ITStrategy and Positioning for Volkswagen Financial Services (UK)

IntroductionThis assignment is constructed to project a case study of an exist line of occupation and analyse its IT strategy and aspect for hawkish advantage. A few hours were spent researching ideals into companies of interest to which I had to withdraw sure it fitted in line with the assignment objective. The brass that sparked my interest was Volkswagen financial hammer (UK). This was beca drug abuse they ar a large constitution which is vastly begetment year by year and have a major model in them motor industry. I also got the privilege of working inside their node experience department as a customer table service advisor.BackgroundVolkswagen financial work is a financial services provider in the Volkswagen Group. The confederation deals in a broad spectrum of automotive products including financing dealers and customers through leasing, corporate financing, vehicle fleet management to banking and insurance products. match to the 2013 report, the corpor ation has experienced a rise in the number of contracts in their portfolio from just under-8 million to over 8.8 million, a 10.9 percent rise. The counseling scorecard Chairman Frank Witter attributes this growth to a 5 percent augment in number of vehicles tilted to more than 9.7 million. The companion was also able to commit more customers with their financial services. As a chokeing financial provider for all things automotive gross revenue within the umbrella of Volkswagen pecuniary serve AG, the party has developed key strategies to hold they achieve their mission, which is to support the sales of all Volkswagen Group brands worldwide and increase customer loyalty in a sustainable manner along the entire automotive epoch economic value chain (VW FS Annual Report, 2013). Volkswagen strategy statement is based on customer-focus, pioneering and acquire things done. To ensure sustainable growth, the company pursues its strategy in trine fronts brands, merchandises and products. That is, developing sassy brands for Volkswagen Group, gear uping unseasoned trades, and developing new products in existing commercializes. Volkswagen monetary Services continue to adopt a consistent customer relationship management (CRM) strategy in its customer c ar. As much(prenominal), structures of the company and its transitiones have been aligned with customer groups and their unique strikements (VW FS Annual Report, 2013). Johnson et al (2013, p.69) describes strategy as the long-term haveion of an organisation. A clearing strategy theorist Michael doorman would refer to this as a agonistical strategy that seeks to be different from competition, by deliberately choosing a different set of activities to deliver a unique mix of value to the intended consumers (Porter, 1996, p.31). The Volkswagen Financial Services strategy dejection be considered to be based on what Porter (1996) describes as variety-based and needs-based positioning. However, V olkswagen Financial Services continual pursuance of consistent CRM strategy in customer c ar led the company to rethink its organisation structure and customer groups as aligned by the customer requirements. In attempt to support this organisational restructuring, the organisation required an IT structure to allow the company have a standard of customer selective information, standard and continuous process support right from customer support to subsequent processing and feat execution, integrating existing transaction- colligate banking system without any additional extensive conversions. In order to meet these requirements, a product and division-oriented IT environment was implemented. Core applications and systems related to transaction-related banking systems where clients accounts and contracts could be managed were implemented. The implementations of these applications and systems isolated the various specific client data from apiece some otherwise making an integral vie w much more alter and cumbersome. But the company solved this problem when they installed customer-oriented IT architecture in beat CRM for a standard customer care and SAP NetWeaverTM as a system integration platform. Although Volkswagen Financial Services whitethorn have considered this a triumph in its efforts to strengthen their CRM-oriented strategy in customer service, its not a unique strategy that tail assembly strengthen their competitive advantage given its ease of adoption by competitors or new entrants.Le Pest C for Volkswagen Financials Services In order to comprehensively understand Volkswagen Financial Services strategicalal capabilities, it is signifi shtupt to use the Le Pest C model (Brooks and Weatherston, 2002) LePestC Possible Issues at VW FS (UK)Legal data security and concealing legislations and jural challenges Economic Low profit big businessman cod to decreased consumer spending power and inability to expand to acclivitous markets policy-making VW Financial Services AG, which inevitable controls its strategic decisions making process purlieu/Ecologic Environmental pressure from regulatory authoritiesSocial diverge of consumer preferences, e.g. study shows that more consumers in europium prefer to run short via use up rather than personal cars Technological New engineering science that are believably to render the current ones obsolete and requires upgrade regularly Competitiveness rivalry from financial companies and other auto dealersLegal Data security and privacy have become serious challenges to many tradees, raising concerns with rise in good-looking data and cloud computing initiatives. Auto suppliers same Volkswagen Financial Services Company collect and store exceedingly confidential and super sensitive customer data that whitethorn be at risk from data breaches. It must be noted that the company is networked not altogether internally but also outerly through network or other telecommunication connect ivity. As such, the company needs to have a sturdy information security practices not only well documented in the form of information security policies but also ensure unappeasable adherence to ethical standards to avoid legal suits. Moreover, the company needs to develop internal ethical standards in line with their backup principles and treat it as part and parcel of the CRM strategies (Barreto, 2010). In case the company wants to use big data, it must strive to develop policy that informs the clients in advance to bind or disagree with such plans. Failure to develop such policies whitethorn attract legal suits from clients disputing the use of their personal data. The outcome of legal suits whitethorn be extremely costly to the company in terms of legal fees, unfavourable strict government regulations and reputation damage. Economic Volkswagen Financial Services Company has experience the challenges associated with the economic financial crisis that started at the onset of 20 08. Although the company considers rise in sales and number of client subscribed in the latest reports, the reduced disposable income is likely to affect the company negatively in the long run, given financial challenges bear upon its major European market. Environmental/ Ecological Auto suppliers like Volkswagen Financial Services daring various challenges in maintaining extra-regulatory compliance with contractual clauses. Some of these clauses lots require them to certify that the car parts of sale are free of asbestos, train paint, chromium, and blood minerals among other banned elements (Mintzberg, et al., 2002). These regulatory compliance requirements are meant to ensure sustainability and protection of environment. Issues such as greenhouse gases that cause global warming, and moulder management increases cost of production. Socio- heathen Studies have shown that public transport in Europe is becoming more popular than passenger cars (Tyrinopoulos and Antoniou, 2013). T his kind of finding may suggest that the change in trend is more associated with change in social preference. More significantly, the company has not managed to break into Chinese among other emerging markets with its financial services considering that Chinese consumers are money-buyers rather than quotation buyers, as noted by the companys 2013 Annual Report. This cultural barrier has affected the companys financial front in terms of sales return. Technological thither are technological challenges associated with auto and financial industries. The challenge with technology is that it changes any day, with new ideas propping up that may provide fast-moving competitors with wear competitive advantage (Maritan and Brush, 2003). VW FS (UK) is one of the companies in this celestial sphere that suffers from the technological challenges. Competitive competition from other auto suppliers is real. Although the company has gained competitive advantage with multi-brand CRM, there is lik elihood that their major competitors will do the same.strategic Capabilities of Volkswagen Financial Services (UK) Strategic capabilities of a firm are those capabilities that lead to a competitive advantage. Mintzberg, et al. (2002) defines strategic Resources and competencies as the two components that define mental imagery capability. Further, resources are those assets that an organisation own or can call upon to attending their progress. Competencies are the ability to deploy those resources effectively or to make use of the available resources to achieve a certain goal (Teece, 2007). In others words, resources are what is available and competencies are the ability to use these resources. Table Representation of strategic capability of Volkswagen Financial ServicesResources CompetenciesMachines, raw materials, products, patents, database, calculating machine systems Physical The company has the means to achieve utilisation of plant, efficiency, productivity, flexibility, mar ketingBalance sheet, cash flow, revenue Financial That company has the means to raise funds and manage cash flow, debtors, creditors, etc. Managers, employees, partners, suppliers, customers Human The company has experience, skills, knowledge, and ability to habitus relationships, motivate others and innovate. However, its yet to bring this ability to the maximum. (Brooks and Weatherston, 2002). If fully used, the above representation would lead to long term survival of VW FS, and subsequently strengthen their competitive advantage. Although the strategic capabilities should be dynamic enough, there is a clear indication that Volkswagen Financial Services is not as dynamic as required. The company should be able to recreate and renew its strategic capabilities according to the changing business environment. For example, while tangible assets, cost control, and quality maintenance are in-chief(postnominal) capabilities that the company has embraced, there are more long term capabi lities such as sensing, seizing and reconfiguring that are significantUsing renewing to prodding entrepreneurshipInnovation and entrepreneurship is about creating the new- both new products and services and new business models and organisations (Johnson, et al., 2013). Creating value for firms and customers, plan and entrepreneurship are fundamental to todays highly competitive economies. But the decision to innovate and pursue new market leads through innovation can be a hard quality for organisations as has been demonstrated by Volkswagen Financial Services attempts to enter Chinese market. The company ought to have asked various fundamental questions such as lead it be appropriate if they too pioneer in new technologies or rather be a fast follower (timing and relationship)innovation dilemma How should they counterbalance to radical innovations that threaten to destroy its existing revenues? In such a highly competitive industry, entrepreneurship is a significant aspect of any business. In other words, entrepreneurship is fundamental aspect of any business that wants to agree up with the changing business environment. Its entrepreneurship that drives innovation.Innovation dilemmaHowever there are innovation dilemmas that may affect a firms decision-making process. Many corporations face strategic dilemma on whether to innovate or note. Johnson et al. (2013,p. 239) describes innovation as the process of converting new knowledge into a new product, process or service and the putting of this new product, process or service into actual use. Another aspect of innovation dilemma face up VW FS is whether to adopt open or closed innovation. Porter (1996) describes open innovation as the process of deliberate importation and exportation of knowledge by a firm in their attempt to speed up and escalate innovation. Open innovation advocates for open exchange of ideas for promptly better products to keep ahead of competition. Closed innovation is based on a fi rms air pressure on making every innovative ideas internal, keeping everything secret from outside people. Volkswagen Financial Services Company seems to focus on closed innovation, which unavoidably limits their ability to source for ideas. There is likelihood that this limits their ability to attract external skills or innovative ideas.Technological or business model innovationMost successful and progressive innovative activities do not of necessity rely on the latest or new science or technology, but involve reorganizing into new business by combining every aspect of a business (Johnson et al., 2013). A business model describes how an organisation manages incomes and costs through the structural arrangements of its activities. For example, when Ryanair decided to adopt the ultra brazen-faced airline tickets, its business model innovation involved the generation of revenues via pass sales through the internet, thereby cutting out intermediary travel agents, while also using c heap secondary airports. Cheap airports and internet sales proved more significant than technological innovation. There are various ways of analysing a business model innovation, including the use of value chain, value net or activity network frameworks (Johnson et al., 2013). Typically, these frameworks are meant to direct managers and entrepreneurs to two primary frameworks for potential innovations The product a new business model may redefine what the product or service is and how it is produced. This concerns technology in relation to the value chain. The selling a new business model may change how an organisation generates its revenue, with implications for selling and distribution. In the perspective of Volkswagen FS, the companys value chain in terms of emerging markets has not picked up as anticipated. The emerging markets, unlike the developed markets are generally cash buyers. The company may consider using instalments compensation model to establish its value chain wi thin the emerging markets like China and India, with attractive product packages targeting the growing middle class consumers in these countries. Innovators and followers There are those who choose to lead innovations and those who follow. Barreto (2010) argue that premiere- performers often start from a positive note where because they get easy and quick sales advance(prenominal), experience fast growth and have the ability to establish the dominant positions. Examples of starting-movers who have succeeded in this line are Coca gage in soft drinks and Hoover in vacuum cleaners. However, there are many set-back-movers that have failed such as the powerful Microsoft which failed with its tablet computer launch in 2001. Nine years later, Apple swept the market with its iPad tablet computer.First-mover advantages and disadvantagesFirst-movers are generally temporary monopolies. Their advantage exists where they appear better off than their competitors as a result of being first t o market with a new product, process or service (Teece, 2009 Teece, 2007). There are five potentially more robust first-movers advantage They can build on experience in a market and benefit from the accrued market knowledge and skills They can scale faster and enjoy the early benefits They have the opportunity for pre-emption of scarce resources They can build early reputation, particularly because consumers have little mind-space to recognise new brands that follows They can exploit the buyer switching costs, by ensuring that their customers are locked with privileged or pastelike relationships that later challengers may find too costly to adopt (Teece, 2009) However, Mintzberg (2002) asseverate that there are disadvantages for being first-movers as seen with Microsofts earlier bankruptcy with tablets. First is the free-riding factor. Late movers may find it easy to imitate first movers technology and other innovations at less put down than passe-partoutly incurred by pioneers. query indicates that the costs of imitation are only 65% of the cost of innovation (Teece, 2009). In addition, late-movers have the ability to occupy from the errors made by first-movers, picking on what worked well and avoiding what did not work for their pioneer competitor. In other words, they may not make so many mistakes and be able to get it right first time unlike their pioneer competitor.Should Volkswagen Financial Services be a first or second?Managers and entrepreneurs often find it hard to choose either to be a first-mover or a follower. However, London Business school days Costas Markides and Paul Geroski argue that the most appropriate response to innovation, oddly radical innovation, is often not to be a first mover but to be a fast second (Mintzberg, 2002). A first second strategy involves being one of the first to imitate the original innovator. According to Porter (1996) there are three contextual factors to consider in choosing between innovating and imitatin g Capacity for profit capture. If a follower can imitate faster and efficiently, it can capture good profits. Its more effective where the pioneer is not able to define the boundaries for intellectual plaza Complementary assets. An organisation in possession of the assets or resources have the ability to scale up the production and marketing of the innovation Fast-moving arenas. In situations where markets or technologies are moving very fast, and especially where both are highly dynamic, first-movers are unlikely to establish a durable advantage. The incumbent can respond to new entrants into the market by adopting dissipated innovation. As has been shown earlier, lush innovation can create substantial growth by go a new performance trajectory that, even if initially indifferent to the performance of existing technologies, has the potential to become markedly superior Winter, 2003). Incumbents can follow two policies to help keep them responsive to potentially disruptive innov ation Develop a portfolio of real options and new venture units.ReferencesBarreto, I. (2010). slashing capabilities a review of past research and an agenda for the future. Journal of Management, 36 (1) 256-80. Brooks, I. and Weatherston, J. (2002). The Business Environment Challenges and Changes. NJ Prentice Hall. Johnson, G., Whittington, R., Scholes, K., Angwin, D., and Regner, P. (2013). Exploring Strategy Text & Cases. NJ Pearson Education. Maritan, C.A and Brush, T.H. (2003). Heterogeneity and transferring practices implementing flow practices in multiple plants. Strategic Management Journal, 24 (10) 945-60. 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