Volkswagen is ranked as the world’s second-largest automaker just behind Toyota. However, in the first half of 2015 fiscal year, the industry surpassed Toyota by selling 5.04 million vehicles. Although the achievement of fulfilling the long-held goal came at a cost, the company still has its primary goal of focusing on the qualitative growth that will make it attain the largest market share globally. The U.S market is still low, and the company is working extra hard to capture a considerable portion of the market. Volkswagen is a top selling automotive industry in China and Europe (Kollowe, 2015). In the past few years, the industry has had misfortunes. Due to the sluggish economic recovery and consumers cutting back their expensive purchases, the company endured a fall in sales for almost two decades. In the year 2015, the emission-rigging scandal affected the sales. Volkswagen had to recall approximately 8.5 million cars after it was discovered that the cars were installed with software that would help in cheating emission test (Kollowe, 2015). The problem lowered the reputation consumers had on the quality of the product.
On the other hand, the Motor Company is headed for a revival given the recent economic recovery in Europe. There was an increase in demand for passengers’ cars in Spain, France, Italy, UK and Germany. The company experienced a positive change of 7.2% in sales between January and September of the year 2015 (Kollowe, 2015). Also, due to the recovering Eurozone economy, consumers’ confidence on Volkswagen improved, and this drove a 3% increase in the industry (Kollowe, 2015).
Currently, the company’s organizational structure is a “top down” corporate system. Precisely, the company is operating under a centralized management structure. The Volkswagen AG board of management manages the Volkswagen AG and Volkswagen Group. The Group Board of Management has the authority to ensure that the Group’s interest is considered when making decisions on the Group’s brand and companies (Volkswagen Group Investor Relation, n.d). Besides, the company’s decision-making process relies mostly on strong leaders and some few groups of key advisers. The body that governs the company consist of board members and top managers that have group management functions. The senior brand manager manages each Volkswagen Group brand and the companies of the Group are separately managed by their respective management (Volkswagen Group Investor Relation, n.d). Additionally, matters affecting the company and are significant to the group are forwarded to the Group Board of Management for approval.
Based on the information I have gathered regarding Volkswagen auto industry, I would suggest the company to reconsider changing their current organizational structure and employ a decentralized organizational structure. The system will solve the company’s problems quickly since more people will be engaged in the decision-making process. Similarly, employees will have confidence on those who make decisions that affect them (Robbins, & Judge, 2013). The company has 12 brands, and it would be better if four holding company are given the chance to run the brands (Automotive News, 2015). First, Volkswagen, Seat passenger car, and Skoda brands will form one holding company. Second, Bugatti, Porsche, and Bentley will form a single unit and headed by one manager. Third, Audi, Ducati, and Lamborghini will also form a holding company. Lastly, the heavy trucks brands such as Scania and Man together with VW commercial vehicle will create another division under a manager (Automotive News, 2015). Also, the company should have a separate group level executive that will head the sales department, production, and the Chinese market. The new organizational structure will ensure a quicker decision-making process and efficiency of the company. For example, each group will make decisions on the models to sell and to which markets.
Automotive News. (2015, June 15). VW Group to be revamped into 4 holding companies, report says. Retrieved March 06, 2016, from http://www.autonews.com/article/20150615/COPY01/306159919/vw-group-to-be-revamped-into-4-holding-companies-reports-say
Kollowe, J. (2015, October 16). Volkswagen market share decline in September. Retrieved from http://www.theguardian.com/business/2015/oct/16/volkswagen-market-share-declines-in-september
Robbins, S. P., & Judge, T. A. (2013). Organizational behavior (15th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
Volkswagen Group Investor Relation. (n.d). Structure and business activities. Retrieved from http://www.volkswagenag.com/content/gb2007/content/en/corporate_governance/structure_and_business_activities__part_of_the_management_report_.html
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