Product details

The case study is situated in the automobile industry in China in 2003. Volkswagen, the largest car maker in Europe, operates on the Chinese market with two joint ventures. As the first foreign automobile company, Volkswagen founded a joint venture with the Chinese state-owned company Shanghai Automotive Industry Corporation (SAIC) in 1985. A second joint venture with First Automotive Works Group (FAW) followed in 1991. The two companies, Shanghai Volkswagen (SVW) and FAW-Volkswagen (FAW-VW) are separate legal entities, which compete in the market. At the time of the case, Volkswagen decided to introduce two new models, which shared a common platform, into the Chinese markets. While one of the models should be produced by SVW, the other one should run from FAW-VW''s assembly line. It is obvious that synergies which arise from a platform strategy can only be realised by volume bundling and common sourcing. In the past, however, Volkswagen''s Chinese joint venture partners always insisted on their sovereignty to decide on suppliers and thus the development of local suppliers was organised independently from each other. The case protagonist is the manager of the product cost optimisation (PCO) team. He was hired by the Volkswagen Group in order to co-ordinate a cost cutting programme in both of Volkswagen''s Chinese joint ventures. Due to the increasingly difficult market situation, the corporate board asks him to present a plan for far reaching cost savings from the supply side.