Volkswagen just seems to go from strength to strength. In recent times it has quietly risen through the ranks of the motor industry to appear as the third largest car manufacturer in the world today. It has done this by a combination of sheer business acumen, some clever acquisitions and a certain amount of good fortune.
Volkswagen Group, or VW AG, as it is now known from its previously ill advised acronym VAG is Europe’s biggest car manufacturer, with its headquarters located in Wolfsburg in central Germany. VW AG not only owns the brand VW, but also owns Audi, Bentley, Bugatti, Lamborghini, Seat and Skoda which is an enviable portfolio by anyone’s reckoning.
To give a brief history lesson, it was in the year 1933 that Adolf Hitler decided that the German public deserved a people s car ; in essence it should have four seats to accommodate the average German family, be able to drive up to 60mph but most importantly to be purchased by means of a saving scheme whereby people saved five German marks a week in order to purchase a car. Many paid into the savings scheme but the outbreak of war ultimately meant that few actually received their car with the notable exception of Hitler who although couldn’t drive received a Beetle for his 49th Birthday! The later success of the Beetle and ultimately the success of Volkswagen arose from these humble beginnings.
The manufacture of the Beetle was a key factor to its success. The main aim was to keep the production cost per unit as low as possible. Since this was the most challenging part of the equation, an entire city, Wolfsburg, was built in central Germany to host the production site. Wolfsburg’s infrastructure was based on the specific needs of Volkswagen. The production facility benefited from its location in relation to other industrial areas of Germany. In addition the railway connection to the Ruhr Valley, Germany’s largest industrial area, was vital as VW was dependent on the steel supply from there. Wolfsburg was built near the town of Braunschweig, which enabled VW to recruit a skilled local workforce.
Once the production aspect was completed, Ferdinand Porsche facilitated the manufacturing process and introduced flow production. He based this on the same principles of flow production at Henry Ford’s production lines in Detroit/USA. The disadvantage of flow production was the limited variety and flexibility within the production line, which was overcome through the production of just one model – the Beetle.
Through continuous re investment of profits into research and development, VW grew in importance through the 70s, 80s and 90s. However, in the early 90s, VW was facing a dilemma regarding their position in the market. It seemed that the luxury car market was growing extensively, leaving VW exposed with their medium range vehicles.
VW’s CEO was keen to be involved with high class brands like Bentley, who had serious financial problems at the time and were in need of backing. VW embarked on a number of high profile acquisitions and with each one introduced the same business philosophies that had worked for them. By the late 90s all of the brands were competing successfully in their markets, improving VW’s overall position. By 2000 VW was operating in nearly every sector of the market including Trucks, leaving them less exposed to risk should one particular market encounter difficulties.
VW’s move to production in Eastern Europe was criticised as it led to job cuts in Germany. However, this was deemed necessary to keep VW competitive as cheaper labour contributed to reducing costs. The ongoing success of Volkswagen is still largely dependent on their well organised infrastructure, not only in Germany but also through their supply channels around the world, which keeps production costs low whilst still maintaining quality, something which has backfired for other car makers.
Author Resource:-
In his latest article Jon Barlow looks at the rise of Volkswagen from humble beginnings to Global brand http://www.heritagewestbury.co.uk/
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