College of Business Administration (COBA) Volkswagen VW is a

College of Business Administration (COBA) Volkswagen VW is a mass-market car producer and has found its competitiveness slipping away in key markets, largely because of high costs in Germany, where it is based. It has traditionally been reluctant to use low-cost locations for components, unlike rival global carmakers. High wages and job protection in Germany have been priorities for the powerful trade union, IG Metall, which is influential on VW’s supervisory board. In the US, VW’s sales slumped for several reasons: the weakness of the US dollar, the lack of appealing new models and the unwillingness of the company to use local suppliers of components for its Mexican factory. In China, where VW was a market leader, competitive pressures have gathered strength, from both other western entrants and Chinese companies. VW has inadvertently strengthened Chinese competitors through its joint ventures with SAIC MOTOR. Changes in strategy have been forced on the company because of its dwindling competitiveness. The management has persuaded the unions that cost savings are imperative. Wage freezes, early retirement and staff reductions through voluntary schemes are being implemented. Under Germany’s system of corporate governance, co-determination is the governing principle. It is useful to begin by highlighting its implications, namely the strong position of the main trade union on the supervisory board. Also important in the case of VW are the share structure, the German takeover law and the role of Porsche, the family-owned luxury carmaker. The main large shareholders are Porsche and the government of Lower Saxony, which have differing perspectives. The families which own Porsche see the economic benefits for themselves of winning control of VW, while the government and trade union prioritize public benefits such as employment in the region. Clashes in perspective lead to disagreement over strategy. Question If you were a shareholder in VW, what changes would you like to see in the way the company is run? (150 words) Japan The jobs-for-life guarantee – Japan’s large companies have prided themselves on their employment system which guaranteed a job for life to permanent, fulltime employees. This was an important element in Japanese corporate culture, giving employees a strong sense of identity with the company, along with high levels of loyalty. Following decades of rapid economic development, Japan went into a period of economic downturn in the 1990s, and in the same decade, Japan’s companies came under competitive pressures from other East Asian economies which were catching up in terms of economic development. Although Japanese companies needed to restructure and abandon the jobs for-life policy, they were reluctant to take drastic steps to slim down workforces. • Core technology and innovation capacities – Japan’s large companies were famous for their innovations, but in embarking on joint ventures with companies in the rising economies of East Asia, lost control of some of their key innovations. Rethinking their innovation strategies, involving decisions on what to keep inhouse and where to seek cooperative strategies, was part of the strategy to regain competitiveness. Japan’s companies have long been at the forefront of imaging technology, including LCD technology, digital cameras and flat TV panels. This gives them a competitive lead in the fast-growing digital sector. By carefully managing this technology, they hope to keep their lead over rivals such as Taiwanese and South Korean companies. The home market is crucial for Japanese companies, and, although Japanese consumers were reluctant to spend during the period of economic downturn, there is hope that consumers will regain their desire for the latest electronic equipment. Companies such as Sony and Toshiba look for renewed growth in their home market. Question Asses the impacts of changes in employment patterns on Japanese society? (150 words)