Broad Cost Leadership Strategy and Focus Strategy

To answer the question, I choose Volkswagen as the example of broad cost leadership strategy and Roll-Royce Motor Cars as the example of focus strategy. First, I want to talk about the Volkswagen which is a big company in the world owns VW, Audi, Porsche, Bentley and many other brands. Every brand has the own characteristics. Among these, VW produces cars that have the relatively low price because it is the low-level brand. It targets the low and middle class, such as Polo, Golf, Passat, Touareg etc. While Audi, Porsche and Bentley produce the more expensive luxury and sports models.

Therefore, the models produced by Volkswagen cover from bottom to top class in all areas. I will illustrate my point of view now. I found that many models made by these four companies share the same platform by accessing to a variety of data. Here I briefly explain how to understand the phenomenon that automotive production sharing same platform. Two cars sharing common platform means they are using a large number of common parts and components, having similar chassis, bodywork structure, wheelbase, engine, steering, suspension and layout.

In China, for example, Polo of VW and A1 of Audi model share the platform. And Q7 of Audi, Cayenne of Porsche, Touareg of VW share same platform. Specifically, Polo and A1 model are produced from the PQ25 platform of Volkswagen, they almost have the same important components and parts except the different interior, exterior and some other unimportant parts, but there's a world of difference in the price of the two cars. In China, the price of Polo is about 100,000 RMB, while A1’s price up to reach about 200,000 RMB. I have to say it is a wise decision that Polo is for low class and A1 is offered to the rich.

If we understand this one, it is easy for us to understand why Q7, Cayenne, Touareg share the same platform. In summary, we can conclude that Volkswagen keep the cost of producing vehicles in a very low level, at the same time, it also covers the low-end and high-end models in order to meet the needs of different groups of people. In my opinion, the company adopts the broad cost leadership strategy. The next I want to analyze the Rolls-Royce Motor Cars. As we all know, Rolls-Royce Motor Cars only produces luxury cars, such as the Phantom, Ghost. When people talk about the Rolls Royce, they all image the elegant and luxurious.

Obviously, the price is very high. According to the online information, Rolls-Royce Motor Cars in the 2011 record sold 3538 cars. Compared to other motor companies, the sale seems to be poor. In fact, it does not mean the vehicles are not good. Let me show you. The company provides incomparable service, including personalized custom service, such as the choice of interior trim material, the color of vehicle and so on.

The most important point is that interior materials joint accomplished by manual. Just for this reason, we can easily distinguish the Rolls Royce from other automaker. It takes a lot of time for workers to finish the job, so the company produces limited vehicles one year. It produces cars based on the different demands of different customers.

Although the cost of doing so will be very high, at the same time, the price is not low. To sum up, Rolls-Royce Motor Cars has very clear strategy that it is only concentration on the production of luxury cars. Its business strategy allows it to be a high-cost provider of cars to affluent consumers. Therefore, I consider it as a perfect example for focus strategy.