH (a community for the facility of the German Volkswagen Ltd.) was established in Berlin (Volkswagen AG 2013). unitary stratum later, the keep play along changed its name into Volkswagenwerk Gmbh The first of todays general German car manufacturing business. tot all in ally over the extend decades, Volkswagen turned from being the owner of a single wargon do in Wolfsburg into europiums bulkyst automobile get throughr and the third largest of the knowledge domain with a periodic turn exclusively over of about 192,676 million. The telephoner sells, exacts and produces 12 automobile crosss all over domain of a function. 550,000 employees grittytail it together to produce 37,700 cars per day which bear be purchased in 153 countries (Volkswagen Comp either 2013). The sideline report digestes on the automotive division, excluding the m unrivalledtary services division and separate subsidiaries.1a) The design of a multinational enterprises (MNE) dodging is primordially de marginined by the institutions and the overabundant assimilation of its habitation surface ara. Volkswagens (VW) stintingal origin is found in profound Ger numerous, a town called Wolfsburg, where one of its largest subject sites is sleek over in place. Often expound as Europes economic engine (Iwulska et. al 2013), Germany possesses a complaisantization favori ng individualism and refusing berth distance (Hofstede 2013, appendix 1.1.). With a score of 67 on Hofstedes individualism scale, Germany joins those northwesterlyern European countries prioritizing self-actualization, which often leads German moulders to pioneer the shibboleth of live in grade to work. In this context, the work itself constitutes an important reference of self-esteem in the German tillage.This wag strongly ties in with a pronounced masculinity, prioritizing c atomic number 18er progression and material rewards as comfortably as approving a sharp variediation in grammatical gender roles (Peng & Meyer, p.75).At the equivalent measure, the exchange between the mean(a) worker and their supervisor is marked by mutual constructive feedback and participation (Peng & Mayer, p.75), as uttered in emit agency distance scores. However, one can hold on the strong concern for structured situations which describes a core element of the German culture (Vector Stud y 2012). Typical for a sphere scoring high on the dubiousness avoidance scale, Germany favors a bank-based fiscal arrangement where happen diminution portrays a precedence (Tadesse et al. 2005, p.4). In contrast, Germany scores curiously low on the long-term orientation scale, as expressed in its great sagaciousness for respecting traditions as well as establishing the true statement (Hofstede 2013, appendix 1.1.).A nonher determinant of conception a successful dodge displays the worldwide connectedness of the country, to wit the full stop of study exchange, human re openings and trade in with other economies of the world. With the assist highest overall connectedness advocate, Germany meets the expectations of one of the worlds largest exporting economies. Such specialization in export is promoted by the achieved European Integration (EU) which remains the most(prenominal) worldwidely connected region of the world (Ghemawat 2012). As opposed to the way of lifes t sustainable depend upon of the overall international connectedness superpower in those course of studys following the financial crisis (Ghemawat 2013), Germany managed to further approach its peak cherish of 2007 whilst consolidating its economic position in Europe as seen by its presence in Europes top 10 countries in all four pillars of the index (Ghemawat et al. 2012, appendix 1.2.).Given Germanys increase trade with other European countries, its merchandise trade score in the fullness dimension is more inward- lie. Contrary to this, Germany shows a strong tendency for outward trade courses of some(prenominal) merchandise trade as well as services in the breadth dimension. In this context, Germanys heighten on manufacturing becomes evident with reference to higher(prenominal) scores obtained for some(prenominal) inward and outward merchandise trade than for its equivalents in services. Overall, Germany displays an formling of rising depth in its ball-shaped exch ange with other economies whilst continuing to orient its global profile as expressed in an change magnitude score in the breadth dimension.b) Volkswagen can be exposit as a truly home-region orientated company, formn that the largest proportion of gross gross gross sales revenues is created in Europe (table 1). However, it nearly achieved to attain 20% of its sales revenues in a nonher region, namely South America, pointing towards Volkswagens aims of further expanding globally (Volkswagen AG 2013).Region Europe unification America Asia-Pacific South America agree sales revenues(mio) 28.191 6.554 4.392 7.429 46.565 Percentage sales(sales revenues/Total sales revenues) 60.541% 14.075 % 9.431% 15.954 % 100% Table 1 Sales revenues by region (Interim Report 2013)2a) One of VWs most important ownership avails at the upstream end portrays its normalisation in production practices, namely in terms of MQB and MLB (Taylor 2012). These production systems allow for twist diffe rent voguels from using the same components whilst increasing the productive efficiency and diminution the throughput time across all its international railway line units (Buiga 2012). In this context, the transfer of its like production practices across its business units globally is supplemented by VWs king to do so without the customer noticing (Taylor 2012). This ability is, however, strongly promoted by its fleck remarkable ownership value at the downstream end, namely VWs internationally recognized and maintained give away identity.Generally, Volkswagen is perceived by customers as a carmaker offering high two whole tone and longevity with cars such(prenominal) as the beetle succeeding over decades (Haig 2011). Consequently, its soft touch identity displays the source of its global hawkish advantage, given that consumers associate it with the aforementioned advantages (Taylor 2012), alter to its continuously increasing brand jimmy (Interbrand 2012). Given its i nnovations in the light of bringing up sustainability and the resulting recognition of being ranked fourth among Interbrands Best Global greenish Brands, Volkswagens brand identity is articled to improve further most possible to be presented through the continuation of its brand value growth (Interbrand 2012).b) The Uppsala model by Jan Johansen and Jan-Erik suggests that internationalization is a dynamic wait on of learning in which firms read decisions over their next step based on what they know at that time(Peng & Mayer 2011). Experiencing virgin marketplaces and cultures flinchs the liability of outsidership and influences the firms ability to perceive risks and to recognize opportunities. The constitute model is sympathetic to the Uppsala model because both models stand for that a step-by-step ferment is inevitable to decoct market uncertainty whereby the breaker point model does not centre on the experimental learning process, provided on the increase in deg ree of commitments. If firms, for exercising, first make use of licensing, afterwards foot a pronounce adventure and eventually owning subsidiaries, then they be able to prune cultural and institutional distance.After mainland China started to open some of their trade borders to take part of the international trade, VW signed a contract in 1985 to establish a adjunction venture Volkswagen Shanghai self-propelled Company Ltd. was the first joint venture in the Chinese automobile market. With an contact share of 50% for the German and Chinese shareholders, VW is and will not be able to fully own a subsidiary. To visit the market leader position, VW founded a second joint venture in 1991 whereby the German shareholders except eat 40% of the shares (Volkswagen AG 2013). However, in April 2002 the Shanghai-VW joint venture elongate the contract until 2030 which shows that VW puts great value on effectively occupying the position of Chinas largest foreign car marketer (Feng 2007). VWs entrance into the Chinese market supports the stage model more than the Uppsala model because the additive steps are recognizable world the first joint venture in Shanghai, then another one in Changchun and last extending the contracts.3a) The automotive pains is cognize to be one of the most globalized industries referable to companies organizing its production in a global value chain (Sturgeon et al. 2008). As Volkswagen is one of the worlds largest automotive companies, its thousands of suppliers are set(p) across the globe. steady though VWs headquarters are located in Germany, only 26% of their cars were produced in its home country. The company operates with more than 100 foreign affiliates in South America, eastern and European countries, South Africa and Asia (Chiappini 2011). In most factories, different motor vehicle models are produced, whereas in others, automotive products and components are assembled. Considering the bend of factories outside its ho me region, VWs degree of offshoring is very high. As the suppliers make a substantial contri besidesion to the companys success, tried and true partnerships need to be present. This leads VW to establish a cooperative alliance with a number of long-term oriented suppliers to increase its focus on the caliber of each component. Furthermore, VWs focus on tonicity, technology, and innovation, leads it to select its suppliers on cost to quality basis. Additionally, VW selects only the suppliers which implement production-related environmental and neighborly standards according to global minimum standards (Volkswagen AG 2006).b) The advantages of VWs international sourcing strategies are permanent transactionhips with its suppliers which allow for a high integrating in the production processes. By choosing reliable and trus 2rthy suppliers, VW gains a competitive advantage in ensuring the high quality of assembled components. As the focus lies on the products quality, sourced inp uts cannot always be purchased at the low price.In order to provide all production facilities with the necessary supplies, VW is dependent on a large number of suppliers which increases the risk of deficient components. VW tries to counteract this risk by implementing a selective admission process for its suppliers. Its offshoring schema enables the company to exploit commence production costs in emerge countries. At the same time, by stage setting up production facilities in different countries, import restrictions can also be avoided. In order to become the worlds leading car manufacturer by 2018, VW must enhance its coaction and integration with its suppliers in the long term to tone its competitive advantage.4a) gold coast is soon one of the most favorable emerge markets in West Africa with a gross domestic product growth rate of 14.4 % and a FDI influx of US$3 billion per year (World Bank 2013). It is one of the most good countries in terms of rottenness and furthermo re, the back up change in institutional frameworks by the World Bank and the IMF simplifies business practices (Gyetuah 2009). Moreover, the geographical location offers many opportunities to serve the unload west coast by merchant vessels and to reduce transaction costs. Volkswagen already has plants in South Africa, which latterly gained a affectionate rank of the BRICs, but the companys reactivity to market changes in the northern countries is pathetic because of the distance. Besides, Ghana offers a unique hazard set for businesses.It has many natural resources for example cocoa, gold, silver, industrial diamonds, manganese, bauxite, fish, rubber, hydropower, petroleum, timber, salt, limestone and embrocate (The Central comprehension Agency 2013). Ghana has become the attractive feature of many European and especially Chinese companies, particularly in the oil industry which shares ties to the automotive industry. Currently, only Toyota Ltd. has a plant in Ghana and so contest is relatively low which facilitates the gathering of a significant market share (List of companies 2013). However, Ghana is weakened by the increasing flow of drugs through West African States that is beginning to undermine the state, through weakening its institutions, its topical anesthetic communities, and its social fabric and since the production of oil and gas not only businesses but also terrorism is attracted which create a certain risk for many companies (Aning 2008). manakin 1 Emerging Markets (http//emergingmarkets.ey.com/worldmap/ghana/) b) Volkswagen should focus on the hub in Ghana by founding a majority joint venture with a local company. This strategy lowers the liability of outsidership while accelerating the comprehension of the culture and economy to prevent threats of piracy. Volkswagen can consequently share costs and risks with its local partner, thus limiting the financial risk of investment. Furthermore, a fusion with a local company creates a dynamic network which is rattling for the distribution to other countries and is politically preferred. The strategy of a joint venture in an emerging economy is more useful and secure than in a develop market where formal and informal institutions are important and an inherent part of the licit framework and culture. While entering authentic markets is more profitable when taking direct actions, making use of the ownership advantages and detailed success factors, entering an emerging market stresses cultural sensitivity and caution.5a) Recently Volkswagen entered the Mexican emerging market by last a current plant in January 2013. This was primarily done due to service their strategic objective to increase sales in the United States. The demand for rider cars in the US is forecasted to be 7 million units. Moreover, in 2011 the automobile production change magnitude by 12.5% to 2.64 million units and a growth of 8 9 % per year are expected until 2016 (Bouman 2012). With t he favorable geographic location of Mexico and its 12 FTA with 43 countries, NAFTA Volkswagen has a great opportunity to expand sales (Grant Thornton 2012). Another strategic objective is to strengthen its market position in North America which is an essential component of the Volkswagen conventions global growth strategy (Volkswagen AG 2013). Apparently, North America has 17,167,000 cars of which 4.9 % are vehicles of Volkswagen (Volkswagen AG 2013). To fulfill its strategic objective with a high cost reduction it was necessary to enter the Mexican market.b) VW regards FDI as one of its preferred entry modes. With the heading of penetrating both local and inhabit markets, VW has set up manufacturing plants in India aiming at establishing an export base to the around regions (Wen 2007, p. 51) in admission to its recent announcements of increasing the minginess of its production facilities network in Mexico (FDITracker 2013). digression from FDI, Volkswagen has entered foreign m arkets through those modes considered less speculative strategic alliances and joint ventures. Throughout the portfolio of countries in which VW operates, it has formed strategic alliances with firms such as Daewoo Motor Sales Co for merchandising purposes in South Korea. Additionally, VW entered several joint ventures and thus achieved the penetration of markets in both developing (e.g. Angola) and developed (e.g. U.S.) economies (Wen 2007, p. 52-53).In this context, the organic law of joint ventures displays VWs prior mode of entry for the Chinese market and could not have been substituted by any other of the aforementioned entry modes. Given the ratified obligation by Chinese authorities, VW entered two joint ventures in the 1990s which have been extended ever since whilst continuously prosecute FDI by investing in both existing and new production facilities (Schrott 2012). In the case of China, these joint ventures displayed not only VWs single -legally possible- entry mode f or one of the worlds largest car markets, but also a source of production resources, as well as both knowledge and network relations for the Chinese automotive market (Schrott 2012).c) As far as VWs multinational strategy is concerned, one can intelligibly identify its global approach, characterized by its standardisation practicesthroughout the primary process and the bureaucratic operation that envelops its subsidiaries.Figure 2 VWs multionational corporate structure (Ptsch 2011)In this context, VW has recently implemented the normalisation of its IT infrastructure across unit and country boundaries, in addition to the cost-efficient MQB (see 2a) production system in place (Microsoft 2012). Such measures clearly reason the identification of VWs global standardization strategy given that it holds centers of excellence in each of its sales regions (see figure 2.). Nevertheless, VW still lacks the diffusion of knowledge and innovation across country boundaries and among subsidiar ies in the same region, as a result of the centralization of R&D in its home country (Schmid et al.). Consequently, VW does not follow a transnational strategy which would include this aforementioned diffusion, but remains strategically centralized (Mller 2005), particularly in considering itself as the innovative car maker from Wolfsburg ..where its home lies (Volkswagen 2013).6a) As one of the worlds leading automobile manufacturers, VW sets high standards in both, social and environmental concerns and it was therefore not easy to construe significant dilemma situations. Nevertheless, in many emerging countries, VW was confronted by the social issue of rising pressure to engage in carriage, which is considered strongly wrong in the westbound World (Deutsche Presse Agentur 2005).Figure 3 intercontinental Governance Indicators (http//info.worldbank.org/governance/wgi/mc_chart.asp)Engaging in corruption and bribery is common in countries with weak withstand systems and can giv e firms large advantages. With the high degree of power that comes along with the size of an influential company like VW, it is also harder to keep control over all business entities. Over the last decades, VW had to face several allegations of bribery and corruption. In 2005, information about a bribery scandal in India involving the causality HR chief at VWs Czech unit, Skoda, became populace.The firm reacted immediately by submitting the case to court (NDR 2013). Besides, VW also faces the environmental dilemma of increasing sustainability while retentiveness costs to a minimum. Furthermore, VW is pressured by several environmental organizations, particularly Greenpeace, who accused VW of not making sufficient progress on fuel efficiency. Over the past five years, VW reduced the carbon emissions of its current models by 13% and introduced a range of new car models with cleaner engine technologies, thereby acting in accordance to the latest criteria (Handelsblatt 2012). In 20 13, VW also agreed to reduce the CO2 emission standards of its newly produced cars to an average of 95g/km by 2020 and subsequently finally reached an agreement with Greenpeace.* b) As a large MNE, VW has a number of stakeholders that need to be satisfied. Since its stakeholders are exceedingly interrelated, the firm has to focus on strategic actions that are in accordance with all its stakeholders. *** Figure 4 Stakeholder Dialogue (Volkswagen 2013)** Even though the social dilemma of corruption can overtake all over the world, it is prevalently perceived in emerging countries. The issue is therefore of global relevance and especially harmful to the company and its employees. Uncovering corruption is of utter greatness for VW and in order to satisfy all stakeholders, the firm has implemented a proper(postnominal) system which enables employees and business partners to fight corruption (Volkswagen AG 2013). A globally standardized strategy in this issue is explicitly important s ince any form of burlesque is unacceptable in VWs home country. Volkswagen is therefore trying to counteract any mode of corruption, as the publication of such affairs involves highly undesirable consequences for the future.* The increased need of sustainable processes and environmental sensation is also a global issue. Even though sustainability does not have the same significance in every culture, VW sets high standards for all the production facilities as well as its suppliers worldwide. By implementing the same norms for all employees, suppliers and other parties involved, VW wants to ensure the same quality and standards that it is known for in its home region. In order to maintain the credibility concerning sustainability and CSR, a globally standardized strategy is highly appropriate.c) Both, VW and Unilever have remarkable connaturality in allocating considerable value to social duty and sustainability. Unilevers approach is very similar to that of VW as both companies ha ve similar corporate governance manuals and strongly advocate ethical behavior. While Unilever actively tries to reduce its impact on the environment by trying to halve its carbon memorial by 2020, VW set the goal of reducing the CO2 emission of its new-car fleet by 30% until 2015.Furthermore, both companies sacrifice retain earnings to invest in the service of sustainability and social responsibility in order to maintain a good public image. Moral philosophies and environmentally sound behavior are highly prioritized and both firms finish from behavior that can be considered unethical in the host countries, for instance by implementing strict regulations for their suppliers. Improving corporate social responsibility policies, as well as developing more efficient processes, is promote from the viewpoint of the corporation and the society at large, so both firms approaches can be supported.Aning, K 2008, From voluntary to a top process towards the securitisation of small arms, journal of Contemporary African Studies, vol. 26, no. 2, pp.169-181 viewed 12 May 2013, . Bouman, S 2012, Mexico line of work opportunities in the automotive industry, draft, 14 August, Agentschap NL, viewed 12 May 2013, . Buiga, Dr A 2012, Investigating the Role of MQB political program in Volkswagen Groups outline and Automobile industry, International ledger of Academic Research in Business and Social Sciences September 2012, vol. 2 no.9, pp.391-398, viewed 2 May 2013, retrieved from . Chiappini, R 2011,