Audi PESTEL Analysis

Introduction:

Audi is a leading brand of premium cars. The brand belongs to the Volkswagen group of automobiles. Apart from Audi, Volkswagen also owns several more auto brands. However, Audi is a distinct brand which enjoys very high level popularity throughout the globe.  The popularity of Audi is due to several factors including technology, luxury and its attractive look. In the developed nations including U.S. and China, the brand enjoys very high sales. The Audi group also includes the Lamborghini and the Ducati brands. In the recent years, the group has turned its focus towards higher safety for the drivers. The overall automotive industry has grown highly competitive and managing growth requires focusing upon all aspects including safety, technology and style as well as marketing and changing consumer trends. Audi has managed a distinct image and a strong and leading position in the premium vehicles segment in the global markets. It also invests a large sum each year in research and innovation so as to respond to the changing market situation and customer demand.

Read more about Audi in this PESTEL analysis and the opportunities and challenges before the brand in the international environment.

Political:-

The role of political factors in the world of business has grown important. Around the world, governments are playing a more active role than ever in the context of international business. The level of control and oversight of large businesses by governments globally has grown. Apart from trade relationships between nations, the political environment of a market also affects how well brands perform in particular nation or market. Audi is a global brand and its products are sold in several countries around the world. Not just that, the supply chain of Volkswagen is also located in various corners of the world.  As such, the political environment in all these regions also affects the supply chain, business and sales of Audi. However, Volkswagen is a German brand and this is why the sales of Audi may have remained unaffected by the growing trade tensions between China and America. However, political stability is also a sign of economic stability and within the last five years, most developed countries where the sales of Audi are high have remained politically stable. This has resulted in stronger sales and profits for the brand.

Economic :-

Economic factors are also playing a strong role in the context of international business. Their impact on sales and profitability of international brands is direct and strong. The economic environment of a country and its economic stability also affect how well a brand performs in the given market. Higher economic activity means higher employment and individuals have higher dispensable income to spend on luxury and lifestyle products. Post recession, economic activity has returned on track worldwide. This has resulted in growth in sales of premium vehicles and sports vehicles. Since Audi is a premium brand, declining economic activity in any of the leading markets can have a direct and adverse impact on its sales and profitability. Moreover, competition has grown intense in the luxury vehicle segment. Apart from BMW, there are more luxury brands that are direct competitors of Audi. Higher competition also means higher expenditure on marketing and sales as well as research and development. Overall, the role of economic factors is not limited to just demand and supply. Companies have to note the economic conditions  in important markets so as to tailor their business and marketing strategies effectively to address the changing situation. Economic fluctuations and changing currency exchange rates too can have adverse impact on the profits of a brand.

Social:-

Sociocultural factors are playing a dominant role in the context of international business. These factors are also having a direct impact on the profitability of businesses worldwide and companies need to be mindful of these factors to be successful in respective markets. Changing social trends and cultural factors can affect sales of specific products. Around the world, in most societies and cultures, the popularity of fuel efficient vehicles has grown. It is why most automotive brands including Audi are investing in sustainability and fuel efficient models. Moreover, these sociocultural factors play an important role in the context of marketing as well. Companies have to be mindful of the local culture while marketing in specific regions of the world. Including these factors in your marketing strategy leads to higher acceptance and sales of your brand and products. Companies stand to profit by including cultural factors in their marketing practices. Moreover, understanding the society and culture helps understand people’s taste in specific regions of the world and tailor your products and services according to them. In this way, sociocultural factors are growing more and more important in the area of international business. The success of brands in their local markets also proves the importance of sociocultural factors in the world of business.

Technological:-

Technology is driving the growth of the business world. Investing in technological innovation helps brands grow their sales and profitability. In the automobiles industry, the role of technology has grown all the more important as customers are looking for fuel efficient and safer vehicles. Digital technology is also playing a very important role in the growth of the automobile industry. Apart from marketing and customer engagement, it is also helping brands manage their supply chains and sales as well as after sales services better. AI and IoT have also changed the world of automobiles. Apart from connected cars, autonomous driving is the latest trend. Not just Volkswagen or Audi but other rival brands are also investing heavily in autonomous vehicles. A race is on among the auto brands to bring the most outstanding autonomous model to the market. The standards are already very high and technology is playing a paramount role in each area from manufacturing to supply chain as well as sales and marketing of automobiles.

Environmental :-

Environmental factors are now of paramount importance in the automobiles industry as governments around the world have formed stringent rules with regards to fuel efficient and carbon emissions of vehicles. The auto industry has a direct impact on the nature and environment. It is why it has a major liability towards the nature as well. This is also a reason that the brands are investing more than ever in innovation and working to bring hybrid and electric vehicles to the market.  The market share of such vehicles has grown which shows that demand for such models and their acceptance in society has grown higher. Governments have formed stricter laws regarding environmental impact of automobiles and sustainability, violating which can prove costly for any auto brand. Volkswagen had to cough up billions for such a violation just a few years ago. This has proved to be a lesson for the company which is now investing a lot in minimizing its environmental impact and managing its image as an accountable brand. Audi has also increased its focus on sustainability and fuel economy. It has brought hybrids to the market and is going to release an electric model named Etron. As the demand for electric cars and hybrids grows around the world, release hybrids and electric cars is not just profitable for Audi but also great for its image.

Legal :-

Law and legal factors have also grown in importance in the context of international business. Legal compliance is of utmost importance for automobile brands and companies that do not comply are made to cough up a large sum, which can be a significant part of their annual net revenue. Apart from product quality and driver safety, there are also several more areas where companies need to be mindful of the applicable laws or bear fines and losses. From labor to environment and emissions, in all these areas, there are laws that affect automotive businesses.  Recently, Volkswagen was made to pay around $25 billions as fines for violating emission regulations. This was the biggest fine in the company’s history. Audi has maintained a relatively cleaner image. However, the fines affect the entire company and not just one or two brands in its portfolio. Audi and Volkswagen must remain careful in the future so as to avoid such hefty fines. Moreover, legal tussles affect brand image also and regaining the position you have built can be difficult once a brand’s image is tainted. While growing legal pressure is considered an impediment to fast growth, compliance is still essential since a brand otherwise stands to lose  a lot if it does not comply and the costs whether in terms of image or profits can be really big.

• Sources:
• Volkswagen Annual report 2018
• Audi Annual report 2018
• https://www.audiusa.com/technology/efficiency/e-tron
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