Volkswagen: Drivers Wanted

Company History
Volkswagens Company is one of the top ten largest automobile companies in the world. From 1934 ---Ferdinand Porsche delivers an Expos on the building of peoples cars to Reich government--- till now, the world changed VW and VW cars changed the world. Lets scroll through history and see how VW has become the company as we know it today. In 1938, the "Gezuvor-Gesellschaft zur Vorbereitung des deutschen Volkswagens mbH" changes its name to "Volkswagenwerk GmbH" and is listed in the Berlin Commercial Register. In 1945, the germ-cell figures of Beetle production already amounted to 1,785. 27 years later, this symbol of the upward trend in the economy of post-war Germany, and of industrialization and motorization in many countries of the world, was to overtake the Ford Model T as the most-sold model in history. In 1949, Allies transfer VW ownership rights to the Federal Government . Two Beetles were shipped from Netherlands overseas to the United States of America.

In the early '50s, the globalization of Volkswagen began. Subsidiaries Were founded all over the world. In 1955, the 1,000,000th Volkswagen comes off the assembly line. In 1960, the government backed a plan to sell shares in Volkswagen, 60% were sold to the public and 40% owned by Federal Republic and state of Lower Saxony.

In 1972, the Beetle overtakes the Model T Ford as best selling car in the world. In 1973, Passat is introduced. In 1974, Golf is introduced. In 1975, Polo is introduced. In 1978, the last Beetle to be built in Germany leaves the plant. Nominal capital is increased from DM 300 million to DM 1,200 million. In 1985, The Annual Meeting of Stockholders passes the resolution to change the company's name to "VOLKSWAGEN AG". In 1994, Volkswagen has coined a phrase for this: The breathing company, a concept with a future - for collective success. In 1998, new sales record: the worldwide deliveries of the Volkswagen Group went up by 7.3 %.(1) (2) Industry Information: All the manufacturing companies, suppliers, and dealers all contribute to make the Automobile Industry one of the largest Industries in the United States of America. According to the survey conducted by the Center for Automobile Research (CAR) found on www.alliance.com, close to 6.6 million jobs are provided by the industry. The automotive industry has the highest level of output within the nation making up 3.7 percent of Americas GDP. This industry also receives the most Research and development funding with an estimated $18.4 billion annually. Due to the Automobile industrys increasing size and levels of output, it is the largest contributor to the nations economy. Industry: According to the U.S Government, the Automobile Industry breaks down its industry by means of standard identification codes (SIC). We are ideally working with the motor vehicle and car bodies sector (code 3711) which is found in the databases off the library global access. For this study on Volkswagen, we are going to define the industry we are working with as Compact Cars. According to the consumer guide at www.consumerguide.com , both Volkswagens Golf and Jetta are classified as subcompact cars. The Passat is slightly bigger with its classification being compact. Another car we are looking at is the New Beetle which is classified as sporty coupe.

Industry Size: The total size of the auto industry was roughly 386.5 billion in U.S new auto sales according to www.morgancom.com . These sales brought in an estimated $200.3 billion in revenue for the passenger car industry. The revenue numbers includes all four car categories (midsize, compact, subcompact, sporty coupe, ) within the automobile industry which are classification as the four models we fouced on for Volkswagen.

Approx. Sales Volume and the market share of Volkswagen Chart 1 VW Subcompact Compact Subcompact Sporty Coupe Total Units Sold Golf Jetta Passat New Beetle Units Sold 23,546 113,582 79,352 26,363 242,843 2,961,220 4,989,515 945,250 824,727 9,720,712 0.08% 2.30% 8.39% 3.20% 3.50%

(as of September 02) According to morgancom.com, 4 major models of Volkswagen are Golf, Jetta, Passat, and New Beetle. Each model falls into a different industry such as subcompact, compact , midsize, and sporty coupe. These 4 models produce most of the revenue for Volkswagen. Chart 1 shows how many car have been sold in each classification of cars. In chart 1, we have numbers of the each units sold, and the numbers of units sold with in the U.S from all passenger manufacturers.For example, for the mid-sized car industry we added all U.S sales number for the Acura Integra, BMW 323i, Ford Focus, and Honda Civic, Nissan Altima, and the Volvo S40 sales numbers. This way, we could figure out the proper number of VWs market share in each industry. We defined our each models competitors are as follows
Passat Make Honda Nissan Saturn Subaru Toyota Acura BMW Ford Honda Nissan Volvo Model Accord Maxima L-Series Legacy Camry Integra 323i Focus Civic Altima S40 Golf Make Dodge Ford Honda Nissan Toyota Toyota BMW Mazda Saturn Chrysler Model Neon Focus Civic Sentra Corolla Echo Z3 Miata Coupe PT cruiser

Jetta

New Beetle

At the bottom, we have total sales unit numbers of these 4 models divided by total sales unit numbers of U.S passenger car industry as of September 2002, to conclude that VW has 3.5% market share in the passenger car industry. Volkswagen still has another quarter to achieve average of 4.0% annual market share ( for total U.S sales of autos). The relative contribution for each product (model) to Volkswagens revenue. In order to come up with each product contribution to revenue the information we used is the 2002 U.S sales of Volkswagen cars, average sales price of each car, and Volkswagens mark up per unit. The assumptions that we used are, for average price we took the price ranges (listed below) added them up and divided by two to get the average price.(5) Then the numbers for 2002 U.S auto sales come from Morgancon.com. These are the assumptions that we went with for the proceeding information. The 2002 U.S sales of Volkswagen and average sales price for each of the cars and the current VW new car sales pie chart. Volkswagen Average Price Range According to Car Models. Price Ranges Passat = Jetta = Beetle= Golf = Avg. Selling Price $30,250 $21,117 $19,650 2002 VWs Auto Sales* 79,352(4) 113,582(4) 26,363(4) 23,546(4)

$21,750 - $38,700(5) = $15,295 - $26,940(5) = $15,900 - $23,400(5) =

$15,050 - $26,825(5) = $20,937 *(Current U.S Sales as of September 02)

From here we need to find the average U.S mark up for the Passat, Jetta, and Golf. In locating this information I spoke with a car dealer/owner (with 20 years of experience) Lou Dominion who stated the average mark up for all new VWs sold is about $8,000 for Jetta/Golf and 40% of the dealers cost for the Passat/ New Beetle, and the average dealer mark up is 12%.(7) With this information in place we can account for each product lines contribution to revenue. Here is the formula we used to process the following data.

Key Terms ASP= average sales price DPP= dealer purchasing price DM= Dealers mark up VWMPU= VWs Company mark up per unit IR= Increased Revenue VWAS= 2002 Volkswagen U.S auto sales

Formulas 1) ASP-( ASP x DM)=DPP 2) DPP-VWMPU= Revenue Contribution (For the Jetta/Golf) per unit sold 3) (DPP x VWMPU) = Revenue Contribution (For the Passat) per unit sold 4) (IR x VWAS) = VWs Total U.S revenue contribution for all models sold This is how we accounted for the relative contribution of the Passat to Volkswagens revenue. ASP=$30,250 DM= 12% VWMPU= 40% 1) 30,250-(30,250 x 12%) = 30,250-3630= 26,620 3) 26,620 x 40%=10,648 4) 10,648 x 79,352= $844,950,744 For each Passat sold in the U.S that sale increased Volkswagens revenue $10,648 dollars per unit. The Passat product line contribution to revenue equals $844,950,744 as of Septembee 2002. This is how we accounted for the relative contribution of the Jetta to Volkswagens revenue ASP=$21,117 DM= 12% VWMPU=$8,000 1) 21,117-(21,117 x 12%) = 21,117- 2,534= 18,582 2) 18,582- 8,000= $10,582 4) 8,000 x 113,582= $908,656,000 For each Passat sold in the U.S that sale increased Volkswagens revenue $8,000 dollars per unit. The Jettas product line contribution to revenue equals $908,656,000 as of September 2002. . This is how we accounted for the relative contribution of the New Beetle to Volkswagens revenue. ASP=$19,650 DM= 12% VWMPU= 40% 1) 19,650-(19,650 x 12%) = 19,6502,358 = 17,292 3) 17,292 x 40%= $6,916 4) $6,916 x 26,363= $182,326,508

For each New Beetle sold in the U.S that sale increased Volkswagens revenue $6,916 dollars per unit. The New Beetles product line contribution to revenue equals $182,326,508 as of Septermer 002. This is how we accounted for the relative contribution of the Golf to Volkswagens revenue. ASP=$20,937 DM=12% VWMPU=$8,000 1) 20,937-(20,937 x 12%)= 20,937-2,512= 18,425 2) 18,425-8,000= $10,425 3) 8000 x 23,546= $188,368,000 For each Golf sold in the U.S that sale increased Volkswagens revenue $8,000 dollars per unit. The Golf product line contribution to revenue equals $188,368,000 as of September 2002. The four Ps. Passat Product Volkswagens Passat is the midsize model the company has to offer. This car is made in the GLS, GLS V6, and GLX models. Each model comes standard with air conditioning, all power, eight- speaker Monsoon cassette/CD stereo system, dual front and front side airbags, and heated front seats. The GLS V6 and GLS models comes with leather and a walnut hand polished interior for a more luxury look. Each of these models is equipped with the 4-motion safety system, which adapts your vehicles power and traction to the weather conditions on the road. Place Volkswagen thrives on making its products widely available with hundreds of dealerships throughout the country. It places its dealer locations usually in densely populated regions where potential consumers are close by. Each dealership offers a fantastic showroom guaranteed to grab the attention of each and every consumer that walks in the door. Inside the showroom customers can view several of the fine cars Volkswagen offers including the Passat. At each dealership the showrooms have the same feel and layout to allow that showroom itself to acts as a form of branding for the VW image. By requiring this setting of their showrooms VW can set a controled environment for all of their shopping customers

Promotion The promotion for the Passat is based upon the information that of past owners. Male 50%, married 71%, median age 39, median household income $89,000, college graduates 78%, and internet access of 91%.(4) VW marketing in commercial, paper, and radio advertisements are directed towards this group of consumers. You can find advertisements for this group in such ad avenues as Men Health, Sports Illustrated, and ESPN. Volkswagen also guarantees customer satisfaction on all of its vehicles including the Passat. As a little incentive to lure customers away from its competitors, Volkswagen now offers to pay the first year of payments and give free gas for a month. Other successful promotion ads featured the free trek mountain bike along with each of its vehicles. VW also incorporates the knowledge that over 87.5% of VW customers have internet access and over 80% of people that have bought car from VW have used the internet to shop for cars at their site.(4) By using the internet VW can reach a market that is most likely to purchase a car from them. Price Volkswagens Passat ranges in price between all of its models, making it affordable to almost anyone. The base model GLS carries a MSRP price of $21,750. Its GLS V6 model runs slightly more in price with an MSRP of $24,250. The More deluxe GLX model is Volkswagens most trendy model with an MSRP of $28,750. Volkswagen prices its Passat slightly lower than all of its competitors and their competing models making it affordable. Jetta Product Volkswagens Jetta is the compact model the company has to offer. The Jetta comes available in the GL, GLS, GLI, and the GLX models. The Jetta base model comes with over 30 standard features on the GL standard and on the Jetta GLS it comes with over 50 standard features. These features including everything from blue and red illuminated instrumentation panel, eight speaker sound systems, CSTA (Child Seat Tether Anchorage Points), and a power outlet in the trunk. These features give the Jetta a unique position in the auto market due to this car having the most standard features in its class of compact cars. This gives the buyer a sense of value in the product they are buying. Place Volkswagen cars readily available throughout the U.S and other countries though its dealerships throughout the country and the world. VW places its dealer locations usually in densely populated regions where potential consumers are close by. Each dealership offers a fantastic showroom guaranteed to grab the attention of each and every consumer that walks in the door. Inside the showroom customers can view several of the fine cars Volkswagen offers including the Jetta. At each dealership the showrooms have the same feel and layout to allow that showroom itself to acts as a form of branding for the VW image. By requiring this setting of their showrooms VW can set a controlled environment for all of their shopping customers

Promotion The promotion of the Jetta is based upon the information that of past owners. Female 61%, single 45%, median age 31, median household income $59,000, college graduates 61%, and internet access of 87%. VWs marketing is in commercial, paper, and radio advertisements are directed towards this group of consumers. You can find advertisements for this group in such ad avenues as Cosmopolitan, O, Vogue, and TV. Volkswagen also guarantees customer satisfaction on all of its vehicles including the Passat. As a little incentive to lure customers away from its competitors, Volkswagen now offers to pay the first year of payments and give free gas for a month. Other successful promotion ads featured the free trek mountain bike along with each of its vehicles. VW also incorporates the knowledge that over 87.5% of VW customers have internet access and over 80% of people that have bought car from VW have used the internet to shop for cars at their site.(4) By using the internet VW can reach a market that is most likely to purchase a car from them. Price Volkswagens Jetta ranges in price between all of its models, making it affordable to almost anyone. The base model GL is priced at $15,295. The More deluxe GLX model is Volkswagens most trendy model with an MSRP of $26,940.Volkswagen pricing is very competitive for the compact market which the Passat is in.

New Beetle
Product The New Beetle is a bundle of contradictions. It's a blast from the past and a gateway to the 21st century. It's small but it's safe. It's pretty but it can also be pretty powerful. It is a trendy fashion statement.Volkswagen's New Beetle debuted at the North American International Auto Show in Detroit this past January to classic 60s tunes and daisies dotting the dashboards.The trademark Beetle body shape is immediately recognizable, though it shares no parts with the old Beetle. It's both larger (161.1 inches in length and 96.3 cubic feet inside) and more powerful than its predecessor, and the engine is no longer in the back. The car is available with a 2.0liter, four-cylinder 115-horsepower engine or a high-tech Turbo Direct Injection diesel engine that gets 48 mpg on the highway and has a driving range of 700 miles. Later in the production cycle, a 1.8-liter 150 horsepower turbocharged engine will also be available. With 16-inch wheels, modified front and rear axles and front-wheel drive, cruising in the New Beetle "may remind you of the first time you drove the go-cart around the track," said a company official. This car is not just for nostalgic Baby Boomers, according to Volkswagen. Its appeal crosses all lines of age, race and class. Its target audience is men, women, young people or people who are simply young at heart New Beetle includes a list of standard features. An eight-speaker Monsoon sound system, the aforementioned six-speed transmission and ESP, dual power outlets, as well

as the company's enhanced warranty protection and roadside assistance for 4 years/50,000 miles, are all standard. Place VW incorporates the knowledge that over 87.5% of VW customers have internet access and over 80% of people that have bought car from VW have used the internet to shop for cars at their site. In November, 2000, VW of America tried on-line marketing and sold 2,500 orders of New Beetle had been sold.(more details in promotion strategy)At each dealership the showrooms have the same feel and layout to allow that showroom itself to acts as a form of branding for the VW image. By requiring this setting of their showrooms VW can set a humongous environment for all of their shopping customers. Promotion According to popularmechanics.com and VW financial specialist, New Beetle has the following biographic group- Female 61%, married 65 %, median age 44, median household income $74,000, college graduates 56%, and internet access of 83%, the owners age over 30 of 88%. Based on those biographic information VW markets New Beetle on TV, magazines, and the internet. Especially, as mentioned above VW promoted New Beetle with New color in 2000, and they advertised as only 2000 New Beetle are available for sale, and only way to claim your New Beetle will be On-line purchasing. That promotion was very successful, and they got 2500 orders through the net. Since that time, VW especially support lots of their customers on-line such as supporting VW owners group on the net, and publish VW driver magazine. They also started certified vehicle plan on their used car to bring up the quality of their used VW. The plan basically give used car buyer a warranty plan as new vehicle, but not long as new one. Pricing First, we need to know that who are the competitors of New Beetle. They are Ford Focus, Honda Civic, Hyundai Tiburon, Saturn SC, Subaru Impreza, and Toyota Celica. Their prices range from $15,900 to $34,995. New Beetle, which average selling price of $19,650, is in the middle of the price range of its competitors group. This is very good position in the price of competitors to appeal consumers. Golf Production The golf is the hatchback series of the VW product line. With the option of the two-door GL or the four-door GSL you cant go wrong. Both cars come with over 40 standard features including illuminated instrumentation, dual front and side impact airbags, CSTAP System(Child Seat Tether Anchorage Points), Latch System (Lower Anchorage Tethers for Child Seats), along with several others. With the GSL having optional packages being the GSL Luxury Package that includes a power sunroof and 15 inch alloy wheels, and the GSL Cold Weather Package that includes heated front seats and heated windshield water nozzles.

Placement VW incorporates the knowledge that over 87.5% of VW customers have internet access and over 80% of people that have bought car from VW have used the internet to shop for cars at their site. (4) At each dealership the showrooms have the same feel and layout to allow that showroom itself to acts as a form of branding for the VW image. By requiring this setting of their showrooms VW can set a humongous environment for all of their shopping customers. Promotion The positioning for the Golf is based upon the information that of past owners. Male 54%, marries 47%, median age 36, median household income $55,000, college graduates 66%, and internet access of 89 %.( 4) VW marketing in commercial, paper, and radio advertisements are directed towards this group of consumers. VWs also offers bumper-to-bumper warranty is now 4years/50,000 miles, and the power train warranty is 5years/60,000 miles. Also mentioned is the 4years/50,000 miles 24-hours roadside assistance. The Jetta safety features are side curtain protection, front and rear three-point safety belts, anti-intrusion side door beams, and ergonomically designed seats. VWs position in the Automotive Industry VW has set out to place them within the automotive industry as an emerging leader with the intent to become a top leader in the automotive industry. Currently VW is the largest carmaker in Europe and fourth largest in the world. VW intends to move up in the automotive market through expansion of their product line, which is currently directed towards their compact cars such as the Golf and the GTI, along with the use of technological advancements in the areas of Power and Performance, Handling and control, Active and Passive Safety, Comfort and Convenience, and Durability, Quality, and Reliability. These technological advancements contribute to both the rational and emotional components of the Volkswagen Brand. I say rational, because they materially improve the car, but also emotional because they make positive contributions to the overall driving experience. Because of this Volkswagen brings to mind words like fun, exciting, and different from the rest. This makes owners feel more connected to their VW than any other brand of car. Within the next few years VW plans on introducing an SUV (The Colorado) to compete with BMWs (X5) in the luxury domain. Also planned in the future is the interest of taking over BMW, which would give them the ability to penetrate the luxury market with the prestige that comes with the BMW title. One aspect that has allowed VW to excel in the automotive market is their constant push for the highest quality car possible. Volkswagen has just been awarded the 2002 Total Quality Award in the USA for its Golf, New Beetle and Passat. This is the second consecutive year that VW has won the award, conducted by the Strategic Vision marketing institute based in San Diego. Because of this VW claims they are the most significant European make on the American Market, especially as the rankings not only refer to customer experience with their new cars but also the service

provided by the dealerships and after-sales teams of the various manufacturers. (10) The ability to appeal to the younger buyers as a cool, hip car has given VW an edge over most of their competition in that segment of the market. This combination of high quality at relatively low prices, applying new technologies, along with the appeal to the younger generation allows VW to stand out form their competition in the automotive industry.

References
1)http://www.hoovers.com/cgi-bin/offsite?site=HBN&url=http://www.vwpersonnel.com/geschichte/gesch_welcome.htm 3)http://www.volkswagen.co.uk/vwworld/vwworldcontroller.jsp? command=forward&appInstance_id=116&nextPage=../frames.jsp&applic=vww orld&category_id=16854&selectedOption=4 4) (Personal Reference) Chris Jackson, 10/10/02, Location Hillsboro OR. VW finance. 5) www.Consumerguide.com/cdb-org/fin?site=auto/carsales/VW_us.htm 6) www.Morgancom.com 7) (Person Reference) Lou Dominion, 10/13/02, Location Benton Harbor, MI; Dealership Dominion Auto. 10) www.motornet.ie 11)www.amherst.edu/~ilstrata/VW.htm 12)www.iht.com/IHT/js/98/js032698.htm