Volkswagen Sources of Competitive Advantage 

What are Volkswagen’s leading sources of competitive advantage?

Volkswagen AG is a leading global automotive company with a strong presence in all the leading automobile markets including the US and China. The company has maintained its strong global presence through a large distribution and sales network. It has also entered into partnerships with other motor brands to strengthen its position in key markets. Its partnership with FAW Motors in China has been particularly successful. As an automobile brand, VW has one of the largest product portfolios in the industry. It has some attractive premium car and motorcycle brands in its portfolio including Audi, Ducati, and Skoda. The global automobile industry entered a difficult phase during 2019. However, VW has still maintained its strong position in leading markets like China where Audi is among the best selling premium car brands. For acquiring faster growth, the company has focused on customer experience as well as innovation. Even after the diesel scandal that happened in 2015, VW made a strong return. The automobile industry has grown highly challenging. However, VW has managed several sources of competitive advantage which will help it retain its leading market position even in the longer term. With competition and a number of challenges growing higher in the automobile industry, automobile companies need to have several sources of competitive advantage to grow their market share and retain sales and revenue.

Large Product portfolio:

One of the leading sources of VW’s competitive advantage in the automobile industry is its large and diversified product portfolio which includes industry-leading brands like Audi and Ducati.  A large product portfolio offers a distinct and unique advantage and helps maintain demand and sales even during difficult times. It also helps VW serve several customer segments including the average consumer and the premium segment. The company has a large customer-oriented product range to cater to various segments of customers with different needs and preferences. Apart from the Volkswagen passenger cars and commercial vehicles under the MAN brand, it also offers cars under the Skoda, Audi, SEAT, and Porsche brands. There are 12 brands in the product portfolio of Volkswagen Motors. 

Brand image:

As an automobile brand, Volkswagen has maintained a strong brand image by focusing on product quality, innovation, and customer satisfaction. This has led to higher popularity and stronger sales worldwide. As competition has intensified in the automobile industry, companies are focusing more on a stronger brand image since it has a direct impact on sales and revenue. For this reason, Volkswagen, as well as the other leading brands, are investing in technological innovation, passenger safety, customer satisfaction, and marketing. While Volkswagen received a major jolt to its image in 2015, the company made a strong return in the following years. Audi was the best selling premium car brand in China in 2018. This shows that the company has maintained a strong brand image globally. In the automobile industry, brand image affects customer loyalty but it also affects market share. The stronger the brand image of an automobile brand, the faster will it grow its market share.

Customer loyalty:

Customer loyalty is also an important source of competitive advantage in the automobile industry. However, managing high customer loyalty requires a focus on several things. Apart from marketing, brands also need to focus on technology, passenger safety as well as the overall riding experience. If Volkswagen has managed a high level of customer loyalty then it is because the company focuses on all these specific areas simultaneously. Fleet customers are also a large part of the company’s overall customer base. A large customer-oriented product range and the service focus of its staff have also continued to drive the level of loyalty VW enjoys worldwide higher. In 2018, Volkswagen sold 10.9 million vehicles compared to 10.77 million in 2017. 

Global presence:

Volkswagen has maintained a strong global presence through its manufacturing and distribution network. To strengthen its global presence the company has also formed partnerships with several other companies. The Volkswagen group operates 122 production plants in 20 countries in Europe as well as 11 more countries in the Americas, Asia, and Africa. The company is headquartered in Wolfsburg and is the largest carmaker in entire Europe. It sells its vehicles across 153 countries. In China, the company has entered into a joint venture with FAW Motors. It has also partnered the Ford Motor Company to serve its customers worldwide better.  Its extensive global manufacturing and distribution network is also an important source of competitive advantage for VW.

 Supply chain network:

Since the level of competition in the automobile industry has increased a lot, any company needs to ensure a consistent supply of raw materials in order to produce great quality products. Volkswagen Group has also managed its global supply chain network. It sources from several thousands of suppliers from around the globe and has formed long term relationships with many to ensure a consistent supply of quality raw material. The company also works in partnership with its suppliers to make its supply chain network as sustainable as possible. VW is also investing in optimizing its supply chain through the use of technology to reduce operational costs and improve production. It has partnered with blockchain specialist Minespider to make its supply chain network more accountable and transparent. Having a well-managed supply chain leads to a strong source of competitive advantage in the automobile industry.

Research and innovation:

Research and innovation are also an important source of competitive advantage for an automobile brand. On the one hand, competition has kept growing intense, on the other technological innovation has become a source of differentiation as well as important for market expansion. All the leading automobile companies including Volkswagen AG are investing a lot in research and development for growing their market share by bringing products that are more attractive as well as technologically advanced. The Volkswagen group is also growing its investment in research and development year after year. In 2018, the company invested €13.64 billion in research and development compared to €13.14 billion in 2017. There were more than 12,000 people working in research and development for Volkswagen Group in the year 2018. Some of the key areas where Volkswagen has focussed its research and development efforts include autonomous driving, sustainability, virtual technologies, passenger safety, etc. 

Other sources of competitive advantage:

Some of the other key sources of competitive advantage for the Volkswagen Group include a large pool of talented human resources and a strong business model. The company employed In 2018, the company employed 6,64,500 employees worldwide. It invests a lot in its employees and their career development to keep them motivated and focused. Talented employees have become key to growth and advancement in the automobile industry. There is a lot of competition between the leading automobile makers to hire and retain talented staff. The total personnel expenses of Volkswagen Group in 2018 amounted to €41.16 billion.

The business model of Volkswagen is also a major source of competitive advantage for the brand. It has a strong business model comprised of 12 brands. Due to its consistent focus on product quality, supply chain efficiency, production management, and industry-leading partnerships, the business model of Volkswagen Group has continued to grow stronger over time.

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