Optimizing Operation and Change: The Case of Volkswagen

Disclaimer: This essay is a simulation and is not a reflection of the actual Volkswagen Company, nor is it intended to represent the views or actions of any real individuals associated with the company, any names or events used are fictitious, and any resemblance to actual people or entities is purely coincidental.

The automotive industry is highly competitive, with players competing fiercely for market share. As the newly appointed CEO of the Volkswagen Group, I have taken on the responsibility of optimizing the organization’s operations to sustain and improve its business outcome. Volkswagen is a multinational automobile corporation specializing in designing, manufacturing, and distributing vehicles. The company was founded in 1937 before growing to operate in approximately 150 countries with over 670,000 employees and 124 manufacturing plants (Volkswagen, 2020). Volkswagen is a global automotive industry leader with a strong reputation for producing high-quality vehicles. However, Volkswagen recently faced significant challenges, such as the “dieselgate” scandal in 2015 (Jong and Van Der Linde, 2022). The scandal involved using software that could manipulate emissions test results in millions of diesel vehicles sold by the company (Jong and Van Der Linde, 2022). This scandal significantly declined the company’s reputation, brand value, and financial performance (Jung and Park, 2017). In addition, the company has struggled to adapt to the growing demand for electric vehicles, facing increased competition from new market entrants such as Tesla (Reyes et al., 2021). In addition, the company faced decreased sales due to the emergency of COVID-19 in 2019. To achieve operational optimization, Volkswagen must adopt lean manufacturing practices, improve supply chain management, and implement a data-driven decision-making process. In this report, I will analyze Volkswagen’s current situation and conclude that its operations must be optimized. I will propose a strategy to release cash for investment or survival to attain and persist similarly enhanced results for the organization that optimizes its operations. I will also evaluate the preparedness of the organization to accept the change related to the suggested optimization of its operations.

Analysis of Internal or External-Driven Needs for Change

This essay can use the PESTLE and SWOT analysis frameworks to analyze Volkswagen’s internal and external-driven needs for change. PESTLE stands for Political, Economic, Sociocultural, Technological, Legal, and Environmental factors, while SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

PESTLE Analysis

• Political: The political environment is an important consideration for Volkswagen. The company has been scrutinized for its role in the diesel emission scandal and has faced regulatory fines and legal action (Šarić and Rosi, 2020). It has damaged the company’s reputation and created a negative perception among consumers.
• Economic: The economic environment has also been challenging for Volkswagen. The company has been impacted by the ongoing shift towards electric vehicles, which has led to decreased sales and market share. The COVID-19 pandemic has significantly impacted the automotive industry, with decreased demand and disrupted supply chains.
• Sociocultural: Sociocultural factors are also important for Volkswagen. Consumers are becoming more environmentally conscious and are looking for sustainable products (Šarić and Rosi, 2020). Additionally, an increasing trend toward urbanization leads to increased demand for mobility solutions.
• Technological: Technological advancements are also impacting Volkswagen. The shift towards electric vehicles creates new opportunities and challenges, and the company must invest in new technologies and infrastructure to stay competitive.
• Legal: The legal environment is a significant consideration for Volkswagen. The company has faced regulatory fines and legal action related to the diesel emission scandal, and it needs to ensure compliance with regulations and laws in all markets (Šarić and Rosi, 2020). Environmental: Environmental factors are also important for Volkswagen. The company must focus on reducing its carbon footprint and investing in sustainable technologies and processes.

SWOT Analysis

Table 1

Volkswagen SWOT Analysis Adapted from (Šarić and Rosi, 2020) and (Jurevicius, 2022)

The Optimization Outcome to be Achieved

Business Process Reengineering (BPR) involves radically redesigning business processes to improve organizational performance significantly. BPR is particularly relevant to Volkswagen, which has been facing several challenges in recently, including the shift towards electric vehicles, and the fallout from the “Dieselgate” scandal. To address these challenges, Volkswagen needs to streamline its operations, reduce costs, and improve quality, which can be achieved through BPR (Fetais et al., 2022). Volkswagen needs to implement BPR to enhance the customer experience. Volkswagen can reengineer its processes to reduce lead times and improve service delivery, ultimately increasing customer satisfaction (Alhawamdeh, 2021). By optimizing processes such as vehicle delivery, after-sales service, and spare parts management, Volkswagen can create a positive customer experience and generate loyalty (Fetais et al., 2022).

The company needs to streamline their operation based on BPR. Volkswagen has a complex organizational structure with multiple divisions and subsidiaries, which can result in duplication of effort, inefficiencies, and slow decision-making (Alhawamdeh, 2021). BPR can help Volkswagen to simplify its organizational structure, eliminate redundant activities, and streamline its operations (Fetais et al., 2022). It will reduce costs, improve efficiency, and enhance the company’s ability to respond to changing market conditions, as discussed in Fetais et al. (2022). In addition, Volkswagen needs to evaluate its existing business processes and identify improvement areas. BPR can help to redesign these processes and make them more efficient (Alhawamdeh, 2021). It will involve mapping current processes, analyzing them, and redesigning them to eliminate inefficiencies and redundancies.

Implementing BPR in Volkswagen can reduce costs. To remain competitive in the automotive industry, Volkswagen must reduce costs while maintaining its high-quality standards. BPR involves analyzing and redesigning business processes to improve performance, quality, and cost significantly (Alhawamdeh, 2021). Volkswagen can reduce costs, increase efficiency, and improve customer satisfaction by optimising its operations. For example, Volkswagen can streamline its supply chain, automate production processes, and eliminate non-value-added activities (Hassan, 2019). Another approach is delayering, which involves reducing the number of management levels in an organization. Delayering can help Volkswagen remove bureaucratic processes, reduce decision-making time, and improve employee communication. By eliminating unnecessary layers of management, Volkswagen can reduce its operational costs and increase efficiency.

The Readiness of the Organization to Change

Force Field Analysis is a model that helps to identify the driving and restraining forces affecting a change process (Smartt, Casey and Ferreira, 2018). In the case of Volkswagen, the driving forces are the need to reduce carbon emissions, the shift towards electric vehicles, and improve brand reputation. However, there are also restraining forces, such as the resistance from changing from internal stakeholders, the complex organizational structure, and the cost of implementing new technology (Amjad and Rehman, 2018). Based on this analysis, it is clear that Volkswagen’s readiness for change is hindered by several restraining forces that must be addressed. In addition, to force field analysis, I also used the readiness for a change model to assess the organization’s readiness for change. This model comprises three components: the change recipients’ characteristics, the change agents’ behavior, and the situation (Smartt, Casey and Ferreira, 2018).

In individual characteristics, Volkswagen employees have varying features that impact their readiness for change. Some employees may be more open to change than others, as Amjad and Rehman (2018) discussed. Therefore, it is essential to identify employees’ characteristics to address their concerns about the change process (Amjad and Rehman, 2018). Conversely, in change agent behavior, agents, including managers and leaders, play a critical role in facilitating the change process. Their behavior can either facilitate or impede change. Therefore, it is crucial to identify change agents’ behavior and ensure they support the change process. Finally, external and internal organizational factors can impact the change process in a change situation. These factors include the company’s culture, communication channels, and resources for the change process (Amjad and Rehman, 2018). The driving forces for change in Volkswagen include improving profitability, increasing customer satisfaction, and staying competitive in the market (Sundaram, 2020). These forces push the organization towards change. On the other hand, the restraining forces that prevent change include resistance to change from employees, bureaucracy, and regulations. These forces restrain the organization from changing (Sundaram, 2020).

Another tool that can be used to assess readiness of Volkswagen to undertake change is the readiness method. The readiness method involves assessing the organization’s capacity, capability, and willingness to undertake change (Metwally et al., 2019). In capacity, Volkswagen has significant resources, including a large workforce and a strong financial position, which should enable it to undertake change (Metwally et al., 2019). Capability refers to the organization’s ability to plan and implement change effectively. Volkswagen’s history of successful change initiatives, including its shift to electric vehicles, demonstrates its capability to undertake change. Willingness refers to the organization’s motivation and commitment to change. Volkswagen’s recent efforts to address the Dieselgate scandal and shift to electric vehicles demonstrate its willingness to undertake change (Painter and Martins, 2017).

Reflection on Readiness to Lead Change as a Leader

As the newly appointed CEO of Volkswagen, I am aware of the need for change in the organization to optimize its operations, release cash for investment, and ensure the sustainability of the business. I have assessed my readiness to lead the change using Kotter’s 8-Step Change Model and written a vision statement to guide the transformation process. According to Kotter’s model, establishing a sense of exigency is the initial step in leading change. As a leader, I have recognized the need for change and communicated this exigency to the organization. I have emphasized the importance of optimizing operations to release cash for investment and ensure the long-term sustainability of the business. This sense of urgency will motivate the organization to support the change effort and work towards achieving the vision (Sittrop and Crosthwaite, 2021).

The model’s second step is forming a powerful coalition (Sittrop and Crosthwaite, 2021). As a leader, I have developed an alliance of key stakeholders, including top executives, managers, and employees, to support the change effort. I have identified individuals with the skills and knowledge necessary to drive the transformation process and brought them together to form a cohesive team. The third step is to create a vision for change (Sittrop and Crosthwaite, 2021). I have written a vision statement outlining Volkswagen’s desired future state. The vision statement highlights the need to optimize operations to release cash for investment and ensure the long-term sustainability of the business. It is clear, concise, and inspiring, and it will guide the organization throughout the transformation process. The fourth step is communicating the vision (Sittrop and Crosthwaite, 2021). I have shared the vision statement with the entire organization as a leader. I have emphasized the importance of the vision and its relevance to the future of Volkswagen. I have encouraged employees to support the idea and work towards achieving it. The fifth step is empowering others to work on the vision (Sittrop and Crosthwaite, 2021). I have provided the necessary resources, support, and training for employees to work on the vision. I have encouraged them to take ownership of the change effort and contribute their ideas and expertise towards achieving the desired future state.

The sixth step is to create short-term wins (Sittrop and Crosthwaite, 2021). I have identified quick successes that can be achieved early in the change process to build momentum and demonstrate the effectiveness of the change effort. These wins will motivate employees and reinforce their commitment to the vision. The seventh step is consolidating gains and producing more change (Sittrop and Crosthwaite, 2021). I have recognized the need to sustain the change effort and ensure that the desired future state becomes the new normal. I have developed a plan to consolidate the gains achieved through the change effort and continue to produce more change in the future. The final step is to fix new strategies in the company’s culture (Sittrop and Crosthwaite, 2021). I have recognized the need to embed new strategies and behaviors in the organization’s culture to ensure the sustainability of the change effort. I have developed a plan to institutionalize the changes and make them a part of the organization’s DNA.

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