VW GOES ABROAD

History

Built a plant in Pennsylvania in 1970’s Steady union fights Sales slipped Planned on expanding to Detroit but

obliterated Pennsylvania plant closed

Improvement 10 year plan to

improve sales in the U.S.

Their goal Increased FDI “Americanized”

Jetta Marketing

strategy of nationalism

Chattanooga Tennessee

1 billion dollar operation 150,000 Sedans per year 2,000 jobs 1,350 acres

Adaption's to the car Change gearing of it’s transmissions Rear drum, rather than disc, brakes European character was lost The car isn’t as “German” Thousands below the original price

No uncomplimentary exchange ratesNo shipping chargesLower wages for Tennessee workers

“Americanizing the Jetta”

New standard engine is smaller and much less powerful than previously standard engine

Made the Jetta bigger and closer to the size of competing mid size sedans like the Honda Accord

Globalization

Foreign competitors able to enter the U.S. industry because of globalization

What Drives Globalization

Two macro factors

1. Decline of trade barriers – Primary responsibility of the World Trade Organization and GATT

GATT lowered barriers to the free flow of goods and services

Then completed the Uruguay Round in 1993 which further reduced trades

What Drives Globalization (continued)

Extended GATT by establishing WTOCreated to make sure nation-states follow

the rules in the trade treaties signed by its 153 nations

World is a single market place with world trade growing faster than world output

What Drives Globalization (continued)

2. Technological ChangeCommunicationInformation processingTransportation technologyMicroprocessor InternetTransportation technologyAll of these reduce cost of information

processing and communication which makes it possible for firms to go global

VW Taking Full Advantage of These Changes

Using computer-guided robot welding

Lasers that check tolerances within 1 mm

Automated engine control

Will they meet their goal?

Potential top car manufacturer in the World?

If plant continues to grow, they plan on building one for Audi (VW owns)

Questions