To see how variations in the stakeholder model can influence strategy, consider Volkswagen AG. From its corporate headquarters in Wolfsburg, Germany, Volkswagen has consistently tried to accomplish two seemingly contradictory goals: remain a sales leader in the global auto industry while at the same time building and maintaining a “worker’s paradise” for its employees. On several occasions over the past decade, however, Volkswagen’s twin goals have come under repeated attacks as global car sales plummeted and the survival of the company itself seemed in doubt.
During one of these crises, sales dropped 20 percent in one year, requiring a massive reduction in working hours by company employees. Indeed, the company determined that it had 30,000 more workers than it needed in Germany alone. Its supervisory board concluded that poor economic conditions would likely remain for several years, and that in order to survive, it had to find a way to quickly reduce its operating costs by 20 percent to match the decline in sales.
As Volkswagen faced this challenge, the business and social environment in which key decisions would be made differed sharply from those the company would have faced in the US. For starters, 20 percent of Volkswagen’s stock is owned by the state of Lower Saxony, where the company’s principle manufacturing facilities are located. In addition, 90 percent of all employees at Volkswagen are unionized. Since the company’s union contract required the approval of over 80 percent of the shareholders on all important decisions, any cost-cutting plan that involved large lay-offs was highly problematic. Lower Saxony and the IG-Metall union also had strong representation on the company’s supervisory board, where cost reduction strategies would be openly discussed. As a result, major lay-offs were not a viable option.