SBU LEVEL CASE
Volkswagen experienced success with cars such as Beetle, Golf, Karmann Gia sport coupe and Microbus during 1950s to 1970s. However during the late 1970s, exchange rate between Deutsche and America dollars grow high making importing much more expensive. This brought Volkswagen to a great defeat since the cost can not be covered by the profit they are making. This economical factor in the global environment affected Volkswagen America greatly at that time period and remains a great influence for Volkswagen America. However, this was later on overcome by production right in America to avoid exchange rate risks.
Oil prices also affected the popularity of certain Volkswagen cars during 1982 and government environmental legislation also affected VW America's sales since its Beetle cannot comply with the legal requirements. At the mean time, Japanese brand cars penetrated the US market causing VW to further lose more sales.
Currently (1998), these factors have been overcome by VW America. However, it is still necessary to make sure environmental factors are taking into concern when making marketing decisions.
Threat of new entrants
The threat of new entrants is very low in car industry. Firstly, car industry requires large sum of capital for start up and large flow of funds are required too. Secondly, there are already established brands and brand image is most important in a car industry. It would be hard for new entrants to compete with established brands. Thirdly, manufacturing cars requires extensive experience and knowledge. Fourthly, government policies and restrictions make it hard for new entrants to enter.
Threat of Substitute
The threat of Substitute is medium. There are several substitutes for a car; including public transport (bus, tram, and train), bicycle and motorcycle. Some of these substitutes cost cheaper and requires less capital to...