Volkswagen of America

Mar 31, 2020 in Case Study

Case Study Example


Volkswagen of America is an automobile company that is renowned for producing the car which has been noted as the most bestselling car in history. Like any other company, VWoA also had to develop strategies and make decisions that would be beneficial to the business of the corporation. However, VWoA was not able to maintain business in the market, as it had regularly recorded fewer sells which were boosted every time the company released a new model into the market. Therefore, the ELTs of the company usually resorted to waiting for a new model that would be able to improve their sales. The information technology of the company was insufficient since at one time the company had to dismiss all the staff in the IT department. This was caused by the fact that the company had other projects that required funding. Hence, they did not consider IT an important project when compared to marketing. Currently, the company is struggling to improve its IT department. Consequently, Uwe Matulovic, Chief Investment Officer, made a decision to fund the Volkswagen Group IT department (Austin 2006).

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Major Issues

  • The organization at VWoA is dependent on the ELTs submitting proposals for projects that they consider important for their areas in the company.
  • The information technology at VWoA is not developed as a result of abandoning the IT-sphere in the mid-1990s.
  • The business policy does not state clearly the goals of the company.
  • VWoA business architecture is designed to base on priority instead of the need to improve the company.

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Analysis of Major Issues

VWoA like any other company producing goods wants to achieve a competitive advantage over its rivals. In order to gain this, they have to deal with the issues within the company that may hinder them from achieving the goal. Consequently, the issues that appear to promote the company to achieve the competitive advantage should be encouraged in the company. To begin with, the organizational method of VWoA can be said to hinder the company from attaining advantage over its competitors. This is due to the fact that in the organization the ELTs are the ones who give proposals of projects to be funded in their particular areas. This makes the ELTs, who have greater persuasion ability, to be able to make their projects get funding, while those who are unable to do that end up having no financial support for their projects. Therefore, even if a certain project proposed by an ELT can give the company an added competitive advantage but is not well presented, the project might be forced to wait since it will not get funding. For instance, in a business case, if a partner proposes investment in the IT-sphere for the business but cannot convince the other partners to support and fund his/her idea, the business can end up not investing in IT. This happens even though the company requires investment in IT department to get a competitive advantage (Austin 2006, 2). Secondly, lack of necessary IT knowledge in VWoA can be said to constitute a major issue that makes the company unable to get a competitive advantage over the other companies.  Lack of funding for IT projects in VW was mostly observed from 1992 to 2002. During this time, the funding priority for the company was marketing and selling activities, while information technology was considered a source of overhead. Therefore, it was kept at subsistence level in order to provide funds to be used in marketing activities. Furthermore, the company eliminated the majority of its IT potential when it reduced the number of its IT staff by 10 people after outsourcing contract with Perot systems. As a result of insufficient IT potential of VWoA, even administration of the outsourcing contract was difficult for the company. This prompted the management to start hiring staff for the IT department.  For the past seven years, the staff reached 28 in number . In a business case, it is common to note that almost all businesses need IT expertise for them to succeed. The IT department in the business helps in connecting the venture to the potential customers through enabling communication. It also helps in the accounting, as well as in other aspects of the business. Therefore, by insufficient IT knowledge, a company exposes itself to possible failure. This very situation was encountered by VWoA (Austin 2006).

Consequently, for a business venture to prosper, it needs to have set and specified goals. The set goals of the business organization are defined by the need to make the company have a competitive advantage. This is the primary role of the IT departments in many organizations. Therefore, a company should have specific target goals that need to be achieved. Hence, they invest in IT to be able to reach their goals. In case of VWoA, there was no specific company goal that needed to be achieved. This resulted in jagged contours of the company’s sales. As the company did not have set goals, they therefore focused on selling the product that was on the market. This made the company rise large sells when a new car brand is released. Nevertheless, the company gained poor sales as the car brand remained in the market for long before another one was released. This made the company have limited resources that could be shared among all the projects including IT that needed funding. The company hence funded marketing activities so as to try and improve their sales of older brand of cars. In a business case, a company that is having financial problems and has poor sales on their products may be seen as an example. For this company, it could be noticed that the marketing for the product is done insufficiently. Therefore, the company has to improve on its marketing activities so as to increase its sales. IT has been found to be an effective means by which marketing is realized on a larger scale. If the development of a marketing network is the goal of the company, it will ensure that its products are known (Applegate 1995).

According to Applegate, the design and implementation of structures and systems help an organization in accomplishing its goals and executing strategies (Applegate 1995, 1). This means that the architecture of the organization holds it and ensures that the goals of an organization are met. VWoA created a high level Business Architecture with the help of BPTO members and NRG program. This architecture was able to understand the relationship between different business elements. The outcome played an important role in formalizing prioritization process since it provided means of categorizing all activities in the organization. This helped in involving IT projects in the organization since it did not discriminate but only considered the elements that had been given, relating them to the logical way of the company strategy. If this architecture were followed, IT projects in the company would have been given funding just like other projects (Austin 2006). However, selfish business units and ELTs ended up complaining and pushing to have their projects funded even when they had not met the quota used by the system to give financial support. These units considered IT a surplus in the organization. In a business case, it is an example of a company with set goals, strategy, and a system by which they aim to achieve their goals. However, some individuals in the organization think that their ideas and strategies are much more important than those of the others. This results in unfair sharing of resources making the organization unable to attain its goals (Graeme 2006).

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The Information Technology department is an important part of an organization, which can be said to be the backbone of a successful business venture. Currently, most of the business activities are done using IT in every department. However, at VWoA the importance of IT department was overlooked in the majority of cases. This exposed the company to experiencing turbulent times in the market since they had not planned to face the market effectively. Marketing activities are done effectively using technology which could only be found in the IT department if it is invested properly. Issues faced by VWoA that made funding of IT projects to be difficult could have been easily avoided. In many cases, the issues resulted from human factor, such as insistence on having the projects which they considered important funded instead of IT.

Consequently, the development of an effective system of organization activities prioritization is not helpful in an organization, if the individuals are unable to adhere to the system. In the case of VWoA, the company had an effective system that could tell which project needed funding based on the company strategy and execution capabilities. However, business unit leaders would often complain to have their projects funded because, according to them, they are important. In most cases, IT projects that had been given funding are the ones that would have been revoked. This shows that the company did not consider IT a crucial component of its activities. As a result, the company did not have enough sales in the markets.


  • Install a full functioning IT system in the organization
  • The CIO should ensure that the ELTs do not interfere with the outcome of the business architecture on project funding.
  • The organization should also develop clear set goals and strategies to achieve them.
  • Have an IT expert in each department to advise on IT needs for every department in the organization.

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