NAFTA's Impact on Volkswagen's Supply Chain Strategy: A Case Study, Slides of Business Management and Analysis

Download NAFTA's Impact on Volkswagen's Supply Chain Strategy: A Case Study and more Slides Business Management and Analysis in PDF only on Docsity! VW: Case Study Questions • The NAFTA challenge • Reconfiguration of supply chain strategy • Become competitive in U.S. market Docsity.com 1. Shift in IPE • How does NAFTA challenge VW to reconfigure their global/North American supply network? • Other factors? Docsity.com NAFTA: Key Issues Regional content Over-reliance on German imports Lack of US or Mexico supply network Increased competition in Mexico and US Instability of Peso Labor instability Docsity.com Changes in Currency DM per $ 1991 2000 Peso per $ 1991 2000 Peso per DM 1991 2000 Docsity.com 2. Supply Chain Management: Location and Flow of Value • How should VW relocate and reconfigure its key value-adding activities, such as production, design, marketing, supply chain, financial management, etc.? • What is your recommended ‘flow’ for auto components, finished vehicles, cash, etc.? Docsity.com 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 margin Docsity.com 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 Docsity.com 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 Docsity.com New Products Docsity.com Product Evolution Docsity.com Missed Opportunities? Docsity.com VW’s U.S. Marketing Efforts • Cross-promotion of Irish folk/new age band “Clannad” (1993; music in commercials) • $45 million U.S. advertising campaign focuses on popularity of Golf /Jetta in Europe (1993) • J.D. Power ranks Golf as “best in class” (1995) • Pushes “test drive outings” vs. rivals’ cars (1995) • Major focus group effort vs. rivals’ cars (1995) • “Drivers Wanted” campaign signals VW’s focus on 17-30 age group; $45 million (1995) • “Duh, Duh Duh” … $70 mil ad campaign (1997) Docsity.com The VW Family • Audi • Bentley • Bugatti • Rolls-Royce • Seat • Skoda • Volkswagen Docsity.com Mexico Policy Efforts • Mexican government lures German FDI in wake of German reunification • Strike at Puebla, August 1992 • Pact for Stability, Competitiveness and Employment limits union’s ability to gain wage raises to 9.9% Docsity.com