Volkswagen AG operates in the automobile industry. It’s subsidiaries/marques include Audi AG, Lamborghini S.p.A, Bentley Motors Ltd, Porsche AG, Bugatti S.A.S, and Volkswagen Passenger Cars. For this analysis, I will be focusing on the North American market.

Volkswagen Group. Source: IB Times

1. Barriers to Entry: HIGH

Not surprisingly, the automobile industry has large barriers preventing new firms from entering. Aside from insurmountable start-up costs, automakers must set-up dealer networks, acquire licensing, and establish trust in the brand (as cars are usually large purchases for consumers). New competitors often come in the form of subsidiaries of current competitors.

2. Power of Suppliers: LOW

Suppliers specialize. They produce parts for only one or two automakers at once, and are heavily reliant on these automakers. It would be devastating for a supplier to lose an automaker contract.

3. Power of Consumers: LOW-MEDIUM

Despite Volkswagen’s large collection of marques, there is an abundance of brand substitutes. However, consumers rarely purchase large quantities of cars; large firms/government agencies have slightly more power as they purchase vehicles in bulk.

4. Availability of Substitutes: MEDIUM

As a result of increasing rising gas prices and government initiatives to promote environmentally friendly transportation, more consumers are opting to take public transit/walk/cycle.

5. Rivalry: HIGH

The US automobile industry can be regarded as an oligopoly. However, with the recent insurgence of Japanese automakers manufacturing domestically, and the revival of “The Big Three” in the US, rivalry is as fierce as ever.

Conclusion:

Based on this analysis, one can conclude that Volkswagen’s position in the automobile industry is relatively safe. As long as they keep up with competitors in innovation, it is possible for the Volkswagen group to hold a considerable market share.