Volkswagen Value Chain Analysis

If you want to add value of your business and make you company more competitive, you need do value chain analysis. But what is a value chain? A value chain is a whole process which contains design, production, marketing and distribution and any other activities included before products have been sold. The concept of a value chain is conduct by Harvard Business School 's Michael E. Porter. who also developed the Five Forces Model that many businesses and companies use to figure out how well they can compete in the current marketplace, first discussed the value chain concept in his book "Competitive Advantage: Creating and Sustaining Superior Performance" (Free Press, 1985)

Theoretical Background

Value chains are everywhere. They exist between

Value Chain of FAW-Volkswagen

FAW-Volkswagen Company is a joint venture between FAW Group and Volkswagen Group which manufactures Audi and Volkswagen marque passenger cars for sale in China. (extracted by FAW-VW Company introduction )

Before 2004, the production mode of FAW-VW is basing sales on production, which means the whole production depends on forecast sales. This kind of production mode is unable to cope with the fluctuated market. It will increase inventory pressure and also lose many chances. After that, the company change to use order system mode of production and marketing. At the same time, the Value Chain of the company has been totally changed. The revolution of business idea and traditional value chain is the key for FAW-VW to transition.

Production and Distribution have been optimized which means value chain primary activities innovation. Improving process is the key to implement order system mode of production and marketing. The purpose of it is to eliminate all elements without value. By adjusting and reforming of value chain, solve the problem in relationship between company and market, FAW-VW built the competitive edge

That is to say, the company is able to avoid risk from market by analyze orders from customers. When holding the biggest market share, maximizing profit by reduce cost of inventory. In the whole process, primary activities and support activities are in the same direction. Whatever which section fulfilled in the value chain, it is able to produce value. Besides, Order system mode of production and marketing raise utilization of time. Time is the source of competitive advantage.(stalk 1988) The whole produce process of FAW-VW is compete with time, which means that which supplier is able to deliver goods fastest, the supplier holds the competitive advantage. This is also the factor contribute to successful of FAW-VW from 2006 to