SWOT Analysis Audi

Audi began in Germany in 1932. It was formed from the merger of four different carmakers. In 1969 Volkswagen acquired the business. In 2008 Audi delivered more than 1 million cars to customers Today the business goes from strength to strength and manufacturers in many parts of the world, including India. This is a smanufacturer of very high quality cars which tend to be highly engineered, robust and priced at a premium level. Would you like a lesson on SWOT analysis?

Opportunities

Without a doubt the new emerging markets of China and India are huge opportunities for Audi. New car sales are growing in both countries as consumers are getting wealthier and more discerning, they need status brands such as Audi. By 2015, the Indian car market is going to be huge, with estimated sales reaching more than $40 billion. In China figures indicate that sales will be in excess of 250,000 million vehicles in a similar period of time.

Audi with its innovative history is obviously investing heavily in vehicles which are low emission and will be targeted at the greener car market. Hybrid electric vehicles (HEVs) will become very popular in the large countries of the United States and China, whereby petrol stations will become slowly replaced by plug-in stations. So obviously the growth of environmentalism and the nature of global warming mean that consumers are calling for low emissions alternatives.

Hopefully in the coming years, the global car market will begin to recover and car sales and production will increase. There are a number of drivers. Government programs which offer incentives to consumers to ditch their old gas guzzler to replace it with a modern hybrid car for example, mean an increase in sales. The problems associated with raising credit in Western nations will hopefully disappear and consumers will begin to take loans to finance their vehicle again. Audi has become a leaner business by increasing its profit per vehicle and reducing its inventory.

Threats

Like any business which operates in a global economic environment, Audi has to deal with local business environments. For example, regulations by local governments in relation to emissions or safety, or even strategic alliances with local companies in order to enter a market, such as China. All please add to the bottom line and reduce margins potentially.

Trading in a global market means that the business is essentially exposed to commodity price fluctuations. Steel prices have been on a helter-skelter. Commodity prices vary, and it makes it difficult for Audi to keep costs steady.

In the car industry, generally, the largest threat relates to the nature and level of competition in what is a mature industry. There are a number of similar brands including BMW and Mercedes. Car production globally tends to move where the high dependence on labour cannot impact its cost base, so over years to come more manufacturing will move to India and China, where costs of labour are lower. The German worker is comparatively expensive.

Strengths

Audi’s reputation is undoubtedly based upon a very strong brand. In fact the four rings of Audi is one of the most identifiable logos and images globally. The brand is very innovative and the range is continually developed and extended.

Being a German technology product, obviously Audi has a reputation for operations management and its production approaches. The company manufactures in excess of 1 million autos a year. Interestingly, more than 1000 of these cars are Lamborghinis, Audi’s premium supercar brand. The company manufactures cars in the German cities of Ingolstadt and Neckarsulm.

Audi is also renowned for technology, creativity and innovation. The business invests almost $3 billion every year in research and development for its new products. Historically, the company’s innovations are quite impressive – for example, Audi Quattro’s four-wheel-drive technology. New innovations include light emitting diode headlights (you may have seen them on the highway) and also MultiMedia Interface (MMI), which is a mash up of entertainment technology, navigation technology, and communication technology – including telephones as well as other innovations, which also improve passenger safety.

Weaknesses

One interesting problem for the business is that whilst it is a very large vehicle manufacturer, it doesn’t operate on the same huge scale as some of its close competitors, including Ford and Toyota. A simple revenue analysis based upon units produced shows that its competitors can make equivalent vehicles more cheaply, simply because of economies of scale. That is to say relative unit costs are higher.

Audi’s are German and its brand is associated with its national identity. Whilst in some ways this is a strength, others might view this as a particular issue. The brand is very dependent upon its European markets. It is relatively small in North America. Some of the sustained sales in Europe have to be due to environmental initiatives and incentives offered by European governments, and this won’t go on forever. The European market might also go into decline, simply because of the debt being experienced by large markets such as the Greece, Ireland and Spain.

In common with some of its competitors including Toyota, Audi has also had to endure the embarrassment of product recalls. Especially for a brand which encompasses security and safety, this could potentially be damaging. In North America, there have been problems with gearboxes (transmissions) . Similar problems occurred in the South Korean market.