Introduction and Background Ferdinand Rorsche designed the first Volkswagen automobiles during the 1930s in Germany. The original vehicles, targeted at the mass market were intended to transport a family of five at highway speeds, use modest amount of fuel, and remain within financial reach of most people. The company’s signature platform by the late 1940’s was the Beetle, which with its rounded styling and reliable air-cooled engine, become internationally popular. For about 20 years, sales of the Beetle hurtled skyward, propelling the company’s total worldwide vehicle sales past a million in 1955 and to a high point in 1969.
After peaking in the late 1960s the pattern of sales for the North American subsidiary of Volkswagen settled into trying cycle of ups and downs. It seemed to some that midlevel managers within VMoA had fallen into an unhealthy habit of waiting for the next round of new models to rescue them from the present difficulties. Case Analysis
The implementation of the new IT project approval process led to the fact, that a SCM project with high importance to the global level of the organization did not get funding as it does not show significant value at VWoA level. Top-ranked NRG goals such as “build brand customer loyalty” or “improve vehicle value” are not addressed directly with this project, whereas stopping it would lead to a major setback for globalization initiatives of VW AG and would probably lead to a conflict with the parent company.
The introduction of VW AG’s new strategy of global product diversification breeds new model introductions in the U.S. and Canadian markets, which emphasizes the need for effective and sophisticated supply chain management even more. The recommendation is to find alternative sources for funding which could be raised in discussion with the IT department of the parent company VW AG or in getting VWoA’s CEO, Gerd Klauss, involved in the funding effort.
This plan should begin as soon as possible, as alternatives have to be found when this plan does not succeed. In the end, our objective is to contribute to the strategic supply chain position of VW AG worldwide with applying an exception-handling process and at the same time following VWoA’s strategic goals of the NRG program in spending the $60 million budget only for projects in the top-ranked goal portfolios. The most important reason for this is to keep consistency in consorting with the new prioritization process for IT projects and thus prevent resistance and business unit executives fighting against it.
The second most important reason is to avoid a potential conflict with VWAG due to impeding the globalization initiatives of the parent company in not finalizing the SCM project. Supporting VW AG in their globalization effort will position the entire VW Company in a long-term strategic stance to face the upcoming challenges from implementing the new strategy of global product diversification. Other alternatives would be not to fund the SCM project and thus stopping it. This decision could lead to serious conflicts with VW AG and to disadvantages in VW’s strategic positioning worldwide.
Another option would be to reopen the prioritization process or to cut funds of other projects at VWoA. Both alternatives could lead to resistance and to the fact, that other projects which are important to VWoA’s strategic goals would be neglected. The risk in our course of action is not being able to find alternative sources for funding the SCM project which could cause discussions and a break with the supply flow people in Germany. If we do not succeed in raising alternative funds for the SCM project we should implement another sort of exception-handling process. This is important to do as successful businesses continuously forge new opportunities which cannot all be covered by the existing IT decisions.
Thus we would bring the issue out into the open and allow debate. The next step to do is calling Gerd Klauss to get him informed about the problem and to get him involved in the solution process. A senior manager has to take a leadership role and responsibility in this IT decision. As any exception to the IT architecture must be justified, we should create a short statement in which we lay out the importance of funding VWoA’s priority portfolio and the SCM project at the same time and thus to raise funds from other sources. After we convinced Klauss of the need of funding from other sources we should negotiate a higher budget with the IT department in Germany or try to raise funds within VWoA in accordance with Klauss.
Reference Austin, D. Robert, “Volkswagen of America: Managing IT Priorities”, Harvard Business School, Case 9-606-003, rev: June 14, 2007 Rock Kopczak, Laura; Johnson, M. Eric, “The Supply-Chain Management Effect”, Rose, Tom, “Prescriptions for Managing IT Priority Pressure”, Information Strategy: The Executive’s Journal, Fall 2000, Vol.17 Issue 1, p.18