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Harvard Business School

9-591-065
January 22, 1991

Volkswagen of America: AUDI 5000 (A)
Audi sought a cure to sluggish sales by moving from a category of a somewhat dowdy, but high-quality "basic" car into the more heady atmosphere of the luxury sedan. Ward's Automotive Yearbook, 1978 The Audi 5000 brought technological innovation to the United States. . . Ward's Automotive Yearbook, 1978In the fall of 1977, the marketing vice president for the Porsche+Audi Division (P+A) of Volkswagen of America (VoA), and the management supervisor at P+A's advertising agency, Doyle Dane Bernbach, Inc. (DDB), were faced with a major decision concerning the upcoming introductory campaign for the Audi 5000, a new P+A entry in the U.S. auto market. On the one hand, both executives were comfortablewith the strategic direction the new campaign would take, i.e., advertising would focus on the engineering and design superiority of the "5000" model. At the same time, DDB's creative director on the Audi account had presented "roughs" of two alternative executions written to the "Engineering" strategy. A swift decision was called for in order that production of both print and televisionexecutions could begin as scheduled in the introductory marketing plan.

Background—VW Acquisition of Auto Union (Audi)
During the period of 1949 to 1968, Volkswagen's worldwide sales had increased from 46,000 to 1,775,500 vehicles annually. The company's success during these years was largely attributable to the efforts of its president, Heinz Nordhoff. Nordhoff's goal was "to develop a car of thehighest technical excellence at the lowest price." Toward this goal, product development efforts during this time were directed largely at the gradual perfection of a single model—the Beetle. An additional part of the Nordhoff heritage was VW's first acquisition. Auto Union, a venerable German auto manufacturer which was in financial difficulty, was wholly purchased in 1965 by Nordhoff largely to getthe firm's Ingolstadt plant to produce Beetles. But Rudolf Leiding, who had been appointed head of this new VW subsidiary, proceeded without Nordhoff's knowledge to develop a new model based on ideas which had been on Auto Union's drawing boards. To everyone's surprise, Nordhoff eventually approved the plans to produce the car and to introduce a

Professor Stephen A. Greyser and Babson CollegeProfessor Robert J. Kopp prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1991 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go tohttp://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 1

591-065

Volkswagen of America: AUDI 5000 (A)

wholly new line to be sold under the Audi name. The first model,the Audi Super 90, appeared in 1969.1 Prior to 1969, products of Auto Union had never been imported into the United States. However, beyond the development of this promising new model, there were several factors which led to the establishment of a separate dealer network to distribute Audi products in the United States. (a) Acquisition of Porsche Distribution in the United States In the late1960s VW had formed an agreement with the family-owned Porsche factory in Stuttgart to produce a Porsche-design sports car (later sold in the United States as Porsche 914). As part of the agreement, the two companies had created a joint VW-Porsche sales corporation to produce and market the automobile. At the same time, it was agreed that VoA would take over U.S. distribution of the entire Porsche...
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