The first section provides brief literature review on globalization within the context of the automotive industry wherein VW operates. This will be followed by background information on Volkswagen's global operations, with a particular emphasis on its operations in America. The second section discusses globalization and the issues affecting Volkswagen with respect to its promotion and distribution strategies. The final section explores the international structure most appropriate for VW based on its current position in the world market.
At its most fundamental, globalisation refers to the world as one big market and source of information. It is characterised by a free flow of goods, people and information around the world, an internationalization of economic processes and the emergence of world markets (Lemoine, W. and Dagnaes, L., 2002). Consequently globalization has given rise to new concepts such as global industries, organizations and strategies used to market and sell global products, brands and services. A global industry has been defined as 'an industry in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall operations' (Porter, 1980, p.275). The automotive industry has been recognized as a global industry in the sense that business activities or transactions made by a multinational automotive enterprise would not likely follow the business model from its host country. Shimokawa (1999) pointed out that these activities would include:
a) product development,
b) supply systems including factory locations,
c) systems to purchase from the suppliers of parts, components, intermediary material and raw material,
d) production systems at factories,
e) automobile sales and distribution systems although they may be different region by region (Shimokawa, 1999).
On the one hand, an organization may generally be considered as global when it 'operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors' (Kotler, 2000). On the other hand, this view was challenged by the perspective that only those organizations which have sales and production concentrations in certain clusters or areas that have been considered as most economically influential are the ones that could truly be called as 'global' (Rugman and Verbeke, 2004). In this context, the clusters or areas being referred are those distinguished for the number of multinational enterprises (MNEs) situated within their geographical territories. One of these clusters has been called the Triad Power comprising of the United States (US), the European Union (EU), and Japan (Ohmae, 1985). In this view, the general concept of globalization as one big market place for homogenous products and services, has been regarded as a myth (Rugman, 2000) since the major firms or MNEs that constitute the bulk of the global market carry out their production and operations on a regional basis. This means that the far-reaching context of