Summary of the situation
The case study involves the adoption by the auto maker, Volkswagen, of the modular transverse matrix (MQB) platform which was proposed by an engineer Ulrich Hackenberg. The strategy involves the application of the fundamental concepts of commonality and modularity in vehicle parts and their application across various vehicle models both new and old. Due to its flexibility, cost effectiveness and greater levels of leverage, the MQB platform has the potential of altering the global auto market completely. This will make the company the global leader in sales with volumes expected to surpass the 10 million mark. However, implementation of the MQB platform also comes with its own risks; the main one being that of enormous recalls if any of the parts fitted in the wide range of global brands fails.
Key issues-identification and analysis
- Potential of the MQB platform in the global auto market
The MQB platform has the potential of turning Volkswagen into a major automaker in the world. The main reason for this is the comparative advantages it presents to Volkswagen in comparison with competitors. Volkswagen had a high proportion of parts that can be shared across its various vehicle models even before they started implementing the MQB platform. Various vehicle parts such as clutches, engines and ventilation equipment were interchangeable across their various vehicle models. The MQB platform has expanded this idea of parts commonality to accommodate the more sophisticated features such as plug and play modularity and flexibility. Such levels of sophistication cannot even be compared with other vehicle manufacturers such as General Motors, Ford and Toyota as they are way behind.
The potential of the adoption of the MQB platform altering the global auto market are portrayed by its ability to push the orders for spare parts from the current average of 6 million to 35 million over the normal lifecycle of six to seven years. The modularity of the platform also presents Volkswagen with another advantage of increasing its vehicle sizes and shapes portfolio. The company has an upper hand in developing vehicle brands that are market specific for its wide global market at minimum costs. The lower costs advantages at the disposal of the company will increase their profitability levels thereby giving them greater benefits since they will exploit their economies of scale. They will also have an opportunity of developing vehicles that suit the demands of specific markets.
- Challenges to other auto dealers
The MQB platform is being touted as the biggest innovation in the auto industry for the last 25 years. This is due to its applicability across the twelve vehicle models which Volkswagen produces. It presents the company with attractive opportunities for leverage in the market. This will increase the competitiveness of their brands and enable the company acquire enormous market share from their competitors. The platform gives the company the upper hand in dislodging Toyota as the highest global leader in car sales. Ability of the company to increase its market share are also boosted by its other strategic characteristics such as its diverse brands, its presence in most geographical regions, technological superiority and its large revenue reserves, in comparison with competitors. Even major auto dealers, Toyota, accept that they will need to make expansive overhauls to most of their structural infrastructure in order to compete at the same level with Volkswagen.
- Ability of Volkswagen to implement the MQB platform
Flexibility and cost savings that the company is posed to reap from the modularity of the toolkits presents great potential benefits. This is due to the reduction of infrastructural requirements due to product homogeneity across vehicle brands. The company also has enough revenue projections which are adequate to implement projects of such magnitude.
- Risks to Volkswagen when implementing the MQB platform
One of the main risks that the company faces is the risk of massive production of parts that may be defective. This will expose the company to huge financial loses reminiscent with product recalls from the market. It also has the potential of ruining the public image that the company enjoys across the world which may lead to slump in sales volumes.
There is also immense danger in the implementation of the MQB platform due to overreliance by Volkswagen on emerging markets especially China for its growth in the future. Such markets are volatile and have lower ability to deal with market shocks and disruptions. They suffer frequent market interruptions e.g. the Chinese market is risky due to possibility of the government imposing restrictions especially on foreign companies. This can mainly be caused by their communist leanings which make excess exposure to that counterproductive.
The company will also be required to put in place an elaborate succession planning strategy since most of its current leadership may have retired by the time the MQB effects will be taking shape i.e. in the next ten years. There needs to be an effective team that will steer the process in the long term. This is in contemplation of the admirable benefits the platform presents to the company and all its stakeholders. An effective team will ensure that none of the gains made is eroded through poor policies and strategies during implementation.
- Efforts by Volkswagen to reduce exposure to emerging markets
The company has withdrawn from the North American market and diversified by increasing its operations in the US market. It is also installing additional production capacity in key markets such as Mexico. The Chattanooga plant in Tennessee and the Puebla plant will be upgraded so that they can accommodate manufacturing of models that support the MQB platform. The managers are also exploring possibilities of expanding their operations in other geographical regions where the company has no production plants. Such markets include Africa, Latin America and the ASEAN region.
Recommendations
The MQB platform appears to present the company with adequate benefits that may make it a force to reckon with in the global auto market. The company needs to adopt a succinct risk mitigation policy when implementing the platform. It is imperative to implement the MQB platform in phases. This can be done with specific product classes such as the luxury brands before moving to the others. It allows for evaluation of performance where any reported cases of underperformance will be addressed before venturing into mass production. This minimizes the inherent risk in mass production using defective parts. It is also vital for the company to safeguard its technology from competitors. It ensures that they retain their competitive advantages over their rivals and the potential to gain considerable market share if the platform is fully successful.
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