Porter’s Five Forces Analysis of Volkswagen Group
|Revenues 2021 Revenues 2020||US$ 295.5Approx.Billion, 2021 (Fortune) / € 250.2 Billion (Annual Re.)
€ 222.84 Billion 2020 (Annual Report.)
|US$ 18.18 BillionApprox.,2021(Fortune 500)/ US$ 17.5 Approx. Billion (Forbes)/ € 19.3 Billion (Annual Report)
€ 9.67 Billion FY 2020 (Annual Report)
|Competitors||General Motors, Toyota|
Headquartered in Wolfsburg, Germany Volkswagen Group, operates in Automotive sector through presence in 153 countries with the plants in 29 countries, having a team of 662,575 employees globally. It was officially registered as “Gesellschaft zur Vorbereitung des Dutschen Volkswagen mbH” on28th May,1937.Its reported revenues are US$ 295.5 approx. /€ 250.2 (AR)billion with net assets valued at US$ 638.3 approx. equivalent (Forbes)/601.02(Fortune 500)/€ 528.6 (AR) billion, as of FYYear 2021.The reported Net Profit is € 19.3 Billion for the Financial Year 2021. Volkswagen is ranked 8th by Fortune 500.
Volkswagen Group is the second biggest leading automotive company in terms of market share by having 2nd highest global business of 6.4% of the total automobile global business transactions as of 2021.
Porter’s Five Forces Analysis
The most widely referred model to design companies’ strategies in reference to its industry for better profits and less exposure to competition is “Porter’s Five Forces Analysis”, defined byProfessor Micheal E. Porter in 1979,at Harvard Business School.
Volkswagen is directly competing with Toyota Motors which is having the highest global business share of 10.5% as of 2021, declared by Statista.
Volkswagen Rivalry among Existing Competitor
- Global Automotive Industry by Market Share: In Global Automobile Industry Toyota holds 5% ,Volkswagen holds 6.4%,Honda 5.3% and Ford holds 5% of the total global automobile market share in FY 2021.
- Volkswagen Business Segmentation: Volkswagen is operating through following Business Segments including Passenger Cars and Light Commercial Vehicles, Commercial Vehicles, Power Engineering and Financial Services.
- Volkswagen Business Segmentation- Passenger Cars and Light Commercial Vehiclesoperates in the manufacturing and sales of passenger cars and related activities.
- Volkswagen Business Segmentation- Commercial Vehiclesoperates in the manufacturing and sales of heavy commercial trucks and buses.
- Volkswagen Business Segmentation- Power Engineering: This segment deals mainly with the energy and charging solution including manufacturing and sales of industrial engines and batteries including related products.
- Volkswagen Business Segmentation- Financial Services deals with the dealer and customer car financing, leasing and insurance financing with other related activities.
- Volkswagen Business Segmentation Revenue Contribution FY 2021 and FY 2020: The Shell Revenue comprises of the following Segmentation by following amounts and percentage of Total Revenue.
- Volkswagen Business Segmentation Revenue Contribution FY 2021:Passenger Cars and Light Commercial Vehiclescontributed €49 Billion which is 70.5% of the total revenue, Commercial Vehicles contributed €29.04 Billion which is 11.6 % of the total revenue,Power Engineeringcontributed € 3.2 Billion 1.2% of the total revenue,Financial Services contributed € 41.06 Billion 16.4 % of the total revenue. (Source Annual Report)
- Volkswagen Business Segmentation Revenue Contribution FY 2020:Passenger Cars and Light Commercial Vehiclescontributed €67 Billion which is 72.08% of the total revenue, Commercial Vehicles contributed €21.11 Billion which is 9.47 % of the total revenue,Power Engineeringcontributed € 3.6 Billion 1.61% of the total revenue,Financial Services contributed € 37.22 Billion 16.7% of the total revenue. (Source Annual Report Page 264)
- Volkswagen Business Segmentation Geographical location wise Revenue Contribution FY 2021 and FY 2020: The Volkswagen Revenue contributed by geographically as follows: €45 Billion from Germany,€ 101.11Billion from Europe/Other markets,€ 45.30 Billion from North America , € 11.03 Billion from South America, and € 48.67 Billion from Asia Pacific in FY 2021.
The Volkswagen Revenue contributed by geographically as follows: € 42.84 Billion from Germany,€ 90.65 Billion from Europe/Other markets,€ 36.81 Billion from North America,€ 8.63 Billion from South America, and € 44.2 Billion from Asia Pacific in FY 2021.
- Battle of the Brands Competitive Rivalry with Toyota:Toyota and Volkswagen are in close competition and fight for the same market share. Toyota with the highest market share of 10.5% of the total global market gave a record revenue of US$ 257 Billion with Net Profits of US$ 28.8 Billion in FY 2021.
- Battle of the Brands Competitive Rivalry with Honda and Ford: Honda is also chasing Volkswagen in competing with the market share of 5.3% and also gave a record revenue of US$ 120.48.While, Ford also experienced a 7% increase in its reported sales revenue of over US $136 billion, in Year 2021, which is increased from US$ 127 billion in Year 2020.Honda and Ford both are offering close completion in lines of compact cars (Honda and Volkswagen).
Volkswagen Threat of New Entrants
- Expert Electrification(Latest Research and Development): Volkswagen also developed extremely amazing EVs for providing best customer experience including ID.4 with 30-36 minutes charging (10% to 80%)time at public points. Also Volkswagen created remote EV features with my VW App. Competing with such established brands and such amazing feature providing car manufacturing companies is impossible.
- High Capital Investment, Infrastructure &Trained Employees – Established Brand: Volkswagen is an established brand with high spending on research and development to have better competitive edge in the market over competitors. The Volkswagen Group spent €6 Billion in research and development in FY 2021.
Volkswagen Bargaining Power of Suppliers
- Supplier Recognition: Volkswagen continuously recognizing it’s top suppliers and celebrating awards like the industry standards even in FY 2020 Volkswagen celebrated 18th time Volkswagen Group Award, due to COVID-19 awards were sent/presented via mail.
- Supplier Industry Educator and Influencer: As due to high-tech production Volkswagen is continuously educating and influencing the supplier’s industry for sourcing better and standardized raw material. Even Volkswagen annually publishes reports for the declaring the transparency, risk and safety measures in the supply chainprocess including Responsible Raw Materials Report 2021.
Volkswagen Bargaining Power of Buyers
- Customer Satisfaction: In the category of “Consumer satisfaction with Volkswagen in the United States from 2006 to 2021 (index score) “Volkswagen scored 77/100 in Year 2022, with reference of Industry average of 78/100, declared by Statista. Volkswagen scored 78 in Year 2021 and 77 in Year 2019.The Volkswagen Group scored the highest of 86/100 in Year 2009
- Business and Engineer Expertise : Volkswagen is using best of it’s engineering and business resources for best development of EV and all other cars, products and services, even they highlighted and appointed Dr.Markus Kleimann (holds a Ph.D. in engineering) for better technical direction and management to provide a better customer experience.
Volkswagen Threat of Substitute Products or Services
- Russia-Ukraine War – Impacts: Volkswagen directly impacted due to Russia –Ukraine war first being a European Car Manufacturer secondly having operations in Russia. Firstly Volkswagen immediately closed down it’s operations in Kaluga and Nizhny. Secondly there will be various disruptions in the Supply Chain an expectedly European Economy will be disturbed baldy due to side-effects of the war including high energy prices, inflation and many more which will decrease the local demand and may affect the global car requirement drop respectively.
- Global Economic Crises Replace the Car Requirements to Basic Commodities: As bounce back from COVID-19 was hard enough for the overall automobile industry, the second set back of Russai-Ukrain war and high inflation in US may drag the world to the global recession which will definitely decrease the car purchasing .As per World Bank it is expected that the global GDP would be decrease by 0.5 % in 2023 and gave an analysis that the world is experiencing a global recession in 2023.
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