Volkswagen is an automobile group that stands in second place as an automobile manufacturer. Along with the passenger vehicle brand, the group has eleven other automobile manufacturers whose product ranges vary from motorcycles, and cars to commercial vehicles. The brand includes Seat, Ducati, Audi, and Scania among the others.
Although the company has created enormous sums of profits and has a great market share, the future is not all promising. The company’s business environment is analyzed using Pestle Analysis which examines external factors prevalent in political, economic, sociocultural, technological, legal, and environmental aspects. The future poses challenges as the company are facing immense trade tariffs, varying preferences of customers, and strict regulations. However, the company’s established brand reputation along with its ability to produce green vehicles may promise a good revenue and market share for the company in the coming days.
POLITICAL FACTORS
The major political factors that affect the working environment of the company are given below:
The challenging trade tariffs
The company is facing uncertainty over the tariffs as the major market share lies in the US and the UK whereas the company’s home base in Germany. The future may present a serious regulation challenge as the political situation between these countries is volatile. The years 2018 – 2019 have shown the quest of the US to impose tariffs on the goods imported from European Unions. Although the automotive industry is not yet subjected to these tariffs there is still the likelihood of the future aggressive imposition of taxes on this sector. The decision of the UK to leave the European Union has further aggravated the risk of tariff imposition on the company’s products.
ECONOMIC FACTORS
Subsequently discussed economic factors are the most significant in affecting the working of the company’s working environment.
Consumer’s Willingness to spend more
The increased willingness of the buyers to purchase more in quality as well as in quantity is showing an optimistic trend for the company’s future revenue growth. This means that consumers have developed the taste and capacity to buy more sophisticated products like electronics and automobile vehicles. These new trends suggest that the buyers in developing markets have also started to purchase automobile products wherein in the past they didn’t purchase. In developed markets, customers tend to buy fully optional products and enhanced model variations with quality in their choices. These trends signify the potential for growth and market share in the future.
SOCIOCULTURAL FACTORS AFFECTING THE VOLKSWAGEN
The following sociocultural factors discussed are responsible for influencing the company
Assorted perception of the brand
The company has a strong brand image and reputation across the world. The well-perceived and heavily valued brands include Lamborghini, Porsche, Audi, Bugatti, and Volkswagen. However, some brands are not as famous as others including Seat, etc. The fact that the company has given the variability of price range i.e. from expensive to affordable cars. The threat of other rival brands is becoming real. The youth of the world have shown their interest in BMW and Tesla as well among others. Therefore, the company has a mixed perception of its brand name.
A social shift away from owning and driving a vehicle
Another significant sociocultural factor is the shift of consumers away from personally owning and driving the car. These obvious reasons are financial as well as environmental. People nowadays prefer to travel by bicycle, train, or ride sharing or they are using traveling apps like Uber or Airshift. This trend has discouraged people from buying and owning expensive cars. This factor can reduce the sales and revenues of the company as well as the automobile industry as a whole. Interestingly, young ones are more likely to adopt this habit for a long time.
TECHNOLOGICAL FACTORS
The most prominent technological factors are discussed below
The provision of Self-driving cars
The new precedent settled by Tesla in the introduction of the self-driving car in the market has opened new technological eras. Automobile industries are undergoing experimentations to devise their self-driving cars. They need to use innovative software and hardware technologies in order to successfully manage self-driving technology. The development of high-quality cameras and accurate sensors has been accomplished by many companies. Whereas the key to this technology is the development of high-quality software that allows the car to sense the traffic and respond the situations. Volkswagen’s strong revenues and finances enable it to pursue this technology where many newcomers and even giant industries are facing constraints in developing the technology.
Green Technologies
The automotive sector is also executing experiments to enable green technologies usage. These eco-friendly technologies have become the new normal along with self-driving vehicles. The technological quest in this sector includes the development of electric motors, batteries as well as hydrogen fuel cells which are more efficient, energy-saver, and environmentally friendly. Audi, besides Porsche has developed many battery-powered cars and Audi is taking this eco-friendly production as its priority.
LEGAL FACTORS AFFECTING THE COMPANY
Ensuing legal factors are affecting the working environment of the company
Emissions Scandal
Volkswagen faced immense criticism when it was caught by the US Environmental Protection Agency in a prolonged scandal. The agency revealed that the company had cheated by using software the diesel engines to test emissions. Between 2009 to 2015, hundreds of hundreds of vehicles were produced by the company which failed to hold the measures of regulatory emissions. The scandal shocked the company as the company was imposed heavy taxes along with the damage to the brand’s reputation and the loss in exchange and stock prices. The company though has learned from the mistake and tried to maintain the laws and regulatory measures to smoothly conduct business operations.
ENVIRONMENTAL FACTORS
Volkswagen Group is affected by the succeeding environmental factors
Green Technologies
The new environmental shift from the use of combustible fossil fuels to the use of electric cars is not only a technological step ahead but also a step to conserve the environment. The perks of using this technology are various including improved gas mileage among others. Thereby, the development of hydrogen fuel cells, electric batteries, and motors are the steps forward toward the preservation of the environment.
CONCLUSION
Volkswagen is a giant in the automotive industrial landscape. The company has given the world’s most valuable brand in the automobile industrial segment. Therefore, the firm must consider strong strategic measures to compete with the challenges discussed above.
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