case analysis: section ALTERNATIVE SOLUTIONS ONLY.
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case-analysis-keyissues-definingproblem.docx
Key Issues
The main issue in this case is that during the period in which Porsche had obtained controlling interest of VW and was placing pressure on the company’s supervisory board with changes, there was a conflict between then Porsche AG CEO, Wendelin Weideking and VW chairman Ferdinand Piech. They were at odds as to the route VW should take in terms of its future goals and overall direction. Weideking believed that VW’s main focus should be on increasing profit and letting go of the company’s models that were unsuccessful in sales. However, Piech disagreed and believed that the company should focus more on amazing engineering rather than just profit and sales. He favored the company’s luxury models Bugatti and Phaeton and although they brought fresh new innovations to the market, the models remained unsuccessful in sales.
Another issue was that there was a conflict of interest concerning Piech who is a member of the Porsche family, with 10% shares in the company. This then would have posed a threat to Piech’s argument of profitability and sales not being of higher priority for the company than superb engineering.
Defining the Problem
Mergers and acquisitions are often used by companies desiring to expand or diversify their operations, acquire intellectual capital or gain new or additional resources. Because all corporations have business models that they have employed within their respective organizations, the blending of two or more companies can generate conflict, when the business models clash. For this reason, some companies allow acquisitions to continue operating under their own business model, but rules and procedures are set which allow the controlling company to coordinate all of the business units for reporting the results of operations up the chain. Rules help ensure that conflict will be minimized. The VW group obviously has not followed this method of combining the operations of its acquisitions, as evidenced by the lack of cohesiveness among them. As a result, there was an aversion to the sharing of knowledge, a lack of cooperation and cohesiveness and the companies acted as if they were standalone entities independent from one another. However, although this existing conflict is a problem, it is not the primary problem described in the case.
The primary problem arose when Porsche gained a controlling interest in the VW Group and attempted to impose its own business model on the company. No attempt at negotiation was made by either party; both thought their own business models had the most merit. The sources of conflict included incompatible goals, no attempt at differentiation and inefficient communication.
1. Incompatible goals - According to McShane and Von Glinow (2013), goal incompatibility exists when one goal or group of goals clashes with another goal or goals. Porsche’s (or Wiedking) vision was to increase efficiency of operations, which clashed directly with the VW Group’s (Piech’s) vision of product engineering and innovation.
2. Differentiation - No attempt on Wiedking or Piech’s part was made to find a common ground. People are more apt to work together if there are commonalities they share (McShane and Von Glinow (2013). There existed a relationship of sorts, between the two CEO’s (Piech’s familial relationship with Porsche Chairman Wolfgang Porsche) that would have been a good starting point to build upon.
3. Inefficient Communication – Wiedking’s high handed antics derailed the possibility of meaningful communication. People are more receptive to new ideas when they are approached with understanding and respect. The Porsche CEO demonstrated that he gave no credence to the existing business model of the VW Group and that he knew what was best for the company.
Ironically, if the two opposing CEOs had been able to find a common ground where they compared their visions and developed a unified vision comprising elements of both, each company would have been the better for it. Combining efficiency and marketing with superb engineering and innovation would result in a win-win situation for both companies.
