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Volkswagen do Brasil Driving Strategy with the Balanced Scorecard Case Solution

Solution Id Length Case Author Case Publisher
2456 1440 Words (6 Pages) Robert S. Kaplan, Ricardo Reisen de Pinho Harvard Business School : 111049
This solution includes: A Word File A Word File

Volkswagen do Brasil is a subsidiary of the Volkswagen group assembling and producing small and medium sized Volkswagen vehicles since 1953 in Brazil. Volkswagen Group has a total market share of 10.3% in the global market and is the third largest automotive company worldwide. In the last few years, the company had been facing a decline in profitability and market share which spurred to make use of the Balanced Scorecard to improve its position which proved to be a successful strategy. However, the Great Depression led to reduced demand for Volkswagen do Brasil’s vehicles as customers worldwide were adversely impacted by the global financial crisis. This has once again led to a fall in revenues and profitability for Volkswagen do Brasil. The newly appointed CEO, Thomas Schmall has brought about a new highly ambitious vision for the company with the motive of ‘re-branding’ Volkswagen do Brasil to build a team of highly motivated and committed employees who were driven to develop innovative products to capture greater market share and work towards making Volkswagen do Brasil the market leader of Brazil’s automotive industry. Volkswagen do Brasil had responded to decreased demand due to recession by engaging in capacity downsizing and cost reduction schemes including laying off employees. This was proving detrimental for the motivation and productivity of existing workers and hence Volkswagen do Brasil had to look towards alternate strategies. The top management was developing a strategy map that highlighted company objectives in a clear manner and steps were being taken to communicate these objectives to all levels of management so the strategies can be implemented effectively and efficiently.

Following questions are answered in this case study solution

  1. How could the new management team of Volkswagen do Brasil resolve the problem of losses caused by the Great Depression?

  2. Should the company move for capacity downsizing, cost reduction, and employee layoffs?

  3. Present an alternative solution to the problem that the company is facing.

Case Analysis for Volkswagen do Brasil Driving Strategy with the Balanced Scorecard Case Solution

1. How could the new management team of Volkswagen do Brasil resolve the problem of losses caused by the Great Depression?

The Great Depression impacted businesses and economies worldwide and similarly also negatively affected the financial position of Volkswagen do Brasil as revealed by the fourth quarter results of 2008. Purchasing power of customers worldwide was drastically reduced due to the depression which lowered demand for Volkswagen’s products leading to a fall in revenues and profitability for the company Volkswagen do Brasil had to respond by cutting down on production and reducing its spending to keep expenses in control. This was impacting Volkswagen do Brasil’s objectives of increasing market share and development of new products. The new management at Volkswagen does Brasil was faced with the dilemma of whether to restore funding or increase production levels and resume discretionary spending for the various initiatives of the company.

The market share of traditional market leaders which included Ford, Fiat, General Motors and Volkswagen do Brasil, was declining as French automotive manufacturers were expanding their presence from Asian Countries into the Brazilian market. In order to retain its market share and recover from losses brought about by the Great Depression, the new CEO Thomas Schmall was faced with a major challenge. An approach was needed that could communicate the objectives of the top management down to production workers to allow for effective execution of strategies and objectives decided by top management. The new management team deploys a strategy map and Balanced Scorecard to accomplish a turnaround of the losses faced by the Volkswagen do Brasil for eight consecutive years. The strategy map aims to align the resources and activities to the objectives of the company to motivate its 22,000 employees and appropriately communicate strategy to them. The culture of the company had become stagnant which made it difficult to improve company performance and hence to resolve the problems faced by Volkswagen do Brasil top management had to focus on developing new and improved relationships with key stakeholders of the company, primarily employees, dealers, and suppliers. The CEO is committed to re-branding the company with highly motivated employees that would work towards innovating and launching high performance and light vehicles. An executive is assigned to each objective who is responsible for ensuring that the particular objective is achieved efficiently and effectively.

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