Overview of Volkswagen
The current research is based on the analysis and valuation of the manufacturing sector industry. In the study, Volkswagen has been chosen, in which mission, vision, products, managerial highlights, products and services of the companies is explained. Moreover, the main focus of the research is on the evaluation of management accounting techniques used by Volkswagen. Further by considering the whole evaluation, the recommendation will be drawn to help the company in solving upcoming difficulties to improvise their overall profitability and productivity.
The selected company for the present task is Volkswagen
The company was founded in 1937.
Volkswagen is known as German international automotive manufacturing company, and it’s headquarter is situated in Wolfsburg, Lower Saxony. The major operational activities of company is designing, manufacturing, and distributing of motorcycle, engines, commercial vehicle, and turbomachinery (Raj, 2017). Their mission is to provide quality products and services to their customers supported by additional services such as leasing, financing, and fleet management. The vision of the Volkswagen Company is to be the leading corporation in products and services associated with the automobile industry. Further, by recognizing such factors company will satisfy their customer needs to reach another level of success (Annual report of Volkswagen, 2016).
Presently the Board of management of Volkswagen AG includes eight members. All the members are accountable to perform the operations in the Volkswagen group. The Chairman of the company is Dr Herbert Diess. The operations the Board of Management of Volkswagen AG is carried by the board of the brands and regions and additionally by the several other group business holdings and units (Annual report of Volkswagen, 2016). Members of the Board of Management of Volkswagen AG includes Oliver Blume as a Chairman of the Executive Board of Porsche AG, Gunnar Kilian as a Functional Responsibility ‘Human Resources’, Andreas Renschler as a Functional Responsibility ‘Commercial Vehicles’, Dr. Stefan Sommer, as a Functional Responsibility ‘Procurement’ and Frank Witter, as a Functional Responsibility ‘Finance and Controlling (Pettinger, 2016).
Volkswagen delivers the wide range of product and services to balance the dynamic requirements of the customers. The product portfolio of the company is inclusive of twelve brands from seven European countries such as Volkswagen Passenger Cars, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania and MAN (Beukes, and van Wyk, 2016).
Recently company’s main focus is on controlling a highly competitive segment of the UK car industry, additionally with its market investment ranging from 6.55 to 10.23 per cent. In 2017 in UK Volkswagen has given a remarkable performance and moreover changed the maximum amount in a decided period of time, the share of the company ranging from 6.55 per cent to 10.06 from April to December (Statista, 2018). In spite of bearing some low figures, in a period of January and May, the market share of the Volkswagen increased in 2018, and moreover, it attains a peak growth in July 2018, at 10.23 per cent.
Mission and Vision
Figure 1: Value chain analysis of Volkswagen
(Source: Mudambi and Puck, 2016)
Primary Activities:
Inbound logistics: VW is directing a huge and worldwide supply chains and their major consideration in on the excellence and rapid tracking manufacturing (Teece, 2010). Moreover the focus on maintainability and for such reason they provide training to its suppliers. By considering this, in the period of 2017, they finished training at approximately 29000 supplier sites.
Operations: The worldwide manufacturing systems of Volkswagen includes 120 production sites. It has been observed that Europe is the most significant manufacturing district with 71 site areas. Moreover alone in Germany, there are 28 manufacturing locations. The Asia Pacific area has five manufacturing sites, and North America has five production sites (Fu, Ogasavara and Sousa-Filho, 2018). And except this, there are nine site in South America and four sites in North America.
Outbound logistics: The vehicles manufactured at the production sites of Volkswagen are delivered to its trader system during the world for sales.
Marketing & Sales: The innovative product has produced novel sales supported marketing policies to reach target consumers. Therefore, their basic objective is to motivate and inspire clients on an global level. Their innovative promotion strategy helps to delight their consumers (Christopher, 2016).
Supporting Activities:
Technology: Technology aspects are the major consideration at Volkswagen, and their productive brand thinks themselves an extremely inventive corporation (Moonesirust and Brown, 2018). Their huge part of budget is dedicated on modernism and for the formation of innovative expertise and model. Furthermore, in the phase of 2017, they spend 13.13 Billion Euros on research and growth.
HRM: it was found that by the year end of 2017 Volkswagen, 642300 workers are functioning for them. VW has entirely modified its Human resource policy to line up with its innovative business policy (Kon?ar, Stankovi? and Lekovi?, 2016). Their main policy is to authorize their workers for a cultural alteration.
Procurement: In 2017, the main liability of the VW Company is to set the aim for its procurement team to defend the essential materials and to produce competitive and innovative products and services supported by optimising cost structure (Donovan et al. 2015). Their products and services are sustained to digitise procurement procedures and enlarge collaboration with its suppliers beneath the VW FAST (Future Automotive Supply Tracks) proposal.
Board of Management
Firm Infrastructure: The Corporation has directed a huge and worldwide infrastructure which contains manufacturing services, R&D services and its business offices. Its headquarters are situated in Wolfsburg, Germany.
Volkswagen has a powerful brand portfolio which is managing the strong manufacturing and automotive brands and also building a well-organised system. Further, performance-based structure have assisted the corporation to be competitive ahead with its peer companies in the business (Goldratt, 2017). To maintain and improvise their market position, the company applies the following strategies for planning, controlling and decision-making process.
Presently, The CEO of the Volkswagen AG, Martin Winterkorn, has declared their update strategies in 2018. The Major objective of the company is to break the records of the world winning company Toyota by 2018 (Schneider 2007).
Thus, the Volkswagen Group makes an effort to develop hugely in the upcoming years. The company have determined to expand their model offerings and make their universal functions stronger. Companies goal is to reach the targets and turn out to be the “world leader in terms of consumer satisfaction, excellence and delivery performance”” by providing “brands and products which are evidently and individually found in the market”.(VW Ready to Transform Automotive Supply Chains, 2016).
The company controls their operations by regular monitoring of operational activities and comparing the same with their expectations. For this, they make use of tools such as benchmarking and budgeting. Further, the internal network Group of Volkswagen helps to Connect with the network of all employees. The platform supports the move of expertise and place specialist connected with each other (Volkswagen Annual Report, 2016). The company is focused on their targets and share their goals and vision with the employees through which group is determined to build up cars familiar to upcoming markets. They also focus on presenting cheaper, smaller vehicles which are mostly demanded by customers
For minimising the issues and for delivering the original and actual information to the customers, the company has removed its several top-line managers and facilities the direct reporting to the CEO. This initial step helps in increasing the speed of taking actions and making further decisions. This approach is known as a top-down approach, and it is important for developing and communication and the overall vision of the transformation (Volkswagen Sustainability Report, 2016). For maintaining a better relationship and achieving the support of higher level manager’s top-down approach is essential (Rödger, 2018).Benefits of a top-down approach in decision making are that it provides the greater clarity and trust within the customers and it helps to Increase the competitive agility. Their main focus is on the real progressive subject which facilities a faster decision-making process.
Product Portfolio
Cost accounting support is necessary for the rising scenario of digitalisation and networking in the manufacturing business. Volkswagen produces the wide range of management accounting techniques to improvise their efficiency and productivity along with ensuring minimum cost and maximum quality (Björk and Hällfors 2015).
Budgeting
VW activities are based on the traditional concepts, relying mostly on the budgetary control system. It applies a yearly plan for resource allocation, evaluating performance, and while observing divergence. The rising convergence of diverse commerce regions and IT is coming up with the new economically worldwide at the right time and with the right equipment (Hakim and Tabuchi, 2015). Therefore budgeting is a most important aspect for supply, cross-brand manufacturing in the worldwide manufacturing network. In manufacturing, for instance, big data procedure helps to examine defective equipment and take action as soon as possible.
The concept of Total quality management established in the 1951 and that was initially recognized for its incessant attempt to decrease the expenses of the organizations. This tool has developed and presently turn out as one of the significant parts of growth of the quality control within the production unit (Liebich, Von Zimmermann and Rapp, 2014). It assists the production firms to produce the high-quality products and services with very fewer expenses (Burki, 2015). The TQM system has helped the organization to determine the quality issues such as production faults, mechanism faults and slow run of the engine etc.
By using these tools, Volkswagen is, in addition, capitalizing on digitalization at its internal IT labs in Wolfsburg, Munich, Berlin, San Francisco and Barcelona. Expert section of Group IT, investigation institute and expertise associate are operating mutually at the innovation hub on future trends in information technology, for example, machine and learning artificial intelligence, digital ecosystems, quantum computing, smart mobility and intelligent human-robot collaboration (Beukes and van Week, 2016).
By considering the aspects of the extremely competitive car industry, the company needs to improve its competence and efficiency of almost all its performance and operations. Relative cost benefits and greater insight into customers’ choices will be essential to compete beside competitor and enlarge market share (Moravcikova et al. 2017). Therefore following management accounting tools that can be applied by Volkswagen to attain their objectives are enumerated as below:
Market Performance
As per the CIMA terminology, standard costing is a ‘control method that accounts for differences by comparing actual costs to predetermined standards for facilitating activities throughout the organization by exception’. This approach assures standards for costs and revenues for management of variances and to attain standard targets (McCormack and Johnson, 2016). Standard costing proposes to give the cost information that is linked with controlling cost, providing expediency and rapidity for calculating manufacturing costs, preparing business financial plan and pricing products, and also helps to determine the performance of division executives.
Balance scorecard is an important method that helps to check the performance of the business. Balance score will assist the corporation and management accountant to measure the competence of the mechanism and labour in contrast with expenses done (Veiga and Franco, 2015). Balance score is essential for the monetary, consumer and modernization and internal analysis of the business.
Conclusion:
From the present study, it is found that Volkswagen Company is operating efficiently as in the value chain examination corporation strikes ability among low-cost strategies and provision of higher quality vehicles. Their vehicles have outstanding designs, excellence and ground-breaking contribution by concerning the most recent technology. This uniqueness of the corporation influences to the customers greatly’ and moreover prepare them to pay a little bit more for the cars. The corporation yet wants to make sure that the premium costs of the vehicles are higher than the differentiation costs to keep away from losses since they attempt to make an impression on the clients. Further, the applicability of suggested management accounting tool would help out the corporation in gaining the correct equipment and raising the best production platforms. The capability must be active in changing the resources into valuable vehicles as the cores competencies must complete the equation by maintaining equilibrium among the brilliant designs and the productivity of the business. By using suggested management accounting tools, the company will manage to set up a strong commerce existence to conquer the competitive forces in the universal trade environment.
Reference:
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