1.Company Profile 1.1.Overview Germany based car manufacturer, Audi is a company which is renowned for its innovative luxury cars. Audi represents one of the world’s best premium brands and is among the most admired companies in the world automobile market. Its success is a result of pioneering concepts in the domains of advanced technology and design.
Audi Company is a global company with an international presence in as many as 110 countries across the world. It is also among the oldest car makers in the world. Apart from making passenger cars, Audi participated in motor sports and won many races as well as accolades. Audi is also well known for its trademark technologies, Quattro (all-wheel drive) and Multi Media Interface (MMI), among others and its premium luxury cars that are innovative and have state-of-the-art technology.
1.2.Audi History The four rings of the logo of Audi Company represent the 4 brands, Audi, DKW, Horch and Wanderer which amalgamated to form the Auto Union in 1932. The corporate tagline of Audi is Vorsprung durch Technik, which means 'Progress through Technology'. Recently, the tagline of Audi has been updated to 'Truth in Engineering' in the U.S.
Audi Company was founded by August Horch, the son of a blacksmith, who was born on 12 October, 1868, in the town Winningen, situated on the banks of the river Moselle. Horch studied at the Technical College in Mittweida and in 1896, at the age of 28 years, he joined Carl Benz in Mannheim. Horch continued there until 1899 as in charge of the motor-vehicle construction department. It can be said that he accompanied as well as contributed quite much during the earliest days of development of the automobile.
August Horch went on to start a small motor-vehicle repair workshop of his own in Cologne in 1899, called Horch & Cie. Motorwagen Werke. Consequently, by 1901 he had built his first car and in 1902, he shifted his company to Reichenbach in the Vogtland region in Germany. Once again, in 1904, he relocated his office to Zwickau, which subsequently became the location of Horch Werke's. Ten years after Horch had begun his motor-vehicle workshop, he left his own company in 1909, owing to differences of opinion. Just a few weeks later, he established another car factory. Horch named it as 'Audi Automobilwerke GmbH', a translation of his name in Latin, in 1910. In 1920, at the age of 52 years, Horch retired as the Chairman from the Audiwerke AG's Management Board. Consequently, he went on to pursue a career as an expert consultant and assessor in matters of automotive engineering. In June 1932, when the new Auto Union AG Company was formed, Horch was invited to join its Supervisory Board. August Horch, founder of 'Audi', died on 3 February, 1951 in Münchberg, Upper Franconia.
1.3.SWOT Analysis Strenghts Audi's reputation is undoubtedly based upon a very strong brand. In fact the four rings of Audi is one of the most identifiable logos and images globally. The brand is very innovative and the range is continually developed and extended. Being a German technology product, obviously Audi has a reputation for operations management and its production approaches. The company manufactures in excess of 1 million autos a year. Interestingly, more than 1000 of these cars are Lamborghinis, Audi's premium supercar brand. The company manufactures cars in the German cities of Ingolstadt and Neckarsulm. Audi is also renowned for technology, creativity and innovation. The business invests almost $3 billion every year in research and development for its new products. Historically, the company's innovations are quite impressive – for example, Audi Quattro’s four-wheel-drive technology. New innovations include light emitting diode headlights (you may have seen them on the highway) and also MultiMedia Interface (MMI), which is a mash up of entertainment technology, navigation technology, and communication technology – including telephones as well as other innovations, which also improve passenger safety.
Weaknesses One interesting problem for the business is that whilst it is a very large vehicle manufacturer, it doesn't operate on the same huge scale as some of its close competitors, including Ford and Toyota. A simple revenue analysis based upon units produced shows that its competitors can make equivalent vehicles more cheaply, simply because of economies of scale. That is to say relative unit costs are higher. Audi's are German and its brand is associated with its national identity. Whilst in some ways this is strength, others might view this as a particular issue.
The brand is very dependent upon its European markets. It is relatively small in North America. Some of the sustained sales in Europe have to be due to environmental initiatives and incentives offered by European governments, and this won’t go on forever.
The European market might also go into decline, simply because of the debt being experienced by large markets such as the Greece, Ireland and Spain. In common with some of its competitors including Toyota, Audi has also had to endure the embarrassment of product recalls. Especially for a brand which encompasses security and safety, this could potentially be damaging. In North America, there have been problems with gearboxes (transmissions). Similar problems occurred in the South Korean market.
Opportunities Without a doubt the new emerging markets of China and India are huge opportunities for Audi. New car sales are growing in both countries as consumers are getting wealthier and more discerning, they need status brands such as Audi. By 2015, the Indian car market is going to be huge, with estimated sales reaching more than $40 billion.
In China figures indicate that sales will be in excess of 250,000 million vehicles in a similar period of time. Audi with its innovative history is obviously investing heavily in vehicles which are low emission and will be targeted at the greener car market. Hybrid electric vehicles (HEVs) will become very popular in the large countries of the United States and China, whereby petrol stations will become slowly replaced by plug-in stations.
So obviously the growth of environmentalism and the nature of global warming mean that consumers are calling for low emissions alternatives. Hopefully in the coming years, the global car market will begin to recover and car sales and production will increase. There are a number of drivers. Government programs which offer incentives to consumers to ditch their old gas guzzler to replace it with a modern hybrid car for example, mean an increase in sales. The problems associated with raising credit in Western nations will hopefully disappear and consumers will begin to take loans to finance their vehicle again. Audi has become a leaner business by increasing its profit per vehicle and reducing its inventory. Threats
Like any business which operates in a global economic environment, Audi has to deal with local business environments. For example, regulations by local governments in relation to emissions or safety, or even strategic alliances with local companies in order to enter a market, such as China. All please add to the bottom line and reduce margins potentially. Trading in a global market means that the business is essentially exposed to commodity price fluctuations. Steel prices have been on a helter-skelter.
Commodity prices vary, and it makes it difficult for Audi to keep costs steady. In the car industry, generally, the largest threat relates to the nature and level of competition in what is a mature industry. There are a number of similar brands including BMW and Mercedes. Car production globally tends to move where the high dependence on labor cannot impact its cost base, so over years to come more manufacturing will move to India and China, where costs of labor are lower. The German worker is comparatively expensive.
1.4.Audi’s Organizational Mission and Goals Mission Statement: “Audi is an internationally renowned manufacturer of high-quality cars. Our success has been achieved through creativity, commitment and the ability to generate enthusiasm. The wishes and emotions of our customers are the guiding principle behind our every action. We strive to lead the way in the field of innovation. We aim to establish new standards to substantiate our brand claim of… Vorsprunf durch Technik (Progress Through Technology)”.
Current Goal: To become the number one premium automotive brand through superior financial strength, continuous growth, becoming the image leader as well as the most attractive employer.
1.5.Audi’s Stakeholders, Partnerships and Customers Audi’s stakeholders include their employees, shareholders, customers, the community, suppliers and even the German Government. Should Audi AG make a wrong turn resulting in massive economic losses, all parties would suffer. Employee wages could be cut or jobs could be lost and the cost of shares could plummet, resulting in the loss of millions of shareholder’s dollars.
The losing jobs would then hurt the surrounding communities, perhaps in the ways that communities in the Midwestern United States suffered after the collapse of the American automobile behemoths. In addition, customers that already own their vehicles would see a decline in their resale value and sequentially, there could be less demand, causing suppliers to feel the effects as well. Finally, with one of Germany’s largest exports being luxury automobiles, the failure of the third largest, as well as the up and coming premier automobile producer would result in extreme damages to the German economy. However, Audi’s primary stakeholder and partner is Volkswagen AG, as it owns 99% of the.
Audi has partnerships with the American Film Institute, BestBuddies International, the U.S. Ski Team, Oakley, the Chinese pianist, Lang Lang, as well as numerous hotels that complement the Audi lifestyle. Currently, Audi’s customer base is made up of a diverse and international group of people. The customer tends to have an income that would classify them from upper-middle class to elite, as the brand is a premium automobile manufacturer. A majority of the company’s customers come from the European market; with the Eastern European market quickly growing. In addition, Audi increased its number of customers in the US and the Asia-Pacific region, mainly the Chinese market, establishing itself as the leader in the premium segment in the region.
1.6.Audi’s position today, size, strength, range, finances, members, etc. Today, Audi AG is 99% owned by Volkswagen AG and is headquartered in Ingolstadt, Germany. Audi stands as the third largest premium car manufacturer in the world, surpassed only by Mercedes-Benz and BMW. As of the third quarter of the 2010 fiscal year, Audi sold 829,307automobiles, versus Mercedes-Benz’s 928,872 and BMW’s 892,737.
However, in 2010, Audi’s sales rose 17.6% versus Mercedes’ 13% and BMW’s 14.8%, marking Audi’s fourteenth straight consecutive year of sales growth. This offers a stark contrast to the fall in sales experienced by the global car market during recent recession years, providing a good outlook for Audi in the long run. Currently, Audi’s range covers all worldwide markets; with significant growth in Eastern European markets and Asian-Pacific markets and increased sales and market share in North America and Western Europe and Latin America. Audi’s 2009 sales in the U.S. rose17.1%, slating it to become the United State’s most imported luxury car brand.
The brand currently offers a range of premium automobiles ranging from sporty two-seaters to executive sedans, to full-sized, seven passenger SUVs. As far as financials, Audi AG’s revenue was up 17.7% at EUR 8,432as of 2010 third quarter results. The Chairman of the Board of Management is currently RupertStadler, with other board members including Ulf Berkenhagen, Michael Dick, Frank Dreves, Peter Schwarzenbauer, Thomas Sigi and Axel Strotbek. As of the latest count in 2009, Audi AG employed 58,011 individuals worldwide, up from 57.822 in the previous year.
1.7.Audi’s strategies to increase market share and how has it attempted to achieve its goals Although Audi’s worldwide mission statement as well as slogan is “Progress through Technology, “in its aim to become the number one premium car manufacturer in the world, it has altered itsslogan in some places in order to increase market share. With the United States being one of theworld’s leading markets for high-end automobiles, Audi began using the slogan “Truth inEngineering” in recent years in an effort to increase market share.
This slogan perhaps resonateswith Americans, as the word “Truth” offers a contrast to the woes that afflicted American car producers as well as the American economy as a whole. At a time when many Americans lost faith in big business and billion dollar government bailouts were necessary to salvage the domestic automotive industry, the German company’s switch in slogans perhaps gave them more credibility as they have steadily increased their market share in America in recent years.
Audi’s current vision is to “delight customers worldwide” and become the biggest premium brand by 2020. The company aims to achieve this via expertise, the best brand experience and innovative and emotional products. Through these techniques, the brand is also looking to achieve superior financial strength,continuous growth, and to become the image leader as well as most attractive employer 1.8.Five S
1.9.Industry Life Cycle
Audi provides an example of a company that has aligned these two factors successfully. In the early 1990s, Audi management realized that its cars were perceived as lowquality, high-priced German automobiles—obviously a poor position from which to compete. The firm decided that it had to move one way or another—up market or down market. It had to do one of two things: (1) lower its costs so that its pricing was consistent with customers’ perceptions of product quality or (2) improve quality sufficiently to justify premium pricing. Given limited resources, the firm could not go in both directions—that is, produce cars in both the low-price and high-quality strata.
Audi made a decision to invest heavily in quality and image; it invested significantly in quality programs and in refining its marketing efforts. Ten years later, the quality of Audi cars has increased significantly, and customer perception has moved them much closer to the level of BMW and Mercedes. Audi has reaped the benefits of premium pricing and improved profitability, but the decisions behind the strategic up-market move entailed significant tradeoffs.