What Challenges Does Schmall Face upon Becoming Ceo of Volkswagen Do Brazil (vwb)?

1. What challenges does Schmall face upon becoming CEO of Volkswagen do Brazil (VWB)?

The challenges Schmall faces upon becoming CEO of VWB can be divided into external and internal ones. We first analyze external factors given that they may have vital influences on the internal ones.

To understand the external challenges, we need to figure out the situation faced by the company. VWB went through a rocky patch in the past few years before Schmall was appointed. Market share shrank tremendously and financial losses were huge. Competitions were intense worldwide in the industry. Competitors constrained price raise which cast a shadow on the export business of VWB because the incremental cost of shipment couldn’t be covered by the export margin. Thus, what Schmall needs to do is to hold back the continuous decrease in sales and market share over the past several years under global financial crises. This is the major challenge Schmall faces upon becoming CEO of VWB.

As for the internal challenges, the first one Schmall has to face is adapting to a different company culture. Schmall did not work for VWB before and might not be familiar with the company culture. Moreover, he wants to change the company’s old culture into a new one. Therefore, he needs to prepare himself with enough knowledge and passion about the old company culture in order to adapt to it and make sure his innovation will go smoothly.

The second internal challenge is mindset changing. As suggested in the case, the company’s reliance on cost reduction and employee layoffs have created an apprehensive atmosphere in the company which results in employee instability. These features hurt VWB’s interest in the past and will definitely affect VWB’s long profitability. A new culture that will work efficiently and meet the needs of customers is needed. However, changes are often accompanied by resistance especially when Schmall wants to aggressively re-brand VWB. So acceptance of the new strategy and culture is also an issue. To ensure the re-branding goes smoothly, Schmall needs to find ways to communicate his strategy to managers and employees.

1. Describe VWB’s new strategy

Responding to the external and internal challenges, VWB actively developed the new strategy to regain its market leading position. It no longer wanted to struggle for surviving by reducing the costs, employees and capacity. Instead, VWB adopted the product differentiation strategy to focus on quality enhancement and brand building, thus generating profits in a sustainable manner.

To successfully achieve the vision, VWB planned to build an efficient team consisting innovative and motivated employees. The previous bureaucratic and conservative corporate culture should be transformed. In that case, the company made efforts to improve the relationships among employees, suppliers and dealers, getting them all involved in the strategy implementation.