Operations Management of Volkswagen, BMW and Porsche - Essay Example

Executive Summary The business report is based on the comparison of operations strategy and operational performance objectives of Volkswagen, BMW andPorsche. As the names are famous themselves, Volkswagen, a German Automotive manufacturing company was founded in 1937 and in 2013 it was ranked ninth in the Fortune Global 500 list of the world’s largest companies. Currently it is ranked eighth and is the third biggest car manufacturer. According to Forbes, Volkswagen (VW) has the biggest market share in Western Europe. Currently VW Group owns most of the major names in the market starting from Volkswagen, Audi, SEAT, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Scania and MAN. According to statista.com VW’s global market share in 2012, based on the number of cars produced, was 13.6% in total (Statista, n.d. d). The report has covered a lot of areas which includes the different strategies used by three brands and about their focus on various elements which in combination become the operations strategies prevailing in individual organizations. The report also includes objectives and a four stage diagram which shows where the brands fall according to the model. It contains 4V analysis and they whole supply chain model. Comparatively, BMW which is currently on sixty-eighth position in Fortune Global 500 is not anywhere near as a competitor of VW. BMW is also a German Automobile manufacturing company that was founded in 1916. BMW owns some very renowned names like Rolls-Royce, which is the parent company of BMW, and Mini Cars. On the contrary BMW’s market share according to statista.com was 3.27% in 2012 based on the number of cars produced (Statista, n.d. a). Porsche was founded in 1931 by Ferdinand Porsche. In 2009 the company was acquired by Volkswagen group and now it is a part of this company. It had a very small contribution in VW market share in 2013 but in 2014 its individual market share increased which also increased the market share of VW as a whole (Winton, 2014). According to statista.com, in 2013 VW was the market leader with its revenue of 197.01 billion Euros followed by BMW which was 76.06 billion Euros (Statista, n.d. c). The contribution of Porsche in VW revenue was about 14.33 billion Euros in 2013 (Statista, n.d. b). Strategy Volkswagen majorly focuses on customer satisfaction and quality through introducing innovation and technologies. VW perceives customer satisfaction as the main factor of long-term success (Volkswagen, 2013). According to Forbes, in 2013 VW sold 9.7 million cars and their goal was to attain more than 10 million cars a year. VW’s major focus is to capture more market share every year which looks quite easy as it is having so many brands in its arsenal (Tierney, 2014). Apart from product strategy Volkswagen intentions is to be most lucrative employer in the market, as they believe that to manufacture best vehicles they need the best team of workers who are highly motivated and qualified. BMW claims to have two targets for its strategies; one of them to be profitable and creating value in their product and other one is to be technologically advanced. They claim that their strategy is built on four pillars which are Growth, Shaping the Future, Profitability and Access to Technologies and Customers (BMW Group, 2012). As far as Porsche is concerned, just like its major stakeholder Volkswagen, the company is focused on people including customers and employees. Secondly they are focused on value and growth followed by innovation and technologies. Mostly they consider themselves as customer-centred organization (Muller, 2013). If we compare all three organizations independently, VW and Porsche are relatively more customer-oriented organizations as compared to BMW. The reason both VW and Porsche combined have a lot of market share is clear as they provide what customers want. They focus on the needs of the customer with one eye and keep the other eye on the future in terms of innovations and technologies. Objectives Volkswagen and Porsche’s major focus is on quality, speed, dependability, flexibility and cost. Their aim is to continuously improve in all these areas. On the other hand BMW’s major focus is on quality and dependability. If one compares all the brands and products, the above statement becomes clearer. For Volkswagen group it has: Volkswagen having 74 Models of Cars Audi with 55 Models of Cars Porsche with 23 different Models Seat with 22 Models of Cars Skoda with 33 Models of Cars Bentley with just 8 Models Bugatti with only 2 The other brands also include a lot of cars, trucks and commercial vehicles as well. Alternatively BMW with three major names has: BMW having 38 different Models Mini 6 -7 Models Rose-Royce with just three luxurious cars We can see that BMW group is more focused on quality as compared to VW group which is focused on customer satisfaction. Four Stage Diagram Volkswagen and BMW group falls in Replication where they both have independent but similar business units. Volkswagen group has focused on replication more than BMW. Because of this reason they have more market share than BMW. 4Vs (Volume, Variety, Variation and Visibility) The Volume Dimension VW is best example to fall in this dimension. They have high volume, low cost and faster production. The volume of their operations is the basic factor which makes their business organized. The factor which is essential to their business is continuous improvement. BMW does not have a high volume as compared to VW. The combination that BMW has is low volume, high cost of production. If we treat Porsche individually it also has a low volume but they are trying to improve it as well. The Variety Dimension Likewise even in the variety dimension VW has more variety and more flexibility in terms of models. It also has its presence in more countries than BMW. For example, when a customer enters a showroom of Volkswagen he has an option to buy from 74 different models. On the other hand if the customer enters a BMW showroom he will only have just half of it. It is human nature that they tend to buy from where they have more options. More options means more customised, according to their needs and satisfaction. Similarly if a person goes for Porsche he will have to choose from only 23 models of cars. The Variation Dimension None of these brands fall in variation dimension, as they are designed and customized by the company itself. Customers do not have any options to modify or customize any of the cars according to their needs. The Visibility Dimension All of the three brands fall in visibility dimension as customers have the option to select from catalogue or go for a test drive and then buy it. The test drive part is expensive than catalogue as company resources are spent more on it as compared to catalogues. But customers prefer to go and physically look at the car, have a test drive and then buy it. Supply Chain Management Volkswagen considers its supply chain management as a responsible supply chain management. The strategy used by VW on their supply chain is of multiple suppliers. All the suppliers need to go through the process created by VW. In the introduction part suppliers have to go through contract clauses, procurement guidelines, introduction packet and awareness training. Then comes the assessment part where suppliers can self-assess themselves through a check list so that they can know there status. Then there are risk assessment and improvement plans if the supplier is lacking in some areas. The next three steps include validation, reporting and sustaining. BMW has named it supply chain management system as the innovative supply chain management system. Their basic strategy is Material-Cost reduction, Improvement of quality target, to approve innovations that are valuable to the customer and 100% supply performance of the plants. BMW supply chain approach is different from VW. All their operations are interconnected starting from supplier strategy where an optimal portfolio of suppliers is compiled and managed, then comes evaluation of supplier, nomination of the supplier, then come supplier risk management, supplier development and integration, supplier relationship management, supplier information management and then supplier audit. In simpler meaning BMW’s supply chain approach is more thorough in nature. Their goal is to detect any weak links as early as possible and to take suitable actions beforehand. Porsche on the other hand has a simple strategy for their supply chain department. Just like the previous two the first goal is to assess and nominate a supplier. Then they have focused on risk assessment and early alarming system. The rest of the factors are more or less the same, as it is now comes under the same parent company Volkswagen group. To conclude all the three companies have a big history and have prominent names and brand identities in the markets all over the world. The only difference comes from the level of operations they have. Volkswagen as the market leader among the three has the most market share and the strategies they are opting is helping them in sustaining their current position. BMW and Porsche have a big gap to cover to be in the competition of VW in the global market. References 1. BMW Group. (2012). Company portrait: Strategy. Retrieved August 10, 2014, from http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/unternehmen/unternehmensprofil/strategie/strategie.html 2. Muller, J. (2013). How Volkswagen Will Rule The World - Forbes. Retrieved August 10, 2014, from http://www.forbes.com/sites/joannmuller/2013/04/17/volkswagens-mission-to-dominate-global-auto-industry-gets-noticeably-harder/ 3. Statista. (n.d. a). BMW - global market share of passenger cars produced | Statistic. Retrieved August 10, 2014, from http://www.statista.com/statistics/277071/global-market-share-of-passenger-cars-produced-by-bmw/ 4. Statista. (n.d. b). Porsche - revenue 2013 | Statistic. Retrieved August 10, 2014, from http://www.statista.com/statistics/279488/revenue-of-porsche/ 5. Statista. (n.d. c.). Volkswagen, BMW, Daimler - revenue comparison 2013 | Statistic. Retrieved August 10, 2014, from http://www.statista.com/statistics/274013/revenue-comparison-of-volkswagen-bmw-and-daimler/ 6. Statista. (n.d. d). VW - global market share of passenger cars produced 2012. Retrieved August 10, 2014, from http://www.statista.com/statistics/277069/global-market-share-of-passenger-cars-produced-by-volkswagen/ 7. Tierney, C. (2014). Three Takeaways From VWs 2013 Global Sales Report - Forbes. Retrieved August 10, 2014, from http://www.forbes.com/sites/christinentierney/2014/01/12/three-takeaways-from-vws-2013-global-sales-report/ 8. Volkswagen. (2013). Volkswagen Group Strategy. Retrieved August 10, 2014, from http://www.volkswagenag.com/content/vwcorp/content/en/the_group/strategy.html Winton, N. (2014). Volkswagen Achieving Ambitious Sales Goals At Expense Of Profitability - Forbes. Retrieved August 10, 2014, from http://www.forbes.com/sites/neilwinton/2014/03/16/volkswagen-achieving-ambitious-sales-goals-at-expense-of-profitability/ Read More