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Published byEleanor Wilson Modified over 9 years ago
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Key Issues U.S. Mexico Germany ??
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NAFTA and Volkswagen U.S. Mexico Germany High-end production Suppliers Low-end Production Some supply Marketing Distribution
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Challenges F New challenges brought by NAFTA? F Can VW compete from outside the U.S.? F What is impact of currency changes? F Should VW reconfigure the supplier network F Is the labor a symptom of a larger problem? F Is the Mexican market really that important?
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What should VW do? F Suppliers F New models F Marketing F Location of production F Local content levels F Management of F/X risk F HR policies
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NAFTA: Key Issues F Regional content F Over-reliance on German imports F Lack of US or Mexico supply network F Increased competition in Mexico and US F Instability of Peso F Labor instability
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Changes in Currency DM per $ 19912000 Peso per $ 19912000 Peso per DM 19912000
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Location and Flow U.S. Mexico Germany ??
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Strong Dollar vs. Peso and DM Location and Flow: Strong Dollar vs. Peso and DM U.S. Mexico Germany Sales Components Mfg. Profit Lower labor costs High component costs Lower profits Low transfer price
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Strong Dollar vs. Peso and DM Location and Flow: Strong Dollar vs. Peso and DM U.S. Mexico Germany Sales Mfg. Components Profit Constant labor costs Const. component costs Profits depend on P-C
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Strong Dollar vs. Peso and DM Location and Flow: Strong Dollar vs. Peso and DM U.S. Mexico Germany Sales Mfg. Components Profit Lower labor costs Low component costs Highest profits Low transfer price
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Weak Dollar vs. Peso and DM Location and Flow: Weak Dollar vs. Peso and DM U.S. Mexico Germany Sales Components Mfg. Profit Medium labor costs Low component costs Medium profits High transfer price
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Currency and Location Strong Dollar F Mexico mfg. F Mexico components F Maximize $ profits Weak Dollar F Mexico mfg. F U.S. components F Maximize Peso profits
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Mexico Policy Efforts F Mexican government lures German FDI in wake of German reunification F Strike at Puebla, August 1992 F Pact for Stability, Competitiveness and Employment limits union’s ability to gain wage raises to 9.9%
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VW Changes F VW Mexico makes $1.0 bil investment: 1990-95 F Piech as new CEO January 1993 –Reversed Hahn’s growth strategy –Cut worldwide investment by 1/3 and German workforce by 10% F Jose Lopez cutting supply costs –Reducing VW suppliers from 1,000 to under 100 –VW suppliers shifting production to low wage countries (including Mexico) F Considering US plant if 10-15% growth achieved
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VW’s U.S. Marketing Efforts F Cross-promotion of Irish folk/new age band “Clannad” (1993; music from commercials) F $45 million U.S. advertising campaign focuses on popularity of Golf /Jetta in Europe (1993) F J.D. Power ranks Golf as “best in class” (1995) F Pushes “test drive outings” vs. rivals’ cars (1995) F Major focus group effort vs. rivals’ cars (1995) F “Drivers Wanted” campaign signals VW’s focus on 17-30 age group; $45 million (1995) F “Duh, Duh Duh” … $70 mil ad campaign (1997)
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New Products
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Missed Opportunities?
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Product Evolution
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The VW Family F Audi F Bentley F Bugatti F Rolls-Royce F Seat F Skoda F Volkswagen
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VW’s North American Sales Number of Units
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