Volkswagen in China: Running the Olympic Marathon

By Som, Ashok | European Business Forum, Autumn 2007 | Go to article overview

Volkswagen in China: Running the Olympic Marathon


Som, Ashok, European Business Forum


Bernd Pischetrieder, CEO of Volkswagen, took a few minutes from his busy agenda to reflect on the group's position. Although VW was still the largest carmaker in Europe, times were difficult. There had been losses in North America and there were serious productivity problems in Germany. And worse still, General Motors had replaced Volkswagen as the leading carmaker in China. This was a personal blow, for China had been one market that he was proud of. When most of his competitors had failed or had marginal success, VW had enjoyed leadership right from the time of market entry in 1985. But that was history. In 2000, VW enjoyed more than 50 per cent of the Chinese passenger car market, but this had slumped to 15 per cent by 2005. Winfried Vahland, who was responsible for the Chinese operations, had launched an "Olympic programme" to restore VW's position of leadership by 2008, the year of the Olympic Games in Beijing. Pischetrieder had faith in Vahland, but he remained concerned. Would Vahland be able to roll out this marathon programme and succeed in restoring the company's position in China?

[ILLUSTRATION OMITTED]

The Volkswagen stable

Founded in 1937 during the Nazi dictatorship in Germany, Volkswagen literally means "the car of the people". The company is based in Wolfsburg, Germany. In the 1950s and 1960s, the famous Beetle and the Volkswagen Bus helped turn the company into an international success story. Another iconic brand, the Golf, was launched in 1974. Other successful products followed: the Scirocco, the Golf GTI, the Lupo and the Touareg.

Organisationally, Volkswagen evolved into the Volkswagen Group, which also included Audi and Seat, which joined the Group in 1986, and Skoda, which VW acquired in 1991. It also included some exclusive elite brands such as Bentley, Bugatti and Lamborghini, in 1998. Services such as leasing, insurance and fleet business were also developed along with Europcar, one of the largest car rental companies in Europe. Within the group, sales revenue and operating profits were broken down into four geographic regions: North America, South America/South Africa, Asia and Europe/Rest of the World. The group's passenger car business was divided into two divisions, one under the leadership of Audi and the other Volkswagen. These two divisions were responsible for the results for their respective clusters worldwide.

VW had about 11.5 per cent of the car market worldwide. Its strongest position was historically Western Europe, where its market share was 18.1 percent. Its lowest market share was in North America with 5.7 percent. VW was much more international than other German carmakers. Although it still described itself as a "European-oriented company", in 1990 VW sold two-thirds of its cars outside Germany, and produced 40 per cent of its units overseas. But while BMW sold more than half its cars outside Germany, less than four per cent of its production sites were abroad.

[ILLUSTRATION OMITTED]

Of Volkswagen's 343,000 workers, about 179,000 were based in Germany, Including 103,000 in Wolfsburg. But Germany had become the most expensive place in the world to manufacture cars. The group needed to cut thousands of jobs and increase efficiency among those who remained. VW's sales were also suffering around the world. Between 2003 and 2004, VW lost market share in all regions except South America.

Volkswagen in China

The first Western auto manufacturer to enter China, VW opened its first office in Beijing in 1985. There followed a successful joint-venture partnership and a near monopoly in government and taxi sales for nearly 20 years. VW was the undisputed leader of the Chinese passenger car market until 2005.

The strategy of targeting taxi and official car fleets enabled VW to sell high volumes and thus harness economies of scale. The taxis become a permanent showroom for the brand, allowing VW to become well known and acquire credibility in China. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Volkswagen in China: Running the Olympic Marathon
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.