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Volkswagen Do Brazil Case Report

In 2007, Thomas Schmall was appointed to the CEO of Volkswagen do Brazil (VMB). Two years later, Brazil experienced a financial crisis making VMB to park its newly manufactured vehicles in its plants waiting for the consumers to start spending again. Consequently, VMB recorded financial losses and a fall in its market share. Using VMB as the case study, this essay covers the strategy that Schmall adopted to swing VMB back to profitability. He adopted a balanced scorecard that enables the company to drive its strategies. The essay also covers dimensions of a balanced scorecard. This is a nice paper that educates companies on what they may do to achieve a high performance culture and thereby improve their output.

Why VMB is so successful?

What approach Schmall adopted to swing VMB back to profitability?

Description

Volkswagen Do Brazil Case Report




Background Information

Volkswagen do Brazil (VMB) is one of the largest manufactures of vehicles in Brazil.
The company has three vehicle plants: Anchieta, Taubaté, São Carlos and Curitiba and a single
engine plant. Its production according to 2013 statistics was approximately 762,000 vehicles,
804,000 engines while the gearboxes were around 130,000. Under an acting CEO Thomas
Schmall, the company has around 22,000. Thomas Schmall presumed his role as the company’s
CEO in 2007, the time that the company was facing diminishing market share and financial
losses (Kaplan, 2014). In spite of adopting a balanced scorecard in 2007 whose aim was to
reverse decreases in the market share of the company, Thomas faced a big financial crisis in
2009. The year was characterized by the highest number of newly manufactured vehicles parked
in the company’s plants as the company waited for the consumers to start spending again. This is
well illustrated in Figure 1(a) at the appendix of this paper.
The VMB fall in the market share was earlier witnessed in 1997 in which it declined to
30% and later to 21% in 2001. This decline continued in the following 8 years to the time of
entry of Thomas Schmall as the company’s CEO. By 2008, its market share had dropped to
10.3% (Kaplan, 2014). The statistics showing this trend can be seen on Figure 1(b). However,
with the assistance of the balanced scorecard, the company was able to drive its strategies since
the balanced scorecard guides the working staff on ways to produce. The map has made VMB to
be the most innovative automotive center in Latin America and is the largest automobile
manufacture in Brazil. This paper presents the new strategy of Volkswagen do Brazil and later
draws conclusions based on the discussed strategy.




The strategy of Volkswagen do Brazil (VWB)

The Volkswagen do Brazil’s new strategy is based on strategic map and balanced
scorecard for cultural and strategic change. The strategy holds the stakeholders, the workers, the
suppliers and dealers together to form an interrelated system. The strategy is led by the balanced
scorecard (BSC) committee. This is the top management that oversees the implementation of the
BSC goals and is led the CEO Mr. Thomas Schmall and the president of human resources Mr.
Senn. The BSC committee delegates power and responsibilities to the strategy formulation and
the balanced scorecard management departments. The role of the strategy formulation
department is to develop strategies that could assist Volkswagen Company to meet goals set by
the BSC committee. The balanced scorecard management, on the other hand, leads, controls,
monitors, staffs and facilitates coordination of the BSC team (Kaplan, 2014).
The BSC team focuses on addressing matters related to the followings dimensions: the
presidency, human resource, finance, operations, sales and marketing, supply, product
development and planning. The BSC team believes that by effectively dealing with matters
related to information technology, government affairs, legal affairs, corporate affairs and press
relations, environment, autovision and Kaizen, VMB could capture a largest market share. This
could be a road towards achieving a 6.6 million sales of vehicles annually by 2018 with a 21%
return investment (Kaplan, 2014).
Under the financial dimension, that is managed by the balanced scorecard team, VMB
aims to grow its market share and have sustainable and positive financial results. To achieve this,
VMB seeks to improve return on investment and the net cash flow. VMB also strives to improve
the percentage revenue that is used as the operating profit. Fund allocation for facility and tool

investment are all measures put forth to address the challenging financial dimension and thereby
achieve positive financial results.
The customer challenges dimension is covered by the VMB’s move to satisfy their
expectations and demands. However, their satisfaction is driven by facilitating internal processes.
For instance, as internal processes, the company seeks to improve the launching process when
new automobiles are produced and increase both direct and indirect progress. Moreover, the
company guarantees its customers continued innovation. Enhancement of this internal process
are believed to satisfy the expectations of the customers (ANFAVEA, 2010).
Elsewhere as stipulated in the strategy map, VWB creates and manages a robust
production as a way of adapting to industry volatility. It has also focused on achieving reliability
by maintaining specific car volume production as dictated by the customer demands. In case of
low demand, the company produces lesser volume of cars, and the converse is also true during
high demand in which a greater volume is produced. As a symbolism of the new production and
the execution of the new strategy, VWB has created a robot “Giga”. With this internal processes,
VWB believes this will address the customer challenges who in return could have a good
reputation towards the company.
The company has advocated for higher performance culture than in its previous culture
that was bureaucratic and slow-moving. The development of attractive and innovative portfolio
and ensuring sustainable management practices are also practiced as strategies to address
potential and growth challenges (ANFAVEA, 2010). The company realized how difficult it was
to achieve sustainable management practices and thus in 2010, it placed sustainability on its
strategic map. The process was followed by development of related sustainable challenges as
management principles and disseminating it in the entire company. Considering that it’s not

possible to tie sustainability in any organization to environmental and social responsibilities, the
company adopted a norm of investing BRL 9.2 billion in the country, an approach that is still in
practice up to date. The company also targets at becoming a sectorial in which authorities and
representative entities may use as their reference in implementing their performance systems
(Acciarto, 2014).
In solving potential and growth challenges, VMB has focused on achieving a high
performance culture that powers the organization towards meeting the customer demands. To
enhance this performance, the company’s strategy advocates for quality-focused training. VMB
has an agreement with the Serviço de Aprendizagem Industrial (Senai) which is tasked with
training the company’s technicians for all plants located in Brazil. The move is to have
specialized individuals who may become references to enhance performance of workers in the
entire Brazil. Additionally, VMB has professional training centers in every unit (Profiraum)
which it uses to train workers with respect to the required technical know-hows. The training is
done solely to achieve a better performance culture (Acciarto, 2014).

Conclusion

This paper was a case study that covered challenges faced by Thomas Schmall who is the
acting CEO of Volkswagen do Brazil (VMB) at the time he became the CEO of the company.
Some of the challenges identified were a fall in the market share and financial losses. For
instance, in the year 2009, Brazil experienced a financial crisis making VMB to park its newly
manufactured vehicles in its plants waiting for the consumers to start spending again. This paper
reviewed these challenges and then represented graphically. The paper later covered the strategy
of Volkswagen do Brazil and the dimensions within the strategy. This paper serves as a

documented material for providing knowledge to companies on ways to achieve a high
performance culture and thereby improve organizational output.

References

Acciarto, M. R. (2014). Volkswagen do Brasil Indústria de. Retrieved from
renato.acciarto@volkswagen.com.br
ANFAVEA. (2010). Brazilian Automotive Industry Yearbook Pg 62.
Kaplan, R. (2014). Volkswagen do Brazil: Driving Strategy with the Balanced Scorecard .
Harvard.

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