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BBS news “Volkswagen (VW) and Porsche have agreed the details under which VW will merge with its German compatriot by 2011.” Basing on the competitive Analysis, Volkswagen and Porsche merge together will gain at least two advantages compare with individual:  Market share in motor business  Drivers of cost advantage Market share in motor business Market share, in strategic management and marketing is the percentage or proportion of the total available market or market segment that is being serviced by a company. It can be expressed as a company's sales revenue (from that market) divided by the total sales revenue available in that market. It can also be expressed as a company's unit sales volume (in a market) divided by the total volume of units sold in that market. It is generally necessary to commission market research to estimate the total market size and a company's market share. Toyota overtakes GM motor to be No 1 market share motor company in the world since 2008. Increasing market share is one of the most important objectives used in business. The main advantage of using market share is that it abstracts from industry-wide macroenvironmental variables such as the state of the economy, or changes in tax policy. According to the national environment, the respective share of different companies changes and hence this causes change in the share market values; the reason can be political ups and downs, or other objectives include return on investment (ROI), return on assets (ROA), and target rate of profit. According to the law of experience, the unit cost value added to a standard product declines by a constant % each time cumulative output doubles. From the time being, the cost per unit of output will be decreased, at the same time, the accumulated unit production will be increased. The experience curve always shows the same pattern in most of the industry. By this reason, if all firms in an industry have the same experience curve, then change in relative costs over time will be equal to relative market share. This implies that market share is linked to profitability. If company becomes market leader, it will be benefit for organization control the cost and profit.

Reference from notes, the costs developing new car models (including plant tooling) $Billion Ford Mondeo/Contour 6 GM Saturn 5 Ford Taurus 2.8 Ford Escort 2 Renault Clio 1.3 Chrysler Neon 1.3 Honda Accord 0.6 BMW Mini 0.5 Rolls Royce Phantom 0.3 Base on above figure, different motor company spend different development cost in new car models. The number of investment is huge. However, new car models must be needed to attractive different level of customer need. How can reduce the cost in the investment? Drivers of cost Advantage In fact, different motor organization merge together can be gain several advantages on cost saving  Specialization and division of labor  Process innovation  Standardizing designs and components  Design for manufacture  Bargaining power from supplier  Reduce Organizational slack Specialization and division of labor Volkswagen (VW) and Porsche merge together can be share the production line, expertise, stock, computer system and components that can be saved a lot of works or staff on some overlap position. Cost can be saved in the operation level. Process and product innovation As two motor companies merge together, some new technology can be shared in both companies. Hence new investment cost on some design, technology or processing method can be saved by corporate engineering

department. Standardizing designs and components Basing on the above figures, it can be found that the investment cost in the new car model is very huge. It is because a lot of new components will be built for new design model. When two organizations merge together, new design components can be standardizing on some non-major parts. Each design and components can be share to both company new car models. Investment cost can be saved. With standardizing components, production line, stock and transportation arrangement can be easily handle. Operational cost can be cut by standardizing. Design for manufacture New design will be also needed new production line. Machine, fixture and worker training will be set up again. Well organization design on manufacture can be reduce the lobar cost, increase the production capacity and better control on the quality. Defect rate can be reduced by mature worker in standard production line. Bargaining power from supplier Supplier will be mark up the price by low quantity of order. With huge order on hand, supplier will be welcome to discuss the price with buyer. Competition also increased to get a big order from different supplier. Bargaining power can be increased by grouping whole organization order. Components or raw material cost can be reduced by high bargaining power. Purchased department also easily manage the supplier by owning 90%~ 100% production capacities in supplier. Reduce Organizational slack Each Organization will set up their scope, Top down the management scope or organization target will be easily by merge together. This is very important of organization behavior that all management level staff must aware organization aim. Otherwise, management will be gone to wrong direction on their target. VW chief executive Martin Winterkorn said the announcement marked "a new era" for the two firms. "Porsche is a real enrichment for our company's portfolio," he said. Mr Winterkorn added that the Porsche and Piech families will be the largest shareholders in the merged firm. Porsche will now

effectively become the 10th brand in the VW family, joining the likes of Audi, Seat and Skoda. As the economy turndown, GM and some US motor company become non-dominant in the motor market. Middle level of motor company is aggressive to merge with other company to gain a market share in this golden chance. It can be imagined that motor market will be changed in next 10 year. US may not be the biggest motor company in the world. Japan and EU will be the next that can control the whole motor market in future.