Globalizing Volkswagen: Creating excellence on all fronts

The Beetle had made Volkswagen (VW) a household name all over the world for more than 50 years. But in the early 1990s the VW Group, with its Audi, Seat and Skoda brands, was in bad shape: a high cost base, costly duplications between the different car brands and a weak model line-up had led profits to decline by 85% in 1992. At this point, Ferdinand Piëch, CEO of Audi, was asked to take over as CEO of the VW Group. The company ended 1993 with a loss of almost €1 billion. After almost a decade of Piëch’s leadership, the company was barely recognizable. In 2001 the Group’s net income increased to a record breaking €2.9 billion. Between 1993 and 2001 sales were up from €39.1 billion to €88.5 billion, with international sales increasing from 55% to 72%. The turnaround of the VW Group included making Audi into a premium brand competing directly with BMW and Mercedes; saving Seat from near bankruptcy; and transforming Skoda Auto from a cheap Eastern European car maker into a respected player. In addition, the VW Group acquired the rights to coveted brands such as Bentley luxury cars, bought an equity stake in Scania Trucks and revived the Bugatti car brand. According to Business Week, VW was “one of the world’s best car companies.” The case describes the transition from 1993 to 2001. The case takes readers through VW’s successful implementation of a platform manufacturing system, its globalization strategy, the move upmarket and many innovations along the business system. Piëch and his management team succeeded in integrating where it made sense while differentiating where it mattered to customers. Therefore VW was able to reap economies of scale over models, brands and regions.

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