Volkswagen International Marketing Strategy by axf18348

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									                             Volkswagen:
                    Drivers Wanted

Company History
     Volkswagen’s Company is one of the top ten largest automobile companies in the
     world. From 1934 ---Ferdinand Porsche delivers an “Expos on the building of people’s
     cars” to Reich government--- till now, the world changed VW and VW cars changed
     the world. Let’s scroll through history and see how VW has become the company as we
     know it today.
     “In 1938, the "Gezuvor-Gesellschaft zur Vorbereitung des deutschen Volkswagens
     mbH" changes its name to "Volkswagenwerk GmbH" and is listed in the Berlin
     Commercial Register.
     In 1945, the germ-cell figures of Beetle production already amounted to 1,785.
     27 years later, this symbol of the upward trend in the economy of post-war Germany,
     and of industrialization and motorization in many countries of the world, was to
     overtake the Ford Model T as the most-sold model in history.
     In 1949, Allies transfer VW ownership rights to the Federal Government. Two Beetles
     were shipped from Netherlands overseas to the United States of America.




     In the early '50s, the globalization of Volkswagen began. Subsidiaries
     Were founded all over the world.
     In 1955, the 1,000,000th Volkswagen comes off the assembly line.
     In 1960, the government backed a plan to sell shares in Volkswagen, 60% were
     sold to the public and 40% owned by Federal Republic and state of Lower
     Saxony.
       In 1972, the Beetle overtakes the Model T Ford as best selling car in the world.
       In 1973, Passat is introduced.
       In 1974, Golf is introduced.
       In 1975, Polo is introduced.
       In 1978, the last Beetle to be built in Germany leaves the plant. Nominal capital
       is increased from DM 300 million to DM 1,200 million.
       In 1985, The Annual Meeting of Stockholders passes the resolution to change
       the company's name to "VOLKSWAGEN AG".
       In 1994, Volkswagen has coined a phrase for this: The breathing company, a
       concept with a future - for collective success. “
       In 1998, new sales record: the worldwide deliveries of the Volkswagen Group
       went up by 7.3 %.(1) (2)

Industry Information:
       All the manufacturing companies, suppliers, and dealers all contribute to make
the Automobile Industry one of the largest Industries in the United States of America.
According to the survey conducted by the Center for Automobile Research (CAR)
found on www.alliance.com, close to 6.6 million jobs are provided by the industry.
The automotive industry has the highest level of output within the nation making up 3.7
percent of America’s GDP. This industry also receives the most Research and
development funding with an estimated $18.4 billion annually. Due to the Automobile
industry’s increasing size and levels of output, it is the largest contributor to the
nation’s economy.

Industry:
        According to the U.S Government, the Automobile Industry breaks down its
industry by means of standard identification codes (SIC). We are ideally working with
the motor vehicle and car bodies sector (code 3711) which is found in the databases off
the library global access. For this study on Volkswagen, we are going to define the
industry we are working with as Compact Cars. According to the consumer guide at
www.consumerguide.com , both Volkswagen’s Golf and Jetta are classified as
subcompact cars. The Passat is slightly bigger with its classification being compact.
Another car we are looking at is the New Beetle which is classified as sporty coupe.




Industry Size:
        The total size of the auto industry was roughly 386.5 billion in U.S new auto
sales according to www.morgancom.com . These sales brought in an estimated $200.3
billion in revenue for the passenger car industry. The revenue numbers includes all four
car categories (midsize, compact, subcompact, sporty coupe, ) within the automobile
industry which are classification as the four models we fouced on for Volkswagen.
Approx. Sales Volume and the market share of Volkswagen

Chart 1
                          VW          Units Sold          Units sold From           Market share of
                                                     all auto manufacturrers       each product line
Subcompact              Golf             23,546             2,961,220                   0.08%
Compact                 Jetta           113,582             4,989,515                   2.30%
Subcompact             Passat            79,352               945,250                   8.39%
Sporty Coupe         New Beetle          26,363               824,727                   3.20%
Total Units Sold                        242,843             9,720,712                   3.50%


                                      (as of September 02)

        According to morgancom.com, 4 major models of Volkswagen are Golf, Jetta,
Passat, and New Beetle. Each model falls into a different industry such as subcompact,
compact , midsize, and sporty coupe. These 4 models produce most of the revenue for
Volkswagen. Chart 1 shows how many car have been sold in each classification of cars.
In chart 1, we have numbers of the each units sold, and the numbers of units sold with
in the U.S from all passenger manufacturers.For example, for the mid-sized car industry
we added all U.S sales number for the Acura Integra, BMW 323i, Ford Focus, and
Honda Civic, Nissan Altima, and the Volvo S40 sales numbers. This way, we could
figure out the proper number of VW’s market share in each industry.


We defined our each model’s competitors are as follows

          Make      Model                     Make       Model
Passat    Honda     Accord     Golf           Dodge      Neon
          Nissan    Maxima                    Ford       Focus
          Saturn    L-Series                  Honda      Civic
          Subaru    Legacy                    Nissan     Sentra
          Toyota    Camry                     Toyota     Corolla
Jetta     Acura     Integra                   Toyota     Echo
          BMW       323i       New Beetle     BMW        Z3
          Ford      Focus                     Mazda      Miata
          Honda     Civic                     Saturn     Coupe
          Nissan    Altima                    Chrysler   PT cruiser
          Volvo     S40
At the bottom, we have total sales unit numbers of these 4 models divided by total sales
unit numbers of U.S passenger car industry as of September 2002, to conclude that VW
has 3.5% market share in the passenger car industry. Volkswagen still has another
quarter to achieve average of 4.0% annual market share ( for total U.S sales of autos).

The relative contribution for each product (model) to Volkswagens revenue.

       In order to come up with each product contribution to revenue the information
we used is the 2002 U.S sales of Volkswagen cars, average sales price of each car, and
Volkswagens mark up per unit. The assumptions that we used are, for average price we
took the price ranges (listed below) added them up and divided by two to get the
average price.(5) Then the numbers for 2002 U.S auto sales come from
Morgancon.com. These are the assumptions that we went with for the proceeding
information. The 2002 U.S sales of Volkswagen and average sales price for each of the
cars and the current VW new car sales pie chart.

Volkswagen Average Price Range According to Car Models.

              Price Ranges          Avg. Selling Price    2002 VW’s Auto Sales*

Passat =   $21,750 - $38,700(5) =        $30,250                   79,352(4)

 Jetta =    $15,295 - $26,940(5) =       $21,117                  113,582(4)

Beetle=    $15,900 - $23,400(5) =        $19,650                   26,363(4)

 Golf =    $15,050 - $26,825(5) =     $20,937                      23,546(4)
                       *(Current U.S Sales as of September 02)

        From here we need to find the average U.S mark up for the Passat, Jetta, and
Golf. In locating this information I spoke with a car dealer/owner (with 20 years of
experience) Lou Dominion who stated “ the average mark up for all new VW’s sold is
about $8,000 for Jetta/Golf and 40% of the dealers cost for the Passat/ New Beetle,
and the average dealer mark up is 12%.”(7) With this information in place we can
account for each product lines contribution to revenue. Here is the formula we used to
process the following data.


Key Term’s
ASP= average sales price
DPP= dealer purchasing price
DM= Dealer’s mark up
VWMPU= VW’s Company mark up per unit
IR= Increased Revenue
VWAS= 2002 Volkswagen U.S auto sales
Formulas
1) ASP-( ASP x DM)=DPP
2) DPP-VWMPU= Revenue Contribution (For the Jetta/Golf) per unit sold
3) (DPP x VWMPU) = Revenue Contribution (For the Passat) per unit sold
4) (IR x VWAS) = VW’s Total U.S revenue contribution for all models sold

This is how we accounted for the relative contribution of the Passat to Volkswagens
revenue.
ASP=$30,250
DM= 12%
VWMPU= 40%
                             1) 30,250-(30,250 x 12%) =
                                 30,250-3630= 26,620
                               3) 26,620 x 40%=10,648
                         4) 10,648 x 79,352= $844,950,744

For each Passat sold in the U.S that sale increased Volkswagens revenue $10,648
dollars per unit. The Passat product line contribution to revenue equals $844,950,744
as of Septembee 2002.

This is how we accounted for the relative contribution of the Jetta to Volkswagens
revenue
ASP=$21,117
DM= 12%
VWMPU=$8,000
                             1) 21,117-(21,117 x 12%) =
                                21,117- 2,534= 18,582
                              2) 18,582- 8,000= $10,582
                         4) 8,000 x 113,582= $908,656,000

For each Passat sold in the U.S that sale increased Volkswagens revenue $8,000 dollars
per unit.

The Jettas product line contribution to revenue equals $908,656,000 as of September
2002.
.
This is how we accounted for the relative contribution of the New Beetle to
Volkswagens revenue.
ASP=$19,650
DM= 12%
VWMPU= 40%
                               1) 19,650-(19,650 x 12%) =
                                  19,650–2,358 = 17,292
                                3) 17,292 x 40%= $6,916
                           4) $6,916 x 26,363= $182,326,508
For each New Beetle sold in the U.S that sale increased Volkswagens revenue $6,916
dollars per unit.

The New Beetles product line contribution to revenue equals $182,326,508 as of
Septermer 002.

This is how we accounted for the relative contribution of the Golf to Volkswagens
revenue.
ASP=$20,937
DM=12%
VWMPU=$8,000
                             1) 20,937-(20,937 x 12%)=
                                20,937-2,512= 18,425
                              2) 18,425-8,000= $10,425
                          3) 8000 x 23,546= $188,368,000

For each Golf sold in the U.S that sale increased Volkswagens revenue $8,000 dollars
per unit.

The Golf product line contribution to revenue equals $188,368,000 as of September
2002.

The four P’s.
                                         Passat

Product
Volkswagen’s Passat is the midsize model the company has to offer. This car is made
in the GLS, GLS V6, and GLX models. Each model comes standard with air
conditioning, all power, eight- speaker Monsoon cassette/CD stereo system, dual front
and front side airbags, and heated front seats. The GLS V6 and GLS models comes
with leather and a walnut hand polished interior for a more luxury look. Each of these
models is equipped with the 4-motion safety system, which adapts your vehicle’s power
and traction to the weather conditions on the road.

Place
        Volkswagen thrives on making its products widely available with hundreds of
dealerships throughout the country. It places its dealer locations usually in densely
populated regions where potential consumers are close by. Each dealership offers a
fantastic showroom guaranteed to grab the attention of each and every consumer that
walks in the door. Inside the showroom customers can view several of the fine cars
Volkswagen offers including the Passat. At each dealership the showrooms have the
same feel and layout to allow that showroom itself to acts as a form of branding for the
VW image. By requiring this setting of their showrooms VW can set a controled
environment for all of their shopping customers
Promotion
        The promotion for the Passat is based upon the information that of past owners.
Male 50%, married 71%, median age 39, median household income $89,000, college
graduates 78%, and internet access of 91%.(4) VW marketing in commercial, paper,
and radio advertisements are directed towards this group of consumers. You can find
advertisements for this group in such ad avenues as Men Health, Sports Illustrated, and
ESPN. Volkswagen also guarantees customer satisfaction on all of its vehicles
including the Passat. As a little incentive to lure customers away from its competitors,
Volkswagen now offers to pay the first year of payments and give free gas for a month.
Other successful promotion ads featured the free trek mountain bike along with each of
its vehicles. VW also incorporates the knowledge that over 87.5% of VW customers
have internet access and over 80% of people that have bought car from VW have used
the internet to shop for cars at their site.(4) By using the internet VW can reach a
market that is most likely to purchase a car from them.

Price
       Volkswagen’s Passat ranges in price between all of its models, making it
affordable to almost anyone. The base model GLS carries a MSRP price of $21,750.
Its GLS V6 model runs slightly more in price with an MSRP of $24,250. The More
deluxe GLX model is Volkswagen’s most trendy model with an MSRP of $28,750.
Volkswagen prices its Passat slightly lower than all of its competitors and their
competing models making it affordable.

                                          Jetta

Product
         Volkswagen’s Jetta is the compact model the company has to offer. The Jetta
comes available in the GL, GLS, GLI, and the GLX models. The Jetta base model
comes with over 30 standard features on the GL standard and on the Jetta GLS it comes
with over 50 standard features. These features including everything from blue and red
illuminated instrumentation panel, eight speaker sound systems, CSTA (Child Seat
Tether Anchorage Points), and a power outlet in the trunk. These features give the Jetta
a unique position in the auto market due to this car having the most standard features in
its class of compact cars. This gives the buyer a sense of value in the product they are
buying.

Place
        Volkswagen cars readily available throughout the U.S and other countries
though its dealerships throughout the country and the world. VW places its dealer
locations usually in densely populated regions where potential consumers are close by.
Each dealership offers a fantastic showroom guaranteed to grab the attention of each
and every consumer that walks in the door. Inside the showroom customers can view
several of the fine cars Volkswagen offers including the Jetta. At each dealership the
showrooms have the same feel and layout to allow that showroom itself to acts as a
form of branding for the VW image. By requiring this setting of their showrooms VW
can set a controlled environment for all of their shopping customers
Promotion
        The promotion of the Jetta is based upon the information that of past owners.
Female 61%, single 45%, median age 31, median household income $59,000, college
graduates 61%, and internet access of 87%. VW’s marketing is in commercial, paper,
and radio advertisements are directed towards this group of consumers. You can find
advertisements for this group in such ad avenues as Cosmopolitan, O, Vogue, and TV.
Volkswagen also guarantees customer satisfaction on all of its vehicles including the
Passat. As a little incentive to lure customers away from its competitors, Volkswagen
now offers to pay the first year of payments and give free gas for a month. Other
successful promotion ads featured the free trek mountain bike along with each of its
vehicles. VW also incorporates the knowledge that over 87.5% of VW customers have
internet access and over 80% of people that have bought car from VW have used the
internet to shop for cars at their site.(4) By using the internet VW can reach a market
that is most likely to purchase a car from them.

Price
        Volkswagen’s Jetta ranges in price between all of its models, making it
affordable to almost anyone. The base model GL is priced at $15,295. The More deluxe
GLX model is Volkswagen’s most trendy model with an MSRP of
$26,940.Volkswagen pricing is very competitive for the compact market which the
Passat is in.



                                      New Beetle
Product
         The New Beetle is a bundle of contradictions. It's a blast from the past and a
gateway to the 21st century. It's small but it's safe. It's pretty but it can also be pretty
powerful. It is a trendy fashion statement.Volkswagen's New Beetle debuted at the
North American International Auto Show in Detroit this past January to classic 60s
tunes and daisies dotting the dashboards.The trademark Beetle body shape is
immediately recognizable, though it shares no parts with the old Beetle. It's both larger
(161.1 inches in length and 96.3 cubic feet inside) and more powerful than its
predecessor, and the engine is no longer in the back. The car is available with a 2.0-
liter, four-cylinder 115-horsepower engine or a high-tech Turbo Direct Injection diesel
engine that gets 48 mpg on the highway and has a driving range of 700 miles. Later in
the production cycle, a 1.8-liter 150 horsepower turbocharged engine will also be
available. With 16-inch wheels, modified front and rear axles and front-wheel drive,
cruising in the New Beetle "may remind you of the first time you drove the go-cart
around the track," said a company official.
This car is not just for nostalgic Baby Boomers, according to Volkswagen. Its appeal
crosses all lines of age, race and class. Its target audience is men, women, young people
or people who are simply young at heart
New Beetle includes a list of standard features. An eight-speaker Monsoon sound
system, the aforementioned six-speed transmission and ESP, dual power outlets, as well
as the company's enhanced warranty protection and roadside assistance for 4
years/50,000 miles, are all standard.

Place
        VW incorporates the knowledge that over 87.5% of VW customers have
internet access and over 80% of people that have bought car from VW have used the
internet to shop for cars at their site. In November, 2000, VW of America tried on-line
marketing and sold 2,500 orders of New Beetle had been sold.(more details in
promotion strategy)At each dealership the showrooms have the same feel and layout to
allow that showroom itself to acts as a form of branding for the VW image. By
requiring this setting of their showrooms VW can set a humongous environment for all
of their shopping customers.

Promotion
        According to popularmechanics.com and VW financial specialist, New Beetle
has the following biographic group- Female 61%, married 65 %, median age 44,
median household income $74,000, college graduates 56%, and internet access of 83%,
the owners’ age over 30 of 88%. Based on those biographic information VW markets
New Beetle on TV, magazines, and the internet. Especially, as mentioned above VW
promoted New Beetle with New color in 2000, and they advertised as “only 2000 New
Beetle are available for sale, and only way to claim your New Beetle will be On-line
purchasing. That promotion was very successful, and they got 2500 orders through the
net. Since that time, VW especially support lots of their customers on-line such as
supporting VW owners group on the net, and publish VW driver magazine. They also
started certified vehicle plan on their used car to bring up the quality of their used VW.
The plan basically give used car buyer a warranty plan as new vehicle, but not long as
new one.

Pricing
        First, we need to know that who are the competitors of New Beetle. They are
Ford Focus, Honda Civic, Hyundai Tiburon, Saturn SC, Subaru Impreza, and Toyota
Celica. Their prices range from $15,900 to $34,995. New Beetle, which average selling
price of $19,650, is in the middle of the price range of its competitors’ group. This is
very good position in the price of competitors to appeal consumers.


                                          Golf
Production
        The golf is the hatchback series of the VW product line. With the option of the
two-door GL or the four-door GSL you can’t go wrong. Both cars come with over 40
standard features including illuminated instrumentation, dual front and side impact air-
bags, CSTAP System(Child Seat Tether Anchorage Points), Latch System (Lower
Anchorage Tethers for Child Seats), along with several others. With the GSL having
optional packages being the GSL Luxury Package that includes a power sunroof and 15
inch alloy wheels, and the GSL Cold Weather Package that includes heated front seats
and heated windshield water nozzles.
Placement
        VW incorporates the knowledge that over 87.5% of VW customers have
internet access and over 80% of people that have bought car from VW have used the
internet to shop for cars at their site. (4) At each dealership the showrooms have the
same feel and layout to allow that showroom itself to acts as a form of branding for the
VW image. By requiring this setting of their showrooms VW can set a humongous
environment for all of their shopping customers.

Promotion
        The positioning for the Golf is based upon the information that of past owners.
Male 54%, marries 47%, median age 36, median household income $55,000, college
graduates 66%, and internet access of 89 %.( 4) VW marketing in commercial, paper,
and radio advertisements are directed towards this group of consumers. VW’s also
offers bumper-to-bumper warranty is now 4years/50,000 miles, and the power train
warranty is 5years/60,000 miles. Also mentioned is the 4years/50,000 miles 24-hours
roadside assistance. The Jetta safety features are side curtain protection, front and rear
three-point safety belts, anti-intrusion side door beams, and ergonomically designed
seats.

VW’s position in the Automotive Industry

         VW has set out to place them within the automotive industry as an emerging
leader with the intent to become a top leader in the automotive industry. Currently VW
is the largest carmaker in Europe and fourth largest in the world. VW intends to move
up in the automotive market through expansion of their product line, which is currently
directed towards their compact cars such as the Golf and the GTI, along with the use of
technological advancements in the areas of Power and Performance, Handling and
control, Active and Passive Safety, Comfort and Convenience, and Durability, Quality,
and Reliability.
         These technological advancements contribute to both the rational and emotional
components of the Volkswagen Brand. I say rational, because they materially improve
the car, but also emotional because they make positive contributions to the overall
driving experience. Because of this Volkswagen brings to mind words like fun,
exciting, and different from the rest. This makes owners feel more connected to their
VW than any other brand of car. Within the next few years VW plans on introducing
an SUV (The Colorado) to compete with BMW’s (X5) in the luxury domain. Also
planned in the future is the interest of taking over BMW, which would give them the
ability to penetrate the luxury market with the prestige that comes with the BMW title.
         One aspect that has allowed VW to excel in the automotive market is their
constant push for the highest quality car possible. Volkswagen has just been awarded
the 2002 “Total Quality Award” in the USA for its Golf, New Beetle and Passat. This is
the second consecutive year that VW has won the award, conducted by the “Strategic
Vision” marketing institute based in San Diego. Because of this VW claims they are
“the most significant European make on the American Market”, especially as the
rankings not only refer to customer experience with their new cars but also the service
provided by the dealerships and after-sales teams of the various manufacturers. (10)
The ability to appeal to the younger buyers as a cool, hip car has given VW an edge
over most of their competition in that segment of the market. This combination of high
quality at relatively low prices, applying new technologies, along with the appeal to the
younger generation allows VW to stand out form their competition in the automotive
industry.
                           References
1)http://www.hoovers.com/cgi-bin/offsite?site=HBN&url=http://www.vw-
personnel.com/geschichte/gesch_welcome.htm
3)http://www.volkswagen.co.uk/vwworld/vwworldcontroller.jsp?command=for
ward&appInstance_id=116&nextPage=../frames.jsp&applic=vwworld&categor
y_id=16854&selectedOption=4
4) (Personal Reference) Chris Jackson, 10/10/02, Location Hillsboro OR. VW
finance.
5) www.Consumerguide.com/cdb-org/fin?site=auto/carsales/VW_us.htm
6) www.Morgancom.com
7) (Person Reference) Lou Dominion, 10/13/02, Location Benton Harbor, MI;
Dealership Dominion Auto.
10) www.motornet.ie
11)www.amherst.edu/~ilstrata/VW.htm
12)www.iht.com/IHT/js/98/js032698.htm

								
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