Volkswagen Group is a German multinational automotive manufacturing company headquartered in Germany and owned by the Austrian Porsche and Piëch families. Volkswagen group is one of the leading companies in the world in the manufacturing and selling of vehicles around the world. In 2016, it was the world’s largest automaker by sales, overtaking Toyota and keeping this title in 2017 and 2018, selling 10.8 million vehicles making a net profit of €13.9 billion in 2018. It has maintained the largest market share in Europe for over two decades.
The Volkswagen group is namely divided into two divisions:
- The automotive division.
- The financial services division.
The automotive division deals with the development, production, and sales of cars and engines for the likes of Volkswagen, Skoda, SEAT, Bentley, Porsche, , Audi, Lamborghini, and others. Volkswagen group normally deals with vehicles such as passenger cars, light commercial vehicles, trucks, buses, and motorcycles.
The financial services division deals with the comprise dealer and customer financing, vehicle leasing, direct banking and insurance activities, fleet management, and mobility offerings.
Volkswagen Group Structure
Cost Concepts
There exist many cost concepts that exist namely accounting costs and analytical costs. (EduPristine, 2019)
Accounting Costs
Accounting costs are the cost that are seen as money that goes out of the bank. Accounting costs include:
- Opportunity and the actual cost
- Business and Full cost
- Explicit and Implicit Cost
- Out-of Pocket cost and booked cost
Analytical Costs
Analytical costs are the cost that are taken into consideration for a company’s manufacturing activities.
Analytical costs include the likes of:
- Fixed and variable cost
- Total, average and marginal cost
- Short-run and long run cost
- Incremental and sunk cost
- Historical and replacement cost
- Private and social cost.
(JBDON, 2019)
Cost classification
Cost classification is a vital tool in management accounting. Cost classification helps a lot in profit planning, effective cost control, fixation of the selling price, marginal cost & break-even analysis, …. etc. (Xplaind.com, 2019)
The diagram below shows the different cost classification:
Factors affecting cost or revenues at Volkswagen Group
Many factors may affect the cost or revenues. For the Volkswagen Group, a PESTLE (Political, Economic, Sociocultural, Technological, Legal and Environmental factors) analysis denoted the main issues that affect the cost or revenues of the company.
Political
Several aspects of government policy can affect business. All firms must abide to the law. So a sudden change in the law will affect the company’s cost and revenues. Some political factors affecting businesses are maybe trading war, change in transportation tax, minimum wage, employment laws, environmental law……etc.
Economic
There are many economic factors that affect the cost of revenues of a company. One of the reasons can be the rise in petrol. Also recession and inflation can contribute to the drop in car sales.
Sociocultural
With the emergence of the internet and social media platform, people have become more and more aware of its preferences and choice. So, through these platforms, a person can already scout for products and make its choice. Some other social factors the affects the costs or revenue of a company can be lifestyle, values, aesthetics, education level, social classes, family size….etc.’
However, the Volkswagen Group is a well-established company which has a powerful brand name. This can play in the advantage of the company and build up on that to increase its sales.
Technological
Technological factors are variables that relate to the existence, availability, and development of technology. Nowadays everyone wants to possess a product that is at the peak of technology. Hence, being in touch with the advancement of technology is one of the requirements of the Volkswagen group to remain competitive in the market. If one of its competitors provides its customers with products with additional useful functions, Volkswagen may lose its customers to its customers. Technological factors may include reduced emission levels, self-driving cars,….etc.
Environmental
Environmental factors also have a great deal of importance for the automotive company. Carbon emission is one of the major problems encountered by automotive companies since people are more aware of climate change and its effects. So, made people nowadays before buying a vehicle, tend to look for its carbon emission related to it before making their choice. Also, laws exist that limit the carbon emission of vehicles. In 2015, the Volkswagen group recalled millions of its vehicles because it wasn’t able to meet the emission standard set by the government. This resulted in millions lost in sales and also Volkswagen has to pay penalties for this problem.
Legal
The legal and regulatory framework has been tightened in the 21st century. Companies nowadays have to abide to a set of rules for them to be able to sell their vehicles. Some examples of legal issues that the Volkswagen group has to abide by is driver safety regulation, carbon emission regulations, labor laws, environmental laws, competition laws……etc. (Bush, 2019)
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