Strategy Execution 2

Strategy Execution
Case Study – Volkswagen

Aadya Gupta
1. What challenges does Thomas Schmall face upon becoming CEO of Volkswagen do Brasil (VWB)?
When Thomas Schmall became the CEO of Volkswagen do Brasil (VWB), he encountered several
challenges. The company was struggling with a decline in market share and financial losses
attributed to declining sales and turnover of newly produced vehicles. Additionally, VWB faced high
competition from emerging rivals. To address these challenges, Schmall and his management team
opted to implement a balanced scorecard approach. However, the successful execution of this
strategy required overcoming various hurdles. Firstly, they needed to create a culture of high
performance within the organization and familiarize employees with the different facets of the
balanced scorecard. Furthermore, They also found it difficult to continue their export-led strategies
and while also keeping their production at a minimum due to the Brazilian currency at the time. With
tight competition in the global auto industry, VWB faced problems in raising prices on exported
products, leading to increasing capacity costs that could not be covered by insufficient export
margins. In addition to these challenges, one of the most significant issue for Schmall and his team
was the cultural transformation and adjusting employee mindsets with the new strategic direction.
2. Describe VWB’s new strategy.
The new VWB strategy focused on Schmall’s vision of "building a high-performance team that
would drive VWB to become South American automotive industry's leader in quality innovation,
sales and profitability on a sustainable basis". By completely disregarding the previous strategy, they
could develop a new, multidimensional strategy. The management team recognised the importance
of establishing relationships with key stakeholders: employees, suppliers, and dealers. This would
become a large tool in utilizing a Balanced Scorecard. By focusing in on new relationships and
controlling an organization at a large magnitude, a communication plan and process must be done
specifically.
Another part of the new strategy was using concepts like the revised Balanced Scorecard and the
strategy map. These tools could help guide the employees in the right direction and remind
management of the attitude and expectations required to perform successfully. The four major
dimensions were: Financial, Customer, Internal Process, and Potential and Growth. Each dimension
set objectives that were developed to incorporate an innovative product portfolio while also
achieving a high-performing culture and sustainability. The next part of the strategy map was placing
a focus on the internal processes of the company that needed to become more service-oriented
among the dealers. Through this layer, Schmall wanted to reduce their costs while improving quality
and the delivery of suppliers at the same time. Finally, the action plans were developed that detailed
which department would be liable for specific achievements and milestones, as well as the resources
they would need to carry out their targets.
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 the strategy map and implementing the Balanced Scorecard helped Volkswagen Brazil
(VWB) in several ways. The strategy map provided a clear framework for addressing key challenges
facing the company, such as financial performance, customer satisfaction, internal processes, and
growth opportunities. By visually displaying these challenges and outlining strategies to address
them, the strategy map fostered alignment and clarity throughout the organization. Employees could
see how their contributions intersected with broader company objectives, enhancing job satisfaction
and engagement. The Balanced Scorecard further aided in implementing the new strategy by
delineating the roles and responsibilities of different departments within VWB. This improved
communication and coordination across the organization, as employees could easily access the
Balanced Scorecard to understand their roles and how they contributed to overall company
objectives. As a result, VWB experienced notable improvements in various metrics, including a
doubling of the employee engagement index, increased suggestions from employees, reduced
absenteeism and workplace accidents, and improvements in supplier and dealer quality scores.
Strengths of the Balanced Scorecard implementation include providing a comprehensive metric

accessible to the entire company, enhancing clarity and alignment of tasks, and enabling employees
and shareholders to focus on specific areas of importance.
However, weaknesses include oversimplified causal relationships between the scorecard and
business outcomes, and a lack of consideration for the time required to complete tasks and
communication challenges across departments. In the case of VWB, breakdowns in communication
led to unsold inventory due to a disconnect between management and suppliers, highlighting the
importance of effective communication and coordination in scorecard implementation.
4. How can Schmall and his team use the scorecard to deal with the challenges in January 2009?
The Balanced Scorecard approach helps in highlighting a company's priorities and areas for
improvement, ultimately aiming to enhance efficiency and profitability. In 2009, Volkswagen do
Brasil (VWB) faced significant challenges, as indicated by shifts in the Balanced Scorecard metrics
from green to yellow and red, particularly with falling sales in the fourth quarter due to the global
financial crisis. To navigate these challenges, Schmall relied on data-driven decision-making,
emphasizing the importance of "driving as fast as you can see" while maintaining control over short-
term decisions.
Schmall's focus on leveraging data and creating a culture of employee input had already addressed
the company's cultural challenges. Now, the focus shifted to addressing unsold inventory in a
troubled Brazilian economy. With everyone aligned with the new company culture, efforts were
directed towards cutting unnecessary spending without adversely affecting employees. Employee
input proved invaluable in identifying areas for improvement and optimizing efficiencies, leading to
profitability, quality, and innovation.
By combining employee insights with market data, VWB could improve manufacturing practices and
tailor product offerings to meet market needs effectively. Considering tough competition from Fiat,
which prioritized low cost, safety, and efficiency, VWB needed to identify the best products with
high sales margins that resonated with the growing middle class. Accessing both internal and external
data allowed VWB to allocate resources strategically and overcome the challenges faced in 2009,
ultimately striving towards their goals of sustained profitability and market success.

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Strategy Execution

Case Study – Volkswagen

Strengths of the Balanced Scorecard implementation include providing a comprehensive metric

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