COMPETITIVE STRATEGIES OF VOLKSWAGEN

The three competitive strategies of Volkswagen are cost leadership, differentiation, and focus. During the early stage of Volkswagen, it was more of a low-cost leader; however, the increasing demand for more luxury models in 1970’s forced the company to shift its business-level strategies to be more differentiation (Plötner, 2011, p. 130). Currently, the company follows integrated cost leadership and differentiation strategy (Eldring, 2009, p. 4). Volkswagen is an example of broad cost leadership strategy. Although each brand has its own characteristics, Volkswagen produces cars with relatively low prices as it is a low-level brand. VW targets the low and middle classes, for instance, Touareg, Polo, Passat and Golf among others. However, Bentley, Audi, and Porsche produce a more expensive sports and luxury models. Volkswagen cars are manufactured for the road as all of their engines are developed with a prolonged service interval of 15,000 kilometres to give their customers more driving time and less time in workshops thus less money for service costs. Also, the cars have low fuel consumption ensures that the total cost of ownership is often kept at a minimum level (Palepu, 2007, p. 197). Therefore, cost leadership has been a key competitive strategy used by VW to target low-income class.

Another competitive strategy used by VW is focus strategy. VW has divided its niche markets into two, low and middle class as well as high class (Plötner, 2011, p. 130). It understands the needs of the low and middle class and hence develops uniquely low-cost as well as well-specified products for the market such as Touareg, Polo, Passat and Golf among others (Palepu, 2007, p. 197). The same happens for high class, for example, Bentley, Audi, and Porsche produce more expensive sports and luxury models for this class. By concentrating on the production of luxury cars, VW is a high-cost provider of cars to the affluent consumers. This has enabled VW to develop a competitive advantage over other firms that target only a single niche market. Finally, VW uses differentiation strategy by focusing on the improvement of product quality, innovation, and sustainability. With differentiation, VW ensures that their customers are fully satisfied with their products thereby being willing to pay a premium for their products (Eldring, 2009, p. 4). VW ensures innovative designs as well as concept cars to satisfy tomorrow’s needs which give them a competitive advantage.

 

 

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