Report topic analysis of international business activities of volkswagen company

VW 1s not just a car brand, but also a diverse set of international business products and services with outstanding products that the VW group offers in the global market such as Volkswa

DA NANG UNIVERSITY UNIVERSITY OF INFORMATION TECHNOLOGY AND

VIETNAMESE KOREAN MEDIA

Instructor guides Dr VO THI THANH THAO

LE TAN BAO HUY

HUYNH KIM DOAT HUYNH GIA KIET

LE THI DUONG

DA NANG UNIVERSITY UNIVERSITY OF INFORMATION TECHNOLOGY AND

VIETNAMESE KOREAN MEDIA

Instructor guides Dr VO THI THANH THAO

LE TAN BAO HUY

HUYNH KIM DOAT HUYNH GIA KIET

LE THI DUONG

THANK YOU

My team would like to express our sincere thanks to Ms Vo Thi Thanh Thao and all

the teachers in the Faculty of Architecture and E-commerce for always accompanying

and supporting us in the learning process and monitoring our learning process

However, in the process of researching the topic, because our specialized knowledge

1s still limited, we still have many concerns when researching, evaluating and

presenting the topic

We look forward to receiving the attention and suggestions of teachers to make our

group's work more complete and complete

Sincerely thank you

LIST OF ABBREVIATIONS

LIST OF IMAGES SMALL

CHAPTER 1 OVERVIE W OF (COMPANY)

1.1 History of the company

1.2 Introduction to pr o ducts/ services

1.3 Markets the company operates in

CHAPTER 2 STATUS OF INTERNATIONAL BUSINESS ENVIRONMENTS

3.1 Factors affecting international business strategy of (company) at

3.1.1 Pressures for cost reduction

3.1.2 Pressures for local responsiveness

3.2 International business strategy of (company)

3.3 Entry modes of (company) at

3.4 Evaluate of international business activities at (over the past 3 years)

CHAPTER 1: OVERVIEW OF THE COMPANY VOLKSWAGEN

1 Overview

The Volkswagen Group is one of the world's leading automobile manufacturers

headquartered in Germany and the largest automobile manufacturer in Europe selling

vehicles in 153 countries The group includes nine brands from seven European countries: Volkswagen, Audi, SEAT, Skoda, Volkswagen Commercial Vehicles, Bentley, Bugatti, Lamborghini and Scania (Volkswagen, 2011)

The Group operates 62 manufacturing plants in 15 European countries and 7 countries

in the Americas, Asia and Africa Approximately 400,000 employees worldwide

stakeholders and motivates VW Group to achieve their objectives

1.1 The formation and development process of Volkswagen company

The formation and development process of Volkswagen company:

In 1937, Volkswagen was founded by the Nazi trade union Deutsche Arbeitsfront,

with the goal of creating an affordable and practical “car for the people.”

The company was originally named Gesellschaft zur Vorbereitung des Deutschen

Volkswagens mbH, and was later renamed Volkswagenwerk GmbH However, World

War IJ interrupted production and the company switched to producing vehicles for the German military

In 1949, Volkswagen came under German control, marking an important element in the postwar reconstruction of West Germany Volkswagen's iconic Beetle reached one million sales in 1955

Volkswagen expanded its brand portfolio by acquiring Auto Union, which owns Audi, and NSU Motorenwerke, then merged the two companies to create the modern Audi brand With Beetle sales falling in 1973, Volkswagen switched to producing cars with front-wheel drive and water-cooled engines

The Volkswagen Group was founded in 1975 to manage the growing automobile business In 1982, Volkswagen partnered with Spanish automaker Seat, eventually acquiring it in 1990 Volkswagen also partnered with Czech automaker Skoda,

becoming the majority shareholder and eventually acquiring it 70% of companies in

1995,

In 1998, Volkswagen acquired Bentley, Bugatti and Lamborghini Audi, a subsidiary

of Volkswagen, acquired Italian motorcycle manufacturer Ducati in 2012

In 2013, Volkswagen settled its longstanding feud with Porsche by buying the remaiming half of Porsche's auto manufacturing operations

Volkswagen is a major player in the global auto industry, operating in 31 countries and

products sold in 153 countries The company reported revenue of approximately $197 billion in 2014 Volkswagen has set a mission and goal to become a leader in the

global auto industry, emphasizing innovation, quality, environmental protection and profits

1.2 Introducing products/services of Volkswagen company

With a long history and solid reputation in the automotive industry, the Volkswagen Group (VW) has become a symbol of quality, innovation and style VW 1s not just a car brand, but also a diverse set of international business products and services with outstanding products that the VW group offers in the global market such as

Volkswagen passenger cars (Passenger cars):

Volkswagen is famous for its diverse and excellent passenger car models such as Volkswagen Golf, Volkswagen Passat, Volkswagen Jetta, and Volkswagen Polo,

Volkswagen Santana These car models are widely distributed in most countries

around the world, including Germany, the United States, China, England, Australia, Canada and many other countries

Volkswagen Commercial Vehicles:

Volkswagen also offers commercial vehicle models such as the Volkswagen Transporter, Volkswagen Crafter and Volkswagen Amarok in many international

markets, including Europe, North America and several others

Tram :

Volkswagen has pioneered the electric vehicle revolution with models such as the

Volkswagen ID.3 and ID.4 These electric vehicle models are already widely distributed in the European market and many other countries, with future expansion expected to accommodate the growing interest in electric vehicles

(11

SSS

SUVs and Crossovers:

Volkswagen offers popular SUV and crossover models such as the Volkswagen Tiguan and Volkswagen Atlas in many international markets, including the United States, Europe and many other countries These models provide comfort and versatility for

those who love this vehicle genre

Components and Spare Parts (Components and Parts):

In addition to the production of vehicles, Volkswagen also contributes to the

automotive industry through the production of high-quality auto components and Spare parts used worldwide and supplied to automakers other

Main financial services:

Volkswagen Financial Services is a subsidiary of VW, providing a range of key

financial services, including car finance, car leasing, insurance and fleet management

to customers and dealers around the world This makes it easier for customers to experience VW products and manage their car-related finances conveniently

Volkswagen product price list updated in 2022 in different countries

Volkswagen Jetta: 90.000 - 150.000 CNY _| Volkswagen Crafter: 300.000 - $00.00 CNY | Volkswagen ¢-Golf: 150.000 - 250.000 CNY | Volkswagen Atlas: 250.000 - 400.000 CNY Volkswagen Golf €20.000 -€40.000 Volkswagen Caddy: €20,000 -€30.000 ‘Volkswagen ID 4: €40.000 - 660.000 Volkswagen Tiguan: €30.000 - €50.000

Germany Volkswagen Passat: €30.000 - €50.000 Volkswagen Transporter: €30.000 - €50.000 Volkswagen ID 3: €30.000 - €50.000 | Volkswagen Touareg €60.000 - €100.000 Volkswagen Jetta: €20.000 - €30.000 Volkswagen Crafter: €40.000 - €70.000 Volkswagen ¢-Golf: €30.000 - €40.000 Volkswagen Atlas: €40.000 - €60.000

Volkswagen Golf: $23,000 - $40,000 Volkswagen Caddy: $26,000 - $35,000 Volkswagen ID.4: $35,000 - $50,000 Volkswagen Tiguan: $25,000 - $40,000

Volkswagen Jetta: $19,000 - $30,000 Volkswagen Crafter $35,000 - $50,000 Volkswagen e-Golf: $30,000 - $35,000 Volkswagen Touareg $50,000 - $60,000 Volkswagen Golf: £20,000 - £40.000 Volkswagen Caddy: £20,000 - £30.000 Volkswagen ID 4: £40,000 - £60,000 Volkswagen Tiguan £25,000 - £45,000

England —_| Volkswagen Passat: £25,000 - £40,000 Volkswagen Transporter: £30,000 - £50,000 _ | Volkswagen ID 3: £30,000 - £45,000 volkswagen Ailas: Not available in the UK Volkswagen Jetta: £20,000 - £30,000 Volkswagen Crafter: £35,000 - £60,000 Volkswagen e-Golf: £25,000 - £35,000 Volkswagen Touareg: £50,000 - £75,000 Volkswagen Golf CAD $23,000 - $40,000 Nolksvagse Tovarce: Not available in the Volkswagen ID.4: CAD $40,000 - $60,000 _| Volkswagen Tiguan: CAD $30,000 - $45,000 Canada Volkswagen Passat:CAD $27,000- $40,000, Volkswagen Jetta: CAD $20,000 - $32,000 | Volk#wagen Touareg: Not waiableinthe Canadian market | Volkswagen Touareg: Not wailble inthe | ates ca $40,000 - $60,000

Volkswagen Touareg: Not available in the

Volkswagen Touareg: Not available in the Canad

Volkswagen Touareg: Not available in the

In this report, the group only focuses on the Volkswagen car brand sold in China and only chooses one product line, the passenger car line, to analyze because this 1s the

first product line that Volkswagen does international business with economy in the

Chinese market

“+ Market of Volkswagen company

Volkswagen Group (VW) has an extensive international business network and produces a variety of products in countries and regions worldwide such as

- Germany: This is Volkswagen's hometown and the group's headquarters In Germany, VW produces a wide range of car models, including the Volkswagen Golf, Volkswagen Passat, Volkswagen Tiguan, and many others Germany is

also home to V W's production lines and research and development centers

- United States: VW has expanded its business in the United States through official export and local distribution and produces many vehicle models,

including the Volkswagen Passat, Volkswagen Atlas, and Volkswagen Jetta, in the United States factories in America

- China: Volkswagen has penetrated with methods such as technology transfer, licensing, and jomt ventures with Chinese partners to produce and distribute cars in China VW products are manufactured at multiple factories in China and include the Volkswagen Santana, Volkswagen Lavida, and Volkswagen Tiguan

- UK: VWhas a large presence in the UK through exports, joint ventures, official local distribution and production of models such as the Volkswagen Polo and

Volkswagen Golf at its UK factory

- Australia: Volkswagen conducts its international business in Australia through

its international penetration through the establishment of local authorized

dealers and distributors supplying a range of products to the Australian market,

including including Volkswagen Golf, Volkswagen Tiguan, and Volkswagen

Amarok These products are distributed through a dealer network in Australia

- Canada: Volkswagen Group has conducted international business in Canada

through export, joint venture and establishment of branches and subsidiaries Providing their products to the Canadian market, mcluding car models such as the Volkswagen Jetta, Volkswagen Golf, and Volkswagen Tiguan

Additionally, VW has expanded their business to many other countries and regions worldwide, such as Europe, Latin America, Africa, and other Asian markets The development of an international production and distribution network helped VW become one of the largest and most successful automobile groups in the world

In this report, only the Chinese market is selected to analyze Volkswagen's international business activities because China is the market where Volkswagen has

the strongest presence Volkswagen has invested in building manufacturing plants in

China and creating products that suit the needs and preferences of Chinese

consumers They have achieved great success and become one of the leading foreign

automobile manufacturers in China Not only that, China is not only the world's largest automobile market with huge potential, but also has low labor costs and strong support policies from the government Impressive economic growth and growing

demand for personal transportation make China an attractive market for automotive

products Therefore, the team chose the Chinese market to analyze Volkswagen's international business operations

CHAPTER 2: ENVIRONMENTAL STATUS OF INTERNATIONAL BUSINESS ACTIVITIES OF VOLKSWAGEN COMPANY IN THE CHINESE MARKET 2.1 Analyze the company’s macro environment in the Chinese market

2.1.1 Economic environment

China's gross national income (GNI) in 2021 is estimated to reach 16,640 billion

USD, an increase of 10.6% compared to 2020 GNI per capita is 11,570 USD, an

increase of 9.8% China remains an upper middle-income country by World Bank standards

Purchasing power is assessed through the consumer price index (CPI) and producer price index (PPI) CPI increased by 0.9%, lower than the target of 3%, while PPI increased by 6.8%, the highest since 2008 GDP growth rate reached 8.1%, ranking first among major economies, but with signs of year-end deceleration due to the

umpact of Covid-19, energy shortages, financial crisis and international competitive pressure

China's human development index (HDI) was 0.779, an increase of 0.006 points Among 189 countries, China ranked 85th, belonging to the group with high human development However, it still faces challenges in poverty reduction, gender equality,

environment and quality of life

Volkswagen car sales in China increased by 61.4% in the first quarter of 2021,

reaching 1.02 million vehicles, showing recovery after the impact of Covid-19 The ability to buy a car depends on many different factors

China succeeded with a GDP growth rate of 8.1%, exceeding the target of 6%, but

faced many challenges such as the Covid-19 epidemic, energy shortage, Evergrande

financial crisis and competitive pressure international

China's debt index in 2021 is estimated to be 66.8% of GDP according to the World Bank and 290% of GDP according to the International Credit Agency, an increase

compared to 2020 High debt levels are a major risk when the economy transition

from export to consumption and services

Inflation is below the control target of 3%, but rising PPI could affect profits and investment Economic risks include loss of production advantage, tight economic management and challenges such as public debt, real estate bubbles and energy shortages These risks could affect the world through reduced trade, investment, tourism and regional stability Economic risks:

Risk of losing manufacturing advantage: China 1s gradually losing its cheap manufacturing advantage, due to rising labor costs, competition from other Asian countries, and the replacement of machinery China needs to improve productivity and product quality, innovate technology and shift economic structure’

Economic management risks: China maintains a mixed economic system, which has a

combination of public and private ownership, as well as State intervention in economic management However, tight government regulation can limit innovation, competition and transparency, causing problems such as public debt, real estate bubbles, energy shortages and financial crises”

These are the biggest risks that the Chinese economy is facing today These risks can affect the world in many ways, such as reducing trade, investment, tourism, cooperation and regional stability

Conclusion : The economy in the Chinese market has impressive growth and many development opportunities The increase in national income, high-end purchasing

power, and significant GDP growth are positive signs In addition, people's growing demand in the consumer sector, as shown by the rapid recovery of the automobile market, is an important driving force for economic development

However, there are still challenges such as increasing price pressure, especially the

increase in the producer price index (PPI), and signs of deceleration in economic growth, which are issues of concern At the same time, with a high debt index and

economic management risks, China is facing major challenges in financial security

and economic stability Loss of manufacturing advantage and international

competitive pressures are also significant challenges, raising questions about

diversification and productivity improvements

2.1.2 Legal and political environment

For the past 59 years, China has been under the rule of a single party (the Communist Party of China) resulting in consistent political decisions by the government The success of the government lies in one-party rule, which needs to go through the normal democratic negotiation process China has built a socialist legal system with Chinese characteristics Nation and focus on the Constitution China now has laws

regulating basic, important aspects of political, economic, cultural and social life

However, China's legal system still has many limitations and lacks transparency Laws are often changed or ignored at the whim of the CCP Judicial bodies are not independent and are subject to interference by political forces Citizens’ freedoms and

human nights are often violated

The Chinese legal system includes both common law and civil law However, it is mainly based on the principle of civil law The regulations in Chinese common law

are set forth by the Chinese National Assembly, which is mainly based on statutes and rules Common law covers areas such as marnage, family, property, contracts, civil liability and mheritance They are often applied to both citizens and businesses In

addition, China also has some civil law elements in its legal system This is largely due to history and influences from other legal systems, but is not a large part of the

modern legal system

Requirements of the legal system:

- Protecting human rights: China's legal system aims to protect human rights and freedom of citizens This includes freedom of speech, freedom of religion, the right to justice, and the right of citizens to participate in public policy decisions

- Intellectual property protection: Chinese law promotes the protection of

intellectual property rights, including copyright, trademarks, industrial designs and business secrets Laws relating to intellectual property aim to ensure that companies and individuals have the legal right to own and use inventions, innovations and knowledge

- Environmental protection: China has put in place many legal regulations to protect the environment and prevent environmental pollution These

regulations apply to industry, resource extraction, and other activities that have

the potential to cause pollution The goal 1s to ensure sustainable development and protect community health

- Protecting the rights and interests of consumers: The Chinese legal system also

aims to protect the rights and interests of consumers Consumer protection regulations aim to ensure product and service quality, ensure correct information and provide effective dispute resolution mechanisms

- Protecting national security: China's legal system has regulations on protecting national security and dealing with activities that threaten national security Laws related to national security are intended to ensure the stability and safety

of the country

China and Germany are two important trading partners of each other According to

data from the German Foreign Ministry, China is Germany's largest export market in

Asia, and Germany's second largest import source after the United States In 2020, two-way trade turnover between the two countries reached 212.1 billion USD, of

which Germany exported to China 103.3 billion USD, and imported from China 108.8 billion USD

China and Germany are also members of various free trade agreements (FTAs), such

as the ASEAN-China Free Trade Agreement (ACFTA), the Regional Comprehensive Economic Partnership (RCEP) , the European Union - Vietnam Free Trade Agreement (EVFTA), and the Comprehenstve Agreement on Investment (CAI) These agreements aim to reduce or eliminate tanffs, protect intellectual property rights, promote services and investment, and resolve trade disputes

In addition, China and Germany also have much cooperation and dialogue on other trade issues, such as technology, energy, environment, human rights, and security Political and legal risks :

- Business policies and regulations: China has complex and constantly changing

business policies and regulations, requiring companies to ensure that their business operations are fully compliant with regulations and latest policies, as well as maintain good relations with government leaders and regulators

- Competition and brand protection: The Chinese auto market is becoming fiercely competitive with the presence of many domestic and foreign auto

companies Protecting trademarks and intellectual property rights is also a risk,

as there may be copyright infringement, intellectual property violations and legal cases related to the Volkswagen brand

- Changing environmental policies: The Chinese government is stepping up

efforts to reduce emissions and enhance environmental protection The

imposition of stricter regulations on emissions standards and energy efficiency could put pressure on automakers like Volkswagen to adapt and meet new requirements

- Political and local risks: China is an economic and political power with special concerns about nationality and national security Political measures, including measures to protect the domestic market and manage capital flows, could affect Volkswagen's business and create legal and commercial risks

Conclusion : The political and legal environment offers many opportunities such as:

China and Germany are benefiting from strong trade relationships Large two-way trade turnover and participation in free trade agreements help enhance export and

import opportunities for both countries Participation in free trade agreements such as

ACFTA, RCEP , EVFTA, and CAI help create a favorable business environment,

reduce risks, and enhance economic cooperation There are also human rights and

freedom of speech challenges in China that could put pressure on the trade relationship with Germany, and political and legal nsks to comply with when operating in this market

2.1.3 Cultural and social environment

Demographics: China is the most populous country in the world with an estimated population of 1.4 billion people in 2020 The average age of the population is 38.4

yearsl, and there is an aging trend due to the low birth rate and high longevity Volkswagen faces the challenge of providing products and services that suit the needs and preferences of different customer groups by age, income, gender, culture and geography

Consumption trends: After a period of breakthrough development lasting many years, China decided to transform its development model to strengthen its global economic position The dual circulation strategy and focus on stimulating domestic demand are clearly demonstrated in the 14th Five-Year Plan (2021 — 2025), announced by the

Chinese government in July 2020 Instead of choosing to continue growing mainly through exports, the Chinese economy shifted towards a new model, placing emphasis

on domestic consumption The country aims to boost domestic spending, which is

expected to help China become the world's largest economy by 2035, with the largest number of middle class people globally

Aesthetics: One of the key aesthetic trends affecting the car industry in China is the combination of tradition and modernity According to [Forbes Magazine], Chinese consumers not only like cars that are beautifully designed, luxurious and modern, but also like cars that reflect China's identity and history For example, some domestic

car brands have used Chinese cultural elements, such as Han characters, dragon shapes, phoenix shapes and the color red, to create unique and attractive car models

In addition, Chinese consumers also prefer cars that express their individuality and distinctiveness, using special accessories, decorations and license plates Therefore, the car industry needs to respect and understand the cultural and personal values of Chinese consumers However, Volkswagen must also adapt to Chinese aesthetic

preferences, including: preference for bright colors, attention to detail and decoration,

desire for spacious and comfortable space, and respect for cultural symbols and traditions6 Volkswagen has created special editions for the Chinese market, for example the Volkswagen Phideon, Volkswagen Lavida and Volkswagen Tayron7 Language: Language is a factor that affects communication and understanding

between Volkswagen and Chinese customers China has many different languages and dialects, of which Mandarin (Mandarin Chinese) is the most popular and official language Volkswagen must use Mandarin to communicate with customers, partners

and employees in China In addition, Volkswagen must also pay attention to cultural and social factors related to language, such as pronunciation, word arrangement, how

to use polite and respectful words, and how to avoid words with negative or offensive connotations Volkswagen does not design vehicles specifically for each language, but

must ensure that signs, tstructions, menus and on-board information are translated

into Mandarin accurately and easily Language used in vehicles: Language used in vehicles in China is an important aspect of the car industry, because it involves

conveying information, instructions and the driver's emotions and vehicle users

Another important feature is the adaptation and innovation of the language to accommodate new car features and technologies For example, some modern cars have voice control systems, allowing drivers and passengers to communicate with the car using voice, instead of using buttons, levers or touch screens This requires the

language used In the vehicle to be able to recognize, analyze and respond to the user's

voice accurately and quickly In addition, some cars also have systems that connect to other smart devices, such as phones, tablets, smart watches or smart glasses This

requires that the language used in the vehicle must be compatible, synchronized and

exchange data with these devices safely and conveniently

Social communication: Germany and China have many differences in culture, values, habits and social conventions This may cause misunderstandings and conflicts

in the communication and cooperation process between Volkswagen and relevant

parties in China Some examples of these differences are: Germany tends to

communicate directly, clearly, and frankly, while China tends to communicate indirectly, tactfully, and avoid conflict Germany values fairness, transparency and efficiency, while China values respect, friendliness and harmony Germany has a serious, formal and disciplined attitude, while China has a relaxed, informal and flexible attitude Germany has a way of greeting by shaking hands, while China has a way of greeting by bowing or nodding Germany has pointing, thumbs up or waving

gestures to express meaning, while China has pointing, thumbs up or waving hand

gestures to express meaning Volkswagen must respect and adapt to these differences

to build good relationships and effective cooperation with stakeholders in China Conclusion : China, with its dense and diverse population, opens up great opportunities for Volkswagen to capture the diverse needs of customers Domestic

consumption trends focus on domestic consumption, opening up opportunities for

Volkswagen to capture and promote demand in the domestic market and the combination of traditional and modern aesthetics creates opportunities to create new models The car is unique and attractive by integrating Chinese cultural elements into its design, colors and decorations However, linguistic and cultural diversity, along with aesthetics and adaptation, pose challenges for Volkswagen in understanding and

interacting with the Chinese market Social and communication differences also

require sensitivity and respect to build effective relationships with customers and partners in China

2.1.4 Technology environment

Technological changes in China have been ushered in through the Chinese

government's heavy emphasis on research and development One of the reasons behind the focus on technology is the starting pomt of political leaders, many of whom have roots in the technology and research sector According to a report by NBS, China's Ministry of Science and Technology, and China's Ministry of Finance, Investment in basic research in the world's second largest economy reached 146.7 billion CNY (about 22.5 billion USD) in 2020, accounting for 6% of total research and development spending Government intervention in research and development could be a major challenge for China's technological development, especially in the

context of a communist government that centralizes decision-making regarding Technology can increase

Volkswagen 1s applying many of the latest and most advanced technologies in the auto industry In China Some outstanding technologies are:

- MQB platform technology: This is the company's most advanced platform technology, allowing the production of many different types of vehicles on the same platform, from hatchbacks, sedans, SUVs, to electric vehicles This technology helps save costs, increase efficiency, and ensure high quality for

Volkswagen products This technology also allows Volkswagen to take

advantage of other technologies, such as driver assistance systems, safety systems, entertainment systems, and smart connectivity systems

- Self-driving support technology: Volkswagen 1s collaborating with technology company Horizon Robotics to develop self-driving support systems in the Chinese market The system uses artificial intelligence and machine learning to analyze data from on-board sensors and cameras, and make safe and efficient

driving decisions The system can also interact with intelligent transportation

systems, such as traffic lights, signs, and other vehicles

- Smart electric vehicle technology: Volkswagen is investing in a new state-of- the-art shopping, innovation and development center for smart electric vehicles

in Hefei city This center will provide services such as car sales, warranty, maintenance, battery charging, and customer consultation The center will also

be a place to test and deploy new technologies for electric vehicles, such as energy management systems, cloud connectivity systems, and cybersecurity

=> Conclusion : With the active application of advanced technology such as the MQB platform, self-driving support technology and smart electric vehicles, Volkswagen is opening up great opportunities in the auto industry in China At the same time, they

have also made significant investments in automotive electrical infrastructure, creating

a unique shopping and development center in Hefei city that provides a diverse and

enhanced customer experience

However, the challenge is the large intervention of the Chinese government in the

field of research and development This could affect technological innovation,

especially in the context of a communist-style government, where technology-related governance could be strengthened Despite this, Volkswagen still maintains its

competitive position in China by constantly researching and developing and flexibly

responding to the diversity of the Chinese auto market

Terrain: China is a country with a large area and diverse terrain, including plateaus,

mountains, plains, grasslands, deserts and peninsulas This creates many potential

markets for Volkswagen, because demand for different types of vehicles will depend

on local terrain For example, in high mountain areas, pickup trucks, SUVs or off-road

vehicles will be more popular, while in the plains, passenger cars, commercial vehicles or electric vehicles will have more customers However, diverse terrain also poses challenges for Volkswagen, because the company must invest heavily in

research, design and production of vehicles suitable for each market, as well as ensure

quality quality and safety of products when operating in different environments

Climate: China is also a country with a complex climate, with four distinct seasons and varying temperatures and rainfall in different regions This also affects consumer demand and preferences for vehicles For example, in cold climates, vehicles with heating, anti-icing, and anti-slip systems will be more popular, while in hot climates, vehicles with cooling and sun protection systems , dustproof will have more customers Climate also affects the performance and longevity of vehicle components, especially the engine, electrical system, tires and fuel tank Therefore, Volkswagen must also invest heavily in research, design and production of vehicles suitable for

each climate, as well as ensure the quality and safety of products when operating in

different climates different climatic conditions

Transportation: China is a country with a developed transportation system, with an extensive network of roads, railways, waterways and airways This creates many opportunities for Volkswagen, because the company can distribute and sell easily in

many areas, as well as cooperate with domestic and foreign partners For example,

Volkswagen can use roads to transport vehicles from factories to dealerships, railways

to transport vehicles from ports to distribution centers, and waterways to import and export vehicles from other countries, by air to transport vehicle parts and components However, China's transportation system also has disadvantages, such as congestion, accidents, pollution and energy shortages This also affects Volkswagen's business operations, as the company faces high risks and costs when transporting and selling, as well as having to adapt to safety requirements and regulations , environmental protection and energy saving by government and society

Conclusion : The biggest challenge comes from environmental pollution, with high CO2 emissions and significant water pollution, affecting public health This puts great pressure on businesses, like Volkswagen, to develop and produce environmentally friendly products In addition, China's diverse terrain and complex climate create opportunities for Volkswagen to expand its market with many different types of

vehicles However, at the same time it also poses challenges in researching, designing and manufacturing vehicles suitable for each region China's developed transportation

system provides opportunities for Volkswagen in distribution and sales, as well as cooperation with partners However, problems such as congestion, accidents and traffic pollution simultaneously pose cost and risk challenges in business operations

“* Summary :

Economic An increase in national income, Pressure to increase prices

environment senior purchasing power, and GDP | Hiph debt index and

growth economic management risks

The growing demand of people in

the consumer sector

Legal and There are strong trade relationships | Human rights and freedom political Participate in free trade agreements | of speech put pressure on the

Climate change issues and security issues and international dialogue

social opening up large market diversity

environment opportunities Social differences and

Domestic consumption trends communication Technology Active application of advanced Massive intervention by the environment technology such as MQB platform, | Chinese government in the

self-driving support technology and | field of research and smart electric vehicles development

Natural Diverse terrain helps expand the Environmental pollution environment development of many different types | problem

Terrain diversity requires research, design and

positioned itself as a passenger-friendly mobility brand for urbanites This automobile brand offers cars to both price-sensitive and high-end consumers Apart from luxury

and premium, the company also offers cars at affordable prices A comprehensive

product mix and focus on quality differentiate VW from its competitors

Volkswagen's target market 1s determined based on household purchasing power and

the characteristics of the Chinese customer group Volkswagen's target customers are increasingly in the age groups from 26 to 35 and 18 to 25 years old This change

suggests that there will be more younger buyers looking for a more sporty, technological and exciting feel in their cars After that, 1t is expected that the number

of women buying cars in China will increase Target customers are mainly looking for

car performance, lower prices, and car features and technology Therefore, the Volkswagen Group's target customers will have a certain shift in gender and age when the market has more female and younger potential customers

TARGET CUSTOMER TABLE

Youthful All 18-35 Medium |Looking for a sporty,

genders technological and fun feel

middle All middle-age | Medium | Pay attention to price and

durable cars

Elite All Middle age | Medium | Looking ffor _ traditional

genders |tooldage | to high luxury cars High-class All Middle age | High Looking for a modern,

genders | to old age sturdy and luxurious car

=> Conclusion: Volkswagen Group has created a strong brand system, diversifying target markets and being flexible in meeting diverse customer needs This diversity not only helps them attract a wide range of customers from the middle to upper class, but also helps create a competitive advantage However, shifts in customer base and

increasing pressure on performance and value pose challenges for Volkswagen To maintain their leadership position, they need to constantly mnovate and respond flexibly to the fluctuations of the automotive market, while maintaining a balance

between luxury and value in their products

2.2.2 Supplier

Volkswagen has many different suppliers in China, including both domestic and

foreign companies Some of Volkswagen's main suppliers in China are:

- Huayou Cobalt: A company that mines and processes cobalt, a key material for electric vehicle batteries Volkswagen has established a joint venture with Huayou Cobalt and Tsingshan Group, a stainless steel producer, to secure nickel and cobalt supplies for its electric vehicle projects in China

- FAW Group: China's largest automobile group, with brands such as Hongqi, Bestune and Jiefang Volkswagen has cooperated with FAW Group since 1991, and currently has two joint ventures in China: FAW-Volkswagen and

Volkswagen Anhui These joint ventures produce and sell vehicles from

Volkswagen, Audi, Skoda and Porsche3

- SAIC Motor: China's second largest auto group, with brands such as Roewe,

MG, Maxus and Wuling Volkswagen has cooperated with SAIC Motor since

1984, and currently has a joint venture in China: SAIC Volkswagen This joint

venture produces and sells vehicles from Volkswagen, Skoda and Audi

- Bosch: A German multinational company that provides technology solutions and services to the automotive, industrial and consumer industries Bosch is the

world's largest supplier of automotive parts and systems, including electronics,

brakes, engines, fuel systems and safety systems Bosch has been present in China since 1909, and currently has more than 60 subsidiaries and more than

40 factories in China

Negotiation capacity:

+ Bargaining power of suppliers:

The bargaining power of suppliers is relatively low in the case of the Volkswagen group Because suppliers specialize and produce parts and raw materials for a limited

number of automakers in the industry and are completely dependent on those

automakers A guilty supplier in such situations cannot afford to lose any contract

with its buyer or car manufacturer However, for spare parts and other items, there are many suppliers on the market, and Volkswagen's suppliers do not want to stop cooperating with such a giant corporation This gives more power to the company and the company can buy products at the lowest possible price to increase profits (Zhang,

2014)

« Bargaining power of buyers

The bargaining power of buyers in the case of Volkswagen is low due to the

determinants of price and ease of switching options It is not easy for Volkswagen consumers to switch to other brands such as Ford or Toyota because of price

Consumers’ bargaining power also depends on the information they have about the

market and cars Volkswagen also produces premium products to attract high-end buyers who are not price sensitive due to differentiated products Volkswagen's differentiated cars have helped it gain customer loyalty, which gives it the power to increase vehicle prices (Nanjekhe, 2018)

=> Conclusion : With a diverse network of suppliers in China, Volkswagen holds

many strategic advantages Close cooperation with Huayou Cobalt and Tsingshan Group ensures a stable supply of nickel and cobalt, key materials for electric vehicle battery production At the same time, the long-term partnership with FAW Group and

SAIC Motor through joint ventures FAW-Volkswagen and SAIC Volkswagen helps

Volkswagen dominate the Chinese market through the widespread production and

distribution of its vehicle lines However However, VW's bargaining power with

suppliers 1s relatively low because of its heavy dependence on international suppliers

such as Bosch, a big name In the auto industry Bosch, as the world's largest supplier

of automotive parts and systems, creates a significant level of dependence on

Jato Dynamics, Tesla's overall market share in China is only 2.2%, but they are a

"giant" in the electric vehicle segment, accounting for 11.6% of China's new electric vehicle sales in 2021, while Volkswagen's market share of all-electric vehicle sales

was only 3.5% during the same period Chinese domestic automakers are also improving their quality and technology, attracting more local customers and gaining market share from foreign automakers ( Volkswagen's strategy to regain the Chinese market (soha VN) )

Table comparing car sales of brands in the Chinese market