International Business: Volkswagen

Topics: Automotive industry, Volkswagen Group, Volkswagen Pages: 10 (4694 words) Published: August 12, 2013
The foundation of Volkswagen dates back to the Third Reich. For the opening of the international automobile show in Berlin 1934, Adolf Hitler demanded the development of a car which should be priced at a maximum price of 1000 Reichsmark and thus remain affordable for the average citizen. This car should be named ‘Car of the people’ (Volkswagen) and offer space for a family of four members. The first model was designed by Ferdinand Porsche in 1934 and in May 1937, the “Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH” (a company for the preparation of the German Volkswagen Ltd.) was established in Berlin (Volkswagen AG 2013). One year later, the company changed its name into “Volkswagenwerk Gmbh”: The beginning of today’s popular German car manufacturer.

Over the last decades, Volkswagen turned from being the owner of a single production plant in Wolfsburg into Europe’s largest automobile producer and the third largest of the world with a yearly turnover of about € 192,676 million. The company sells, directs and produces twelve automobile brands all over world. 550,000 employees work together to produce 37,700 cars per day which can be purchased in 153 countries (Volkswagen Company 2013). The following report focuses on the automotive division, excluding the financial services division and other subsidiaries.

1a) The design of a multinational enterprise’s (MNE) strategy is primordially determined by the institutions and the prevailing culture of its home country. Volkswagen’s (VW) economic origin is found in central Germany, a town called Wolfsburg, where one of its largest production sites is still in place. Often described as Europe’s economic engine (Iwulska et. al 2013), Germany possesses a culture favoring individualism and refusing power distance (Hofstede 2013, appendix 1.1.). With a score of 67 on Hofstede’s individualism scale, Germany joins those Northern European countries prioritizing self-actualization, which often leads German workers to pioneer the motto of “live in order to work”. In this context, the work itself constitutes an important source of self-esteem in the German culture. This mentality strongly ties in with a pronounced masculinity, prioritizing career progression and material rewards as well as approving a sharp differentiation in gender roles (Peng & Meyer, p.75).At the same time, the exchange between the average worker and their supervisor is marked by mutual constructive feedback and participation (Peng & Mayer, p.75), as expressed in low power distance scores. However, one can observe the strong concern for structured situations which describes a core element of the German culture (Vector Study 2012). Typical for a country scoring high on the uncertainty avoidance scale, Germany favors a bank-based financial system where risk reduction portrays a priority (Tadesse et al. 2005, p.4). In contrast, Germany scores particularly low on the long-term orientation scale, as expressed in its great appreciation for respecting traditions as well as establishing the truth (Hofstede 2013, appendix 1.1.).

Another determinant of designing a successful strategy displays the global connectedness of the country, namely the degree of information exchange, human resources and trade with other economies of the world. With the second highest overall connectedness index, Germany meets the expectations of one of the world’s largest exporting economies. Such strength in export is promoted by the achieved European Integration (EU) which remains the most globally connected region of the world (Ghemawat 2012). As opposed to the modest sustainable rally of the overall global connectedness index in those years following the financial crisis (Ghemawat 2013), Germany managed to further approach its peak value of 2007 whilst consolidating its economic position in Europe as seen by its presence in Europe’s top 10 countries in all four pillars of the index (Ghemawat et al. 2012, appendix 1.2.)....
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