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Volkswagen ROE shows a negative trend for the period between 2011 and 2015. It decreased from 29.77% to -1.78%. The most recent Q4 2016 ROE for Volkswagen is 0.82%. Its competitors like Toyota and Honda also showed a negative trend of ROE from 2011 to 2015. However, General Motors was able to report highest ROE of 22.22 % in the first quarter of 2016 due to increase in revenue. Moreover, the most recent Q4 2016 ROE for Toyota is 15.90%. The average ROE for automotive industry is between 15% and 17% as seen in the graph below.
30 | P a g e Stock Price Analysis Volkswagen saw its stock price go down by 30% overnight when the Environment protection Agency announced that they manipulated the software to hide the actual emissions by the car. This announcement reduced its market cap by $20 billion and its share price dropped from $170 to $110.
31 | P a g e Appendix G: Key Resources & Capabilities Resources Capabilities Tangible 1.Finance 2.Plant & equipment 3.Global locations 4.Distribution network 5.Knowledge workers 1.Product development 2.Purchasing 3.Engineering 4.Manufacturing 5.R&D 6.Marketing & sales 7.Government relations 8.Strategic management Intangible 1.Technology 2.Wide brand portfolio 3.Synergy among different brands and groups Appendix H: Global Revenue
32 | P a g e Appendix I: Porter’s Five Forces Analysis Barriers to Entry: HIGH The automobile industry has large entry barriers which prevents new firms from entering. Some of the factors responsible for this include, immense start-up costs, extended time periods required to develop distribution networks and brand image and trust, and a steep learning curve to achieve economies of scale in order to compete at a competitive price. Power of Suppliers: LOW - MEDIUM Supplier specialization is a given in the automobile industry. Suppliers often produce parts for only one or two automakers at once and often heavily rely on the automakers they partner with for sales orders and continued business. It would devastating for a supplier to lose a partnership with a major automaker such as Volkswagen. However, automakers require a wide variety of precious and in-demand materials e.g. computer components, copper wiring, and rubber. A growing and increasingly industrial and globalized world is creating heavier demands on these materials as well as metals, sand, and silica, leading to rising prices. Suppliers of certain materials determine prices of these materials based on the demand from many industries, leaving automakers subject to forces in various unrelated markets and to a certain extent, at the whim of these suppliers. Power of Consumers: LOW - MEDIUM Volkswagen has a wide array of models, but there still exist a wide range of brand substitutes. Nevertheless, the power of individual consumers is low given the capital intensiveness and frequency of purchase by individual (probably an average of 1 car per individual every 5 to 10 years). Individuals or small businesses rarely buy cars in large quantities but large firms or government agencies that regularly buy in bulk do have slightly more power than average individuals. Furthermore, for a company like Volkswagen with a wide customer