PRINCIPLES OF MANAGEMENT
Case Study
Sound Planning at Volkswagen?

Volkswagen AG, based in Germany, is one of the largest automobile manufacturers in the world. Over time, Volkswagen has prospered while manufacturing reliable and affordable cars such as the Jetta and the Golf for the average consumer. In fact, Volkswagen literally means “the people’s car.” Despite Volkswagen’s past success as a company that produces, mid-priced automobiles, Bernd Pischetsrieder, Volkswagen’s new CEO, wants to modify the company’s direction. During a recent study of the automobile industry, Volkswagen’s executives attempted to better understand the company’s product line. The executives listed all of the different model segments in the automobile industry such as “big SUVs” and “hatchbacks” and compared the list against all of the automobiles that Volkswagen produces. Study results clearly showed that Volkswagen did not offer products in the luxury market to compete with other German automobile manufacturers such as BMW and Mercedes-Benz. Although Pischetsrieder already knew about Volkswagen’s lack of luxury car product, study results caused him to think. In the past, management at Volkswagen had opted to focus simply on the “averaged-priced” automobiles. Past management realized that the company made less profit on each average-priced” car sold, but knew that automobile manufacturers typically will sell more averaged-priced automobiles than higher priced luxury automobiles. Based upon the study, Pischetsrieder decided to introduce a new line of luxury automobiles. One of the company’s recent luxury models, known as the Phaeton, includes a driver’s seat with a lower-back massager. The Phaeton also has Italian leather seats and solar cells in the sunroof that control the car’s ventilation system. Despite all of these features, the