VWB Case Study

WHU Otto Beisheim School of Management
"Volkswagen do Brasil: Driving Strategy with the Balanced Scorecard "
Professor:
Dr. Utz Schäffer
Authors:
Samarth Garg
Vallendar, 20.03.2023
Question 1: What challenges does Thomas Schmall face upon becoming CEO of
Volkswagen do Brasil (VWB)?
Upon his appointment as CEO of Volkswagen do Brasil (VWB) in 2007, Thomas Schmall
confronted a multitude of challenges as he aimed to revitalize the struggling company. From
its once-dominant market position, with over 30% share and 580,000 vehicle sales in 1997,
VWB's performance had significantly deteriorated, culminating in a third-place market
ranking with a mere 21% share and 280,000 units sold in 2003. With a dwindling market
presence due to increased competition from French, Japanese, Korean, and Chinese
automakers, VWB's share further declined to 77% in 2008.
This downward trajectory engendered a shift in the company’s culture, becoming more
bureaucratic and conservative, fostering apprehension and instability among employees. To
mitigate the losses, VWB relied on cost reduction, employee layoffs, and capacity
downsizing, which ran counter to Schmall's vision of establishing a high-performance team
and positioning VWB as the South American automotive industry leader in quality. Schmall
recognized the need for a cultural transformation that would prioritize quality over production
volumes, but overcoming the existing management approach and employee mindset was a
major obstacle.
Compounding these challenges, the 2008 financial crisis had a devastating impact on VWB's
sales in 2009. Sales plummeted in the fourth quarter, leaving newly produced vehicles idle
around plants, awaiting a resurgence in consumer spending. Schmall faced the difficult
decision of whether to restore funding and ramp up production schedules to support market
share expansion and new product development or hold off until sales recovered. This careful
balancing act would be crucial in navigating the company through the crisis and determining
its future success.
Question 2: Describe VWB’s new strategy
VWB's new strategy was designed to transform the company culture and position it as the
South American automotive industry leader. To achieve this, they identified the need for a
cultural transformation and formed a new Strategy Committee that developed a strategy map
based on four dimensions: Finance, Customer, Internal Process, and Potential and Growth.
The map described the strategy consistently and clearly and translated it into a language that
everyone could understand, which is why they created a map limited to the above four
dimensions.
To accelerate the adoption of the new strategy, they introduced the concept of a Balanced
Scorecard, which was the way to execute the strategy. The senior executive team, including
Schmall, Senn, and Isensee, presented the map and accompanying scorecard to the executives
as the first milestone in the new transformation program, called Act to Win. They focused on
proper communication and believed it to be the key to the success of the transformation
program.
Using the framework provided, VWAG looked at the problems and identified the key issue of
declining market share. They strategically appointed the aptest people to solve the problem,
including Schmall and Senn, who introduced new procedures in the way managers interacted
with production lines and helped introduce the Balanced Scorecard within the function.
VWB's plan to become the leader was aligned with the four dimensions of the strategy map:
Finance, Customer, Internal Process, and Potential and Growth. The adoption of the Balanced
Scorecard was the way to execute the strategy, and proper communication was emphasized as
the key to the success of the transformation program.
Question 3: How does developing the strategy map and the Balanced Scorecard help to
implement the new strategy? What are the strengths and weaknesses of the scorecard
and its implementation?
Developing a strategy map and balanced scorecard provided Volkswagen do Brasil (VWB)
with a framework for communicating and aligning the workforce with the new strategy's
objectives. The strategy map outlined the immediate and long-term goals, while the balanced
scorecard monitored and measured performance among leaders. This allowed VWB to track
progress, make necessary adjustments, and improve employee satisfaction by showing how
their contributions fit into the bigger picture.
The strength of the balanced scorecard introduction at Volkswagen does Brasil was having a
metric that the entire company had access to that explained the inner workings of the
business. The balanced scorecard allowed employees and shareholders to focus on a specific
area, giving them a clear picture of their task significance and how their involvement would
directly benefit the company. The scorecard is easy to understand and implement and
provides the organization with predefined expectations, leading to improved sustainability
and reliability.
The weaknesses of the scorecard and its implementation are that it can be difficult to develop
the scorecard and ensure that the metrics are aligned with the strategic objectives.
Additionally, there is a risk that the scorecard can become too complex and difficult to
manage. The balanced scorecard neglects the amount of time each area takes to complete its
task and does not take into account how difficult communication across those lines may be.
Question 4: How can Schmall and his team use the scorecard to deal with the challenges
in January 2009?
To deal with the challenges faced by VWB in January 2009, Schmall and his team can use
the balanced scorecard to focus on key metrics and make adjustments:
Profitability: Reduce production costs by cutting unnecessary spending based on employee

input on efficiencies. Produce vehicles that meet market needs based on data on desired
products and sales margins. This could help address unsold inventory challenges.
Employee satisfaction: Improve communication across departments to align efforts. Include

employee input on efficiencies and acknowledge their role in suggesting improvements.
Customer satisfaction: Train their 600 dealers to meet service and satisfaction standards. This
could boost sales and brand perception despite the struggling economy.
By tracking performance on the balanced scorecard, Schmall's team can monitor the impact
of changes and make further adjustments as needed to overcome difficulties in 2009.

VWB Case Study

Uploaded by

Copyright:

Available Formats

VWB Case Study

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

VWB Case Study

Uploaded by

Copyright:

Available Formats

WHU Otto Beisheim School of Management

"Volkswagen do Brasil: Driving Strategy with the Balanced Scorecard "

Dr. Utz Schäffer

Question 2: Describe VWB’s new strategy

Profitability: Reduce production costs by cutting unnecessary spending based on employee

Employee satisfaction: Improve communication across departments to align efforts. Include

You might also like