Question

Volkswagen ranks with GM and Toyota as one of the top-three carmakers in the world today in terms of sales volume (in units). It uses its Volkswagen brand, as well as its entire portfolio of other brands, including the luxury marques of Porsche, Audi, Bentley, Bugatti, and Lamborghini, and at the lower end, the Seat, Skoda, and Scania. What type of diversification is Volkswagen pursuing? What are the advantages and disadvantages in VW’s corporate strategy?

Answer 1

VERTICAL DIVERSIFICATION

The comany is famous for it's vertical diversification.

A way to measure if a firm has high vertical integration(vertical diversification is also know as vertical integration)is through a value which is been added in sales ratio.If it is high the firm is set to be a vertical integrated,volkswagen's sale are one of the highest among the competitors.

The main plant for volkswagen is wolfsburg where it is assembled 45% of vertical integration.The group counts with the join venture of different business which takes care of different parts of the process of manufacturing a vehicle.

Volkswagen is also using a related or product diversification strategy of expanding into similar products. It is also expanding the geographically from Europe into the U.S. and China.

ADVANTAGES & DISADVANTAGES

IN VOLKSWAGENS CORPORATE STRATEGY

And the advantage of this strategy is sharing their resources and that are design and marketing etc,and the economies of scale.

Where related diversification often offers higher performance than the single business or unrelated diversification,and geographic diversification may limit economic downturns in one market.

Disadvantages of this strategy include the risk of focusing on efficiencies that threaten maintaining separate brand identities,(where they dont have the different way or the new way to attract the consumer in new innovation like various comfortable options that are not available in volkswagen) or economic, technological, or other trends that reduce the demand for automobiles.

Another disadvantage of geographic diversification involves meeting different consumer demands in different markets where each consumer have their way of taste in choosing the cars and volkswagen

And the main disadvantage in volkswagen is the maintenance cost,where as comparatively it is some what high than the other car manufacturing companies-not compared with luxury marque.