SWOT ANALYSIS OF AUDI

One of the topmost luxury automobile manufacturers in the world, Audi is as much known for its car as for its sophisticated luxury. Audi is a completely owned group of Volkswagen and has one of the most famous logos of automobile history – the four interconnected rings of Audi. Here is the SWOT analysis of Audi.

Strengths in the SWOT analysis of Audi

Technology and engineering – Audi is known for the engineering and precision behind their cars. And that is exactly what they market. The look and design of the car comes with precision engineering and use of high capacity engines. The same looks cannot be achieved without the proper manufacturing facilities or the right manufacturing process.

Brand name – A brand is a promise and Audi definitely carries the “trust” factor behind it. Known as one of the most safe cars in the world, Audi has the design, the technology and the safety to be one of the best cars around. Furthermore, years of proper marketing communications and years of introducing newer, faster and more sleek cars has added to the brand name of Audi as a super premium car manufacturer.

Products – For an automobile manufacturer, the products are the key driving elements for the success or failure of the company. This is where Audi is at its best. Audi has varying series of car models, all from premium to super premium to ultra premium. The A series and the Q series of Audi cars are one of the most popular and in demandseries from Audi. But other then that, Audi also focuses on innovation with cars like Audi ultra, Audi Quattro, Audi sport and others.

Design – BMW, Mercedes, Audi, Ferrari, all these cars are known and are premium because of the design of their cars. Sleek, Sophisticated and Rich, all these attributes can be associated with an Audi car. Audi cars are differentiated mainly by its logo which involves 4 interconnected circles. Besides these, the car comes in hatchback as well as sedan and luxury cars. The accessories which accompany an Audi car is almost as famous as the car itself. Air bags for safety, seat and mirror warmers, automated gears, the interior decoration of the car, all of these things contribute to the design element of Audi.

Weaknesses in the SWOT analysis of Audi

Diversification – BMW diversified itself into low cost cars and has kept a larger productportfolio because it wants to increase its turnover. Same strategy has not been followed by Audi because of which BMW has taken the front seat in the luxury car segments leaving Audi lagging behind.

Promotions and communications – The message of Audi ads always hits the bullseye. However, Audi needs to pick up the frequency of promotions as well. You will see Audi promoting even less then BMW which is a mistake. Although premium brands need not be present everywhere, regular and to the point promotions which set the idea of “premium” in the minds of the customers need to shown again and again. Both BMW and Mercedes are promoting more vigorously then Audi.

Opportunities in the SWOT analysis of Audi

Target Emerging markets – Because of its presence in limited number of markets, Audi can introduce its products in emerging markets as well, thereby covering more geographical territory and bringing more turn over and profits for themselves.

Innovate for mature markets – Innovation and diversification in mature markets will give Audi an edge from their competitors making them stand apart in the crowd. Innovation can be in the form of battery fueled premium cars, or more energy efficiency or the overall working of cars in themselves. Innovation is a driving force behind differentiation which will help Audi in the long run.

Threats in the SWOT analysis of Audi

Limited markets – The market is limited and the share of the pie is going to other premium brands as well. This may cause saturation in the long run.

Threats in general to luxury cars – Younger generation spending more on gadgets and realizing the value of savings on other products

Risks of international markets – Audi cannot survive with its home territory. It has to spread internationally. The PEST risks across countries is high which takes a lot of time of the brand to manage.

Competition – Like any industry, competition is high even in the luxury car manufacturers segment, the competition being strongest from BMW.

Thus overall, even though the going is good for Audi, the future is grim with the opportunities to expand being limited in mature markets and at the same time rising competition from Mercedes and BMW as well as other premium cars. However, Audi being Audi, we are sure that the company will thrive in the long run and make the necessary strategy changes to expand further and become more profitable.

Benchmarking Example

Example

Company ‘A’ has used performance benchmarking to compare its product ‘X’ with the competitor’s product ‘Y’ and found out that the product ‘X’ is priced slightly lower, but it also has fewer features than product ‘Y’. The company recognized that in order to win a larger market share and establish itself in the market, it has to increase the number of features in its product while keeping the price at the same level or even decreasing it.

To achieve this, the company ’A’ has set up a team that investigated product ‘X’ value chain analysis. The team identified that the activities adding the most to the cost are marketing and purchasing parts in an open market. The team also identified that by buying standards parts in the market, the company has little room to introduce new features as this would require customized parts for its product ‘X’. The next step was to assign the proper metrics to marketing and purchasing activities and gather the required data. The company joined the benchmarking network and in a few weeks gathered enough data to compare the performance of its processes.

The results indicated that the marketing activities could be improved significantly. The team recognized that many businesses in the industry were able to attract new customers profitably through heavy advertising online. Yet, further observations of the companies outside the industry showed that the average returns on advertising weren’t so huge compared to the returns when attracting customers through social media. Therefore, the team decided to rely on social media rather than advertising to attract more customers, while reducing its costs by 20%.

The next activity analyzed was the purchase of parts in the open market. While this was a convenient way to conduct the business it was costing more and didn’t allow customizing the product. The team identified that this activity could be improved by manufacturing the parts inside the company or by establishing long term relationships with suppliers. The collected data and the experience of other similar businesses showed that the best option would be to establish long term relationships with suppliers. It would cost less than manufacturing the parts inside the company or buying them in an open market. It would also allow ordering customized parts that were needed for the new features.

By engaging in benchmarking activities, the team has identified the gaps in company’s performance and introduced new ways to improve the current processes to achieve the higher performance.

Competitive Advantage

Definition

Competitive advantage

 

means superior performance relative to other competitors in the same industry or superior performance relative to the industry average.

What is competitive advantage?

There is no one answer about what is competitive advantage or one way to measure it, and for the right reason. Nearly everything can be considered as competitive edge, e.g. higher profit margin, greater return on assets, valuable resource such as brand reputation or unique competence in producing jet engines. Every company must have at least one advantage to successfully compete in the market. If a company can’t identify one or just doesn’t possess it, competitors soon outperform it and force the business to leave the market.

There are many ways to achieve the advantage but only two basic types of it: cost or differentiation advantage. A company that is able to achieve superiority in cost or differentiation is able to offer consumers the products at lower costs or with higher degree of differentiation and most importantly, is able to compete with its rivals.

An organization that is capable of outperforming its competitors over a long period of time has sustainable competitive advantage.

The following diagram illustrates the basic competitive advantage model, which is explained below in the article:

Porter's Five Fores Model

It is every strategist’s job to evaluate company’s competitive position in the industry and to identify what strengths or weakness can be exploited to strengthen that position. The tool is very useful in formulating firm’s strategy as it reveals how powerful each of the five key forces is in a particular industry.

Threat of new entrants:

This force determines how easy (or not) it is to enter a particular industry. If an industry is profitable and there are few barriers to enter, rivalry soon intensifies. When more organizations compete for the same market share, profits start to fall. It is essential for existing organizations to create high barriers to enter to deter new entrants. Threat of new entrants is high when:

• Low amount of capital is required to enter a market;
• Existing companies can do little to retaliate;
• Existing firms do not possess patents, trademarks or do not have established brand reputation;
• There is no government regulation;
• Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other industries);
• There is low customer loyalty;
• Products are nearly identical;
• Economies of scale can be easily achieved.

Bargaining power of suppliers:

Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their buyers. This directly affects the buying firms’ profits because it has to pay more for materials. Suppliers have strong bargaining power when:

• There are few suppliers but many buyers;
• Suppliers are large and threaten to forward integrate;
• Few substitute raw materials exist;
• Suppliers hold scarce resources;
• Cost of switching raw materials is especially high.

Bargaining power of buyers:

 Buyers have the power to demand lower price or higher product quality from industry producers when their bargaining power is strong. Lower price means lower revenues for the producer, while higher quality products usually raise production costs. Both scenarios result in lower profits for producers. Buyers exert strong bargaining power when:

• Buying in large quantities or control many access points to the final customer;
• Only few buyers exist;
• Switching costs to other supplier are low;
• They threaten to backward integrate;
• There are many substitutes;
• Buyers are price sensitive.

Threat of substitutes:

This force is especially threatening when buyers can easily find substitute products with attractive prices or better quality and when buyers can switch from one product or service to another with little cost. For example, to switch from coffee to tea doesn’t cost anything, unlike switching from car to bicycle.

Rivalry among existing competitors: 

This force is the major determinant on how competitive and profitable an industry is. In competitive industry, firms have to compete aggressively for a market share, which results in low profits. Rivalry among competitors is intense when:

• There are many competitors;
• Exit barriers are high;
• Industry of growth is slow or negative;
• Products are not differentiated and can be easily substituted;
• Competitors are of equal size;
• Low customer loyalty.

Although, Porter originally introduced five forces affecting an industry, scholars have suggested including the sixth force: complements. Complements increase the demand of the primary product with which they are used, thus, increasing firm’s and industry’s profit potential. For example, iTunes was created to complement iPod and added value for both products. As a result, both iTunes and iPod sales increased, increasing Apple’s profits.

The Strategic Management Model

The strategic management process can best be studied and applied using a model. every moodel represents some kind of process. The framework illustrated in above is a widely accepted, comprehensive model of the strategic management process. This model does not guarantee success, but it does represent a clear and practical approach for formulating, implementing and evaluating strategies. Relationships among major compoents of the strategic management process are shown in the model, which appears in all subsequent chapters with appropriate areas shaped to show the particular focus of each chapter.

These are three important questions to answer in developing a strategic plan :

• Where are we now? 
• Where do we want to go ? 
• How we are going to get there ? 

Identifying an organizations vision, mission,objectives, and strategies is the logical starting point for strategic management because a firm's present situation and condition may replude certain strategies and may even dictade a particular course of action.
Every organization has a vision, mission, objectives and strategy, even if these elements are not consciously designed,written, or communicated.
The answer to where an organization is going an be determined largely by where the organizations has been !

Mission Statements Example

I want to explain that a formal summary of the aims and values of a company, organization or instutition. Every organization has a unique purpose and reason for being. This uniqueness should be reflected in mission statements. Mission is important to the all of the instutitions and companies. Today, I will review the Google Mission. 

Google described that their mission is like this : 

“Our mission is to organize the information in the World and make it accessible to everyone.”

1. Customers – Who are the firm’s customer?

2. Product or services- What are the firm’s major products or services?

3. Markets- Geographically, where does the firm compete?

4. Technology- Is the firm technology current?

5. Concern for survival,growth and profitability- Is the firm committed to growth and financial soundness?

6. Philosophy- What are the basic beliefs, values, aspirations, and ethical priorities of the firm ?

7. Self-Concept- What is the firm’s distinctive compentence or major competitive advantage?

8. Concern for public image- Is the firm responsive to social, community, and environmental concerns?

9. Concern for employees – Are employees a valuable asset of the firm?

(Author Comment : Statement doesn’t contain the necessary ingredients (3,4,5,6,7,8,9)