Volkswagen Group Harvard Case Solution & Analysis

Introduction

Volkswagen is a German based automotive corporation, a multinational company with headquarters in Wolfsburg the fifth largest city of Lower Saxony in Germany.

Volkswagen is ranked as the world’s seventh largest company by fortune 500 of 2016. Volkswagenspecializesindesign, manufactureand distribution of passenger and commercial vehicle, engine, motorcycle and turbo machinery. Volkswagen have surpassed Toyota through the sales of 10.3 million in 2016. (Due to unavailability of theindustry average. This company also compared for measuring performance)

Volkswagen AG was founded in 1937 to manufacture cars initially known asBeetle and afterwardsin 1965 it started growth through the strategy of acquisition. The group’s further strengths in particular include its unique brand portfolio, its steadily growing presence in all the main world markets, holdingnames of Bentley, Audi, Skoda, Bugatti, Porsche, SEAT, Lamborghini and Volkswagen marques. It holdsmotorcycle division under Ducati brand and another commercial vehicle under marques Scania, Van and Volkswagenoperate in 153 countries of the world.

Volkswagen Group Harvard Case Solution & Analysis

The Volkswagen Group is well positioned to deal with the mixed developments in automotive markets around the world. The group’s brands will further optimize their vehicle and drivetrain portfolio in 2017 to concentrate on the most attractive and fastest-growing market segments.

Volkswagenowns two categories in shares market i.e. ordinary shares, and preference shares and its shares are primarily traded in Frankfurt Stock Exchange while listed and traded on other domestic and worldwide stock exchange as well. The presentation currency in financials is euro due to German origin of the company. Although dealing and having significant stake all around the world Volkswagen group faces currency risk which is reduced through natural hedging comprising currency forward, currency options and cross-currency swapping.Likewise,interest rate risk is also hedged through interest rate swaps, cross currency swap and other interest rate contracts that management feel appropriate.

Volkswagen had suffered acrisis in 2015 which also covers effect on its financial stability due to thescandal of emission. Volkswagen had put a software namedDefeat Device that makes a vehicle appear more environmentally friendly. This issue was tracked and raised by Environmental Protection Agency claiming on half of a million cars. The concern of emission hit Volkswagenshares and the product market aswell.Consequently,Volkswagen has also recognisedexpense amount above approximately sixteen billion for diesel issue in 2015 and faced additional costs above six billion in 2016 fiscal year.Auditors have also highlighted these by including anemphasis of matter paragraph on thekey event and diesel issues in their report but with anunmodified opinion.

Financial Analysis on Volkswagen

Gross profit margin of Volkswagen rise in the recent year to 19% from 16% in 2015. Net profit ratio is moved to positive 2% in the latest available financialreports from 2015 where Volkswagenwas bearinganet loss of 1,361 million Euros, due to which return on asset and return on equity were computed negative as well...............

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