-------------------

GROUP ASSIGNMENT
COURSE: INTERNATIONAL BUSINESS
(INE2028-E)
TOPIC: ANALYZE EXPORTING STATEGY OF VOLKSWAGEN

Instructor: MSc. Tran Thu Thuy

Group 3: Nguyen Thi Phuong Dung - 22050986
Do Huong Trang - 22051241
Le Thu Ha - 22051022
Ha Phuong Anh - 22050939
Phan Ngoc Diep - 22050983
Nong Phuong Tra - 22051238

Ha Noi, 11/2024
TABLE OF CONTENTS
LIST OF IMAGE.............................................................................................................
INTRODUCTION ......................................................................................................... 1
I. INTRODUCTION ...................................................................................................... 2
1.1. Overview of exporting ........................................................................................ 2
1.2. Introduction to Volkswagen .............................................................................. 2
II. CASE STUDY: VOLKSWAGEN EXPORTING TO THE EUROPEAN
MARKET ....................................................................................................................... 3
2.1. Why did Volkswagen choose the European market? ..................................... 3
2.2. How Volkswagen applied exporting strategy .................................................. 5
2.3. Benefits and drawbacks for Volkswagen ......................................................... 7
2.3.1. Benefits ......................................................................................................... 8
2.3.2. Drawbacks ................................................................................................... 9
2.3.4. Learned lessons ......................................................................................... 11
III. CONCLUSION ..................................................................................................... 12
3.1. Recommendations for Volkswagen ................................................................ 12
3.2. Summary ........................................................................................................... 13
IV. REFERENCES ...................................................................................................... 14
 LIST OF IMAGE

No. Figure Page No.

1 Key figures of VW 3

2 The Marshall Plan 4

3 European Economic Community 4

4 The “Think Small” campaign 7

 INTRODUCTION
1. The Urgency of the Topic
Understanding Volkswagen's exporting strategies to the European market from 1945
to 1970 is crucial due to the post-World War II economic landscape. This period saw
Volkswagen transform into a major player in the automotive industry, providing
insights into effective market entry strategies and adaptation in a competitive
environment.
2. Research Objectives and Questions
General Objective: To analyze Volkswagen's exporting entry mode in Europe from
1945 to 1970, focusing on strategies, challenges, and outcomes.
Specific Objectives:
 Examine the historical context of Volkswagen's exports in Europe.
 Identify key strategies for market penetration.
 Assess challenges faced and solutions implemented.
 Evaluate the impact on Volkswagen's growth and market position.
Research Questions:
1. What influenced Volkswagen's decision to export to Europe post-WWII?
2. What strategies did Volkswagen use to establish its brand in Europe?
3. What challenges did Volkswagen encounter, and how were they addressed?
4. How did these exporting activities affect Volkswagen's competitiveness in the
European market?
3. Scope of Study
Geographical Scope: Focus on key European markets, including Germany, France,
the UK, and Italy.
Time Frame: Cover the period from 1945 to 1970.
Content Scope: Analyze Volkswagen's exporting strategies, marketing practices,
production adaptations, and responses to competition in the European automotive
industry.

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I. INTRODUCTION

1.1. Overview of exporting

 Exporting is a way to increase market size and profit thanks to lower trade barriers
under the WTO and regional economics agreements.
 The advantages of exporting:
 Fast entry: Exporting allows companies to quickly enter international markets
without the need to establish a legal business entity abroad.
 Low financial risk: Compared to other entry modes like joint ventures or
establishing subsidiaries, exporting requires minimal investment in
infrastructure and operations in the foreign market.
 Diversified revenue source: By selling products or services in multiple
markets, exporting helps diversify revenue streams, reducing dependence on
the domestic market and mitigating risks associated with economic downturns
or demand fluctuations in a single region.
 The disadvantages of exporting:
 Low control: Relying on foreign agents or partners reduces a company’s
ability to control how its products are marketed and distributed.
 Limited local knowledge: A lack of in-depth understanding of the local market
can lead to ineffective business decisions, especially in complex or diverse
markets.
 Potential negative environmental impact of transportation: Exporting involves
international shipping, which increases carbon emissions and contributes to
environmental damage.
 Cultural and language barriers: Differences in culture and language can create
challenges in building relationships with customers and partners in foreign
markets.
 Transportation costs and complexities: Costs associated with packaging,
shipping, insurance, and logistics can increase the overall expenses of
exporting, reducing product competitiveness.
=> Exporting plays a crucial role in global business strategies, offering companies a
pathway to expand their reach, diversify markets, and enhance competitiveness.

1.2. Introduction to Volkswagen

 Volkswagen AG, headquartered in Wolfsburg, Germany, is a leading global

automobile manufacturer renowned for producing a diverse range of vehicles,
including passenger cars, trucks, and commercial vehicles. The company
operates under several prominent brands, such as Volkswagen, Audi, Porsche,
Škoda, and Lamborghini, and has a significant presence in over 30 countries,
with a strong focus on European and Chinese markets.

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  In 2019, Volkswagen achieved its highest sales volume in history, with
approximately 11 million vehicles, capturing a 12.2% share of the global
automotive market, and ranking among the top two brand-driven Original
Equipment Manufacturers (OEMs) globally, following Toyota.
 In 2023, Volkswagen boasted 114 production facilities spanning 17 European
countries and 10 countries in the Americas, Asia, and Africa. With such an
extensive production network, it's no surprise that Volkswagen employs 684,000
people worldwide. In terms of business performance, Volkswagen delivered 9.2
million vehicles globally in 2023 and achieved sales revenue of 322.3 billion
euros. These figures highlight Volkswagen's strength and influence in the global
automotive market.

Figure 1: Key figures of VW

Source: Volkswagen group

II. CASE STUDY: VOLKSWAGEN EXPORTING TO THE EUROPEAN

MARKET

2.1. Why did Volkswagen choose the European market?

- Post-War economic boom

After World War II, Europe’s reconstruction under the Marshall Plan created a demand
for affordable and reliable transportation. Volkswagen recognized this as an opportunity
to meet the mobility needs of a growing population, particularly through its iconic
Beetle, which combined affordability and reliability.
Figure 2: The Marshall Plan

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- European economic integration
The formation of the European Economic Community (EEC) in 1957 significantly
benefited Volkswagen by:
+ Eliminating tariffs and trade barriers: Streamlining cross-border trade within
member states.
+ Encouraging free trade: Boosted cross-border car sales and cemented Volkswagen’s
leadership across Europe without facing major financial or regulatory obstacles.
Figure 3: European Economic Community

- Alignment with European consumer preferences

 Compact, economical cars: European consumers in the mid-20th century

preferred smaller, fuel-efficient cars due to limited road infrastructure and higher
fuel costs compared to the U.S. Volkswagen’s Beetle was ideally suited to these
conditions.
 Rising urbanization: As European cities grew, compact cars like Volkswagen’s
models became practical for navigating narrow streets and limited parking.

- Cost-effective manufacturing and exporting

+ Cost-effectiveness: The Wolfsburg factory in Germany, designed for large-scale

production, enabled Volkswagen to:
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  Mass-produce vehicles for export
 Avoid the financial burden of building foreign production facilities

+ Geographic proximity: Germany’s central location in Europe made logistics simple

and cost-effective, enabling:

 Quick distribution to neighboring countries.

 Lower transportation costs for exported vehicles.

+ Testing market potential: By exporting rather than establishing foreign plants early
on, Volkswagen minimizes financial risks while gauging the demand for its vehicles in
various European countries.

+ Partnership with local importers: Volkswagen partnered with established local

distributors to facilitate entry into Europe markets without the need to establish direct
sales operations.

2.2. How Volkswagen applied exporting strategy

a, First steps in exporting (Late 1940s):

 Pon’s Automobielhandel in Amersfoort became an authorized importer for the

Netherlands. At the beginning of October 1947, the Pon brothers imported five
Volkswagen saloons, thus closing Volkswagen’s first export deal. After
exporting 56 Volkswagens in 1947, exports surged within a year to 4,500 units.
 In order to assist the export business, Volkswagen signed contracts in 1948 with
Walter Haefner’s Neue Amag AG in Switzerland, with Anciens Etablissements
D’Ieteren Frères in Belgium as well as with partners in Luxembourg, Sweden,
Denmark and Norway. Specifically, 4,385 vehicles were exported to European
countries: 1,820 to the Netherlands, 1,380 to Switzerland, 1,050 to Belgium, 75
to Luxembourg, 55 to Sweden and 5 to Denmark. Exports the following year
climbed to a total of 7,127 vehicles, meaning that Volkswagen sold over 15
percent of its total production to European markets.

=> This early export activity laid the foundation for Volkswagen's international
success.

b, Strategic export expansion (1950s):

- By the early 1950s, Volkswagen’s export numbers significantly increased.

Volkswagen exported one-third of its car production to 18 countries, primarily in
Europe. The main export markets were Sweden, Belgium, the Netherlands, and
Switzerland.

- Strategic use of CKD kits: Volkswagen exported Completely Knocked Down (CKD)
kits to the European market, particularly during the early expansion phase of its
operations.

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  Example: The export of CKD kits of the Volkswagen Beetle to Ireland in 1950.
These kits were assembled locally, starting in Dublin, to help reduce costs and
avoid the high expenses associated with building a full production facility in
countries with limited market sizes.

- Volkswagen began its exports to the United Kingdom by shipping 900 vehicles in
1953; only ten years later, on June 18, the one hundred thousandth vehicle – a red VW
1500 – was delivered.

c, Volkswagen's achievements in expanding its export market in Europe:

 In 1953, Belgium was the largest export market for the Type 2 with deliveries
totaling 1,841 units.
 In 1954, 70 percent of foreign sales were generated by the successful general
importers in Europe, especially in Belgium, Sweden, the Netherlands and
Switzerland. Global market orientation is profitable for both the company and its
distributors.
 Fifteen years after entering the Swedish market, the new Volkswagen Center
opens in Södertälje. While the Swedish general importer AB Scania-Vabis only
imported 7 Volkswagen in 1948, the figure rises to 43,391 new cars in 1963.
 On April 24, 1972 Volkswagen celebrated the completion of the 600,000th
vehicle for the Dutch market. Beetle sedan exports to neighboring Holland began
23 years earlier, in October 1947, marking the beginning of global export success
for Volkswagen.
 More recently, Volkswagen has continued to lead the European market, not just
through production within Europe but also through steady exports to underserved
regions. By 2023, Volkswagen remained the best-selling car brand in the
European Union, largely due to its historical roots in exporting strategies.

d, Key factors behind volkswagen's export success in Europe

- Utilizing existing infrastructure:

 In December 1945, under British management, Volkswagen resumed production

at the Wolfsburg plant with the Volkswagen Type 1, later known as the Beetle,
achieving a production output of 55 vehicles by the end of the year. Thanks to its
large-scale production capabilities, the plant experienced impressive growth,
increasing output to approximately 10,000 vehicles in 1946 and doubling to
around 19,244 vehicles in 1948 to meet the rising consumer demand.
 The Wolfsburg plant, with its large-scale production capacity, enabled the
company to scale up manufacturing for export markets without requiring
additional infrastructure. This allowed Volkswagen to maximize its existing
production capacity and minimize initial investments in foreign production
facilities, ensuring cost efficiency.

- Engineering and quality improvements: The Volkswagen Beetle became famous for
its reliability and fuel efficiency, two crucial factors for consumers in war-torn Europe,
where resources were limited. By the 1950s, the Beetle added to its appeal among the

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European people. Technical changes and innovations lead to a continuous improvement
in product quality and vehicle safety.

 In 1952, the Beetle was improved with a triangular rear window, new tires, brake
lights, a partially synchronized gearbox, and upgraded suspension, enhancing
safety and comfort.
 In 1953, the split rear window of the “Brezel Beetle” was replaced by a larger
oval-shaped window which gives the “Ovali Beetle” its name.
 In 1955, single-compartment rear lamps with integrated brake lights, a double
exhaust and a PVC sunroof were added. The rectangular rear window and an
enlarged windscreen improved driving conditions from 1957 onwards; a large
wing mirror was added one year later.

- Establishment of sales and service networks: Volkswagen focused on building a robust

sales and service network to support its exports.

 In the beginning, this comprised 10 main distributors and 28 dealers.

 By 1948, in the three western zones of occupied Germany, 16 main distributors,
31 wholesalers, 103 dealers and 81 contract service centers handled sales and
service operations.
 In 1954, the dealership organization in Germany comprised 66 main distributors,
239 dealers and 531 contract service centers. The central registry established at
the year-end lists 63 sales managers and 1,997 sales executives in the field sales
organization. There are 82 sales agencies outside of Germany, including
importers in Europe.

- Marketing strategy: VW's marketing strategies were groundbreaking for their time.
The "Think Small" campaign launched in the 1960s highlighted the Beetle's compact
size and affordability, resonating with consumers who valued practicality over luxury.
This campaign significantly boosted sales and brand recognition. Link youtube

2.3. Benefits and drawbacks for Volkswagen

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2.3.1. Benefits

- Volkswagen can avoid development costs and risks associated with operating business
in the foreign market

- The firm can assert their position as well as reputation on the automobile export market
compared to competitors

- Exporting to European market contributes to the increasing source of foreign currency

 During the 1950s, Europe’s economic recovery and the emerging

industrialisation of many countries outside Europe created a favorable situation
for the export of Volkswagens. With a share of up to 50 percent of all German
car exports, Volkswagen was the most important earner of foreign currency and
the leading German car exporter during the given period..

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- By the 1960s, for EEC (European Economic Community ) countries, the elimination
of the tax on goods to be exported also had a favorable effect on trade. This led to the
positive impact on Volkswagen exports to the European market.

 According to the Annual Report of Volkswagen (1963) , exports to European

nations increased over 1962, especially to EEC countries, which imported
136,567 vehicles representing 45.9% of our European exports.

2.3.2. Drawbacks

- The fluctuation of foreign exchange rate and the revaluation of the Deutschmark

Sales problems also arose abroad, intensified by the relaxing of exchange rate controls,
leading to stronger competition from foreign car-makers on the domestic market as
demand fell. Volkswagen responded to changes in exchange rate policy by increasing
prices, especially as higher production costs and lower yields left little leeway for any
other course of action. As a result, prices increased relative to other car-makers, and the
company’s competitive position on key volume markets deteriorated.

- The protectionism for the domestic automobile industry in the European market
create barriers for Volkswagen

- International transportation challenges and logistics management difficulties.

+ The substantial increase in export shipments

+ The challenge of ever-growing overseas exports by purchasing its own ships.

In 1963, 430,366 finished new cars and 41,784 SKD or CKD sedans and Transporter
were shipped. An additional 72,617 CKD kits were also dispatched by sea.

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- The shortage of raw material

Export is an essential pillar for Volkswagenwerk. When there is a chronic shortage of

materials, export revenue from the 46,881 vehicles sold in 43 countries is invaluable,
particularly for purchasing raw materials abroad. Therefore, exporting to the European
market was also impacted by this issue in 1952.

- Intensified competition among both domestic and international car

manufacturers

In the end of 1960s - the early 1970s, Volkswagen's rivals, including Ford , Fiat,
and Renault, introduced a plethora of new models, incorporated technological
advancements, and employed aggressive marketing strategies, significantly
encroaching upon Volkswagen's market share. This deterred the exporting ability
of Volkswagen where its products cost more fuel.

Fiat 128 Berlina (1970)

Ford Mustang Twister (1970)

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 Renault 8 ( 1970)

2.3.4. Learned lessons

- Adaptation to Market Needs

The ability to adapt products for specific markets is crucial. Volkswagen has shown that
understanding local consumer preferences - such as vehicle size, features, and pricing -
is essential for success.

- Efficient Logistics and Supply Chain Management

A robust logistics framework is vital for successful exporting operations. Volkswagen
has developed efficient supply chain management practices that include centralized
order coordination and real-time logistics tracking. This ensures timely delivery of
CKD kits and finished vehicles while managing costs effectively. The company’s
experience underscores the importance of having a well-organized logistics system to
navigate the complexities of international trade.
- Regulatory Compliance and Risk Management
Navigating different regulatory environments is a significant challenge in exporting.
Volkswagen has learned the necessity of understanding local laws regarding tariffs,
taxes, and vehicle standards. This knowledge is essential for minimizing risks
associated with compliance failures and ensuring smooth operations across various
countries. The company’s proactive approach to regulatory challenges enhances its
ability to respond swiftly to changes in trade policies.
- Strategic Use of Export Hubs
Volkswagen has effectively utilized strategic locations as export hubs, such as its
Kaluga plant in Russia, which have become key points for exporting vehicles to
Europe and beyond. This geographic strategy allows for optimized logistics and
reduced shipping costs while expanding their reach into various international markets.
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- Focus on Emerging Markets

Volkswagen's strategy emphasizes the potential of emerging markets for growth through
exports. By targeting regions with increasing demand for vehicles, Volkswagen is
positioning itself to capitalize on new opportunities.

III. CONCLUSION

3.1. Recommendations for Volkswagen

- Mitigating foreign exchange fluctuation and the revaluation of the Deutschmark:
 Use financial instruments like forward contracts, futures, options, and swaps to
lock in exchange rates and reduce exposure to currency volatility.
 Expand production and sales to regions with more stable currencies or currencies
aligned with the Deutschmark, reducing dependency on markets affected by
significant exchange rate fluctuations.
- Addressing protectionism in the European automobile market:
 Build or expand factories in key European markets to comply with local trade
regulations, reduce tariffs, and meet market demand more effectively.
 Partner with local suppliers and distributors to enhance market penetration,
navigate regulatory challenges, and build a stronger presence in protected
markets.
- Improving logistics management for international transportation:
 Instead of owning ships, collaborate with specialized logistics companies to
optimize transportation routes, reduce costs, and ensure timely deliveries.
 Utilize multimodal transportation (sea, rail, road, and air) to ensure cost-
effectiveness and flexibility, particularly in handling surges in export volumes.
- Alleviating raw material shortages:
 Diversify raw material sources by establishing relationships with suppliers across
multiple countries, reducing dependency on a single region or supplier.
 Invest in or form joint ventures with raw material providers to secure a stable
supply chain and control costs.

- Adapt to technological advancements and competition:

 To maintain an edge over competitors like Ford, Fiat, and Renault, Volkswagen
should focus on developing advanced technologies, particularly in fuel
efficiency, superior safety measures, and modern autonomous driving features.
 Volkswagen must consistently improve product quality, continue refining its
designs and upholding strict production standards to differentiate the brand from
competitors in the market.

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3.2. Summary
Volkswagen's achievements in exporting to Europe highlights the effectiveness of
strategic decisions like utilizing existing infrastructure, forming local partnerships, and
adapting products to local markets. Through these efforts, Volkswagen overcame
challenges such as fluctuating exchange rates, protectionism, and raw material
shortages. Their ability to navigate these issues, along with their focus on quality,
supply chain efficiency, and meeting local consumer preferences, helped them
establish a strong presence in Europe.

To maintain their competitive edge, Volkswagen should continue to diversify

production, collaborate with logistics partners, and address currency risks. Additionally,
focusing on emerging markets and technological advancements will ensure continued
growth in a competitive global market. In summary, Volkswagen’s export strategy has
played a key role in their success, and refining it will support sustained market
leadership.

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 IV. REFERENCES
1. “Beetles in boxes: 70 years of CKD car exports bY Volkswagen”
https://www.volkswagen-newsroom.com/en/press-releases/beetles-in-boxes-70-
years-of-ckd-car-exports-by-volkswagen-6726
2. Volkswagen group: “1950 to 1960 – Internationalisation and Mass Production
in the Era of Germany’s Economic Miracle”
https://www.volkswagen-group.com/en/volkswagen-chronicle-17351/1950-to-1960-
internationalisation-and-mass-production-in-the-era-of-germanys-economic-miracle-
17356#1950
3. Volkswagen group: “1961 to 1972 – Boom and Crisis in the One-Product
Business”
https://www.volkswagen-group.com/en/volkswagen-chronicle-17351/1961-to-1972-
boom-and-crisis-in-the-one-product-business-17357
4. Advertising Vietnam. (2020) “Volkswagen và chiến dịch quảng cáo huyền
thoại “Think Small,” Happy Live”
https://happy.live/volkswagen-va-chien-dich-think-small/.
5. Chris Buseman. (2013) VW’s international strategy.
https://prezi.com/hp4tyx1fudfx/vw-sinternational-strategy/
6. Pakistan Journal of Social Sciences 3. (2005) “A Long Way of Volkswagen’s
Internationalization: Strategies and Dynamics of Capitalism”
https://docsdrive.com/pdfs/medwelljournals/pjssci/2005/761-775.pdf
7. International Entry Modes
https://opentext.wsu.edu/cpim/chapter/7-1-international-entry-
modes/#:~:text=Exporting%20is%20the%20sale%20of,operations%20in%20th
e%20new%20country.

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