Whats Driving Porsche - Term Paper Example

Whats Driving Porsche Porsche AG is an automobile manufacturer that specializes in the production of high-end sports car. Its range of cars include sports cars, sport utility vehicles, super cars, and sedans. The company has a philosophy of high performance with limited costs. This explains why it makes light-weight vehicles that pay attention to aerodynamics. The Stuttgart-based company makes various models in the form of Cayman, Cayenne, Boxster, 918, 911, Macan, and Panamera. The Porsche Company was founded in 1931 by Ferdinand Porsche and Anton Piech, a son in law. The company started off as a firm offering consultancy services on car engineering processes. In 1934, Adolf Hitler commissioned the company to make a car that could be used in everyday situation (Porsche, 2014). In the end, Ferdinand came up with the idea of the Volkswagen Beetle. This led towards the formation of a Volkswagen plant in 1938. During the Second World War, the company produced automobile designs for tanks. In 1945, the French government arrested Ferdinand for war crimes thereby inspiring Ferry Porsche, his son, to enhance his commitment in the company. Ferry came up with the model of the Porsche 356 in 1948 (Porsche, 2014). . Ferry inspired the Porsche’s brand of a handmade, expensive, and high performance car. The company began production from a level of five cars every month thereby relocating from Gmund to Stuttgart. In the 1950’s, Porsche’s products became familiar with celebrities and film stars such as James Dean. Porsche’s continuous expansion inspired Ferry to make the entity a public company in 1972. In the later years, Porsche, unlike other companies, made an exceptional commitment to research and engineering development, which attracted its lucrative contracts from the government and private companies. The company currently makes premium and high end cars that cost between $50, 000 and $900, 000. These cars are marketed all over the world in spite of the fact that most of Porsche’s customers are from the developed countries. Strategic plan Financial analysis Porsche has one of the most profitable automobile manufacturer per unit basis. Over time, the company has managed 100, 000 automobiles annually. The company has trudged a long way in achieving this feat. In the late 1980’s and the early 1990’s, the company faced a key revenue crisis since the US economy receded. Between 1986 and 1993, the company’s sales reduced by 36, 000. A revolutionary management, however, prevented the company from eventual bankruptcy. The company found ways of engaging efficiency through concepts such as lean manufacturing thereby lowering costs and expanding profits. Besides, a diversified product range inspired a considerable financial success for the company. The company has witnessed a gradual growth in production that correspond with sales and revenues. In 1999, the company manufactured annual units of 47, 000 Porsche vehicles (Henderson & Reavis, 2009). In addition, it harnessed revenues worth 3, 000 million euros. In the following year, the company made 50, 000 units of vehicles with 3, 500 million euros of revenues. In 2008, the company progressed to make 97, 000 Porsche vehicles and possessed revenue worth 6, 500 million euros. Porsche, as compared to its competitors, makes mild unit sales and revenues. Its competitors, such as Toyota, GM, Ford, and Nissan, relatively makes considerable sales and revenues. In 2007, the largest car manufacturer, Toyota, made $ 252, 394 million in revenues and $ 8, 900, 000 in unit sales (Henderson & Reavis, 2009). Such figures were much more than the related figures of Porsche unit sales and revenues. In the same year, Porsche made unit sales of 98, 652 and had revenues worth $10, 060 million. Porsche, especially, makes fewer sales because it makes luxury goods that targets a specific market segment. In spite of few sales, the products attract high compensation value. This, especially, makes the company achieve high profit on the per unit basis. In 2007, for instance, Porsche was second to Toyota in terms of net income. GM and VW, for instance, made $ 180, 000 million euros and $ 160, 285 million euros respectively, but they managed limited net income (Henderson & Reavis, 2009). This is understandable since Toyota only employs 12, 202 people while Toyota employs 299, 234 people. Porsche has recorded financial success in the first 9 months of the 2014 year. This occurred as revenues, sales, and profit grew. For instance, the company has sold 135, 642 sports cars that represented a 13 percent increase in the sale of cars. In turn, the revenue grew by 17% in terms of 12.24 billion euros. Besides, the profit of 1.93 billion euros represented an increase of 2 percent. SWOT analysis The company possesses notable strengths. To begin with, Porsche has created a distinct brand that enables it exploit a prospective market segment. It makes high-end and pricey cars that attract significant social value (Asongu, 2007). Porsche, especially, sought to introduce exceptional performance and sportiness into an everyday car. Porsche diverges from the Rolls Royce brand that target an aristocratic and bohemian wealthy group. Beyond aesthetics, the company emphasizes on functionality of cars. Such a value appeals to elite and prosperous group of customers. More essentially, the company appeals to a class of wealthy families and businessmen. In a subtle sense, the company capitalizes on exclusivity due to the demanding market segment that it serves. Other automobile companies find it difficult feat to achieve this feat thereby making a Porsche a formidable brand in the market. The upper class market segment is not significantly susceptible to fluctuating economic conditions that usually see an average consumer cut down on their luxury purchases. In addition, the brand allows Porsche to attach premium set of prices on their products. The car industry has few players that directly compete with Porsche. Although brands, such as Lamborghini, Ferrari, and Maserati, compete with Porsche, they rarely manage the number of cars that Porsche produces every year. A company, such as Bugatti, for instance, produces a highly customized and minimal number of cars thereby compromising on its competiveness. Besides, Porsche flourishes over other entities, such as Lamborghini, because it seeks functionality besides branding. This explains why Porsche cars participate in motorsports. Motorsports has provided a key market for Porsche’s products. It is essential to highlight that Motorsports is a wide market since it involves several types of sports. In the realm of sports car racing, Porsche began its participation by making engines for cars. In races, engines are the principal tools in winning races. Over time, however, Porsche has made full cars for races. Currently, Porsche is the largest race car maker. Porsche, for instance, is successful in its engineering development as regards the Formula 1 races. Porsche’s major success, however, in car rallies whereby the Porsche 911 became a serious competitor. Although Volkswagen is currently the largest car manufacturer, it enjoys an intimate relationship with Porsche (Wimmer & Muni, 2012). In this sense, Porsche enjoys the idea of indirect competition from Volkswagen. The first assignment of Ferdinand Porsche regarded making a car that every person could use. This lead to the Volkswagen prototype that Volkswagen later adopted. The Volkswagen Beetle is one of the most enduring car types of all times (Wimmer & Muni, 2012). This initiated a close relationship with the Porsche Company that explains the notable collaborations. For instance, the two companies have collaborated on making the VW-Porsche 916 which possessed a 914-6 engine. Volkswagen currently owns a significant number of the luxury brands such as Rolla Royce, Bugatti, and Lamborghini. In this sense, it eases competition for Porsche since a majority of the luxury car brands fall under the Volkswagen brand. Besides, the company significantly practices differentiation. The company has seven product lines in the form of 918, 911, Panamera, Cayman, Boxster, Cayenne, and Macan. These brand lines are further sub-divided into other product lines. For instance, the Cayenne brand has continually produced its versions such as Cayenne S and Cayenne GTS. Differentiation helps the company diversify its risks since dealing in one type of product is subject to risks associated with shifts in tastes and preferences. In addition, differentiation help Porsche tap into different market segments and appeal to tastes that, otherwise, would be neglected. For instance, the Cayenne satisfies the business types while the 911 brand appeals to leisure-oriented individuals. The company, however, faces different weaknesses. For instance, in spite of Porsche’s notable differentiation, the company only deals with a specific product line. Sports cars appeal to a distinct market segment, which entails elite consumers. During financial and economic crisis, consumers normally cut down on their luxury purchases in order to harness income for immediate needs such as food. In close relation to this argument, Porsche faces stringent competition from large automobile producers such as Toyota and BMW. Although companies such as Toyota and BMW manufacture different types of cars, they still manage to make successful sports. This explains why Porsche, in spite of its specialization, has not been able to make successful Porsche cars for races. Porsche, in striving to create a distinct brand, it has not managed to create a unique design that gives forth an exceptional brand. The market offers various opportunities. To begin with, a continuous expansion of the green market offers a great opportunity for Porsche. Due to continuous environmental regulation, Porsche can counteract the penalty costs of relevant authorities by engaging green considerations. For instance, UNEP will increasingly make regulations that, especially, target developed countries’ industries, which are highly blamed for emission. The transport is one of the factors that receive blame for continuous and uncontrollable emission rates because it involves the use of petroleum fuels. The difficulty of finding an immediate and effective alternative is a significant challenge from the car industry. A company, which will take the risks of making cars that use alternative energy will highly benefit from the market. It is essential to highlight that there is a growing group of green-conscious consumers who significantly consider the nature of products they consume. Due to their stringent standards, they are highly likely to buy products from only environmentally ethical companies. In terms of threats, the company faces the risks of a financial and economic crisis. Such crises happen sporadically that, sometimes, it is difficult for companies to forecast trouble in the market. In a financial crisis, sourcing for credit, saving, and trusting on the value of capital becomes difficult. On the other hand, an economic crisis usually cuts down on the purchasing power of consumers. In this sense, consumers usually reduce their expenditure on luxury goods as they save for basic goods. The company also faces the threat of alternative products and new entrants. The existing industry has many players such as Lamborghini, Ferrari, Maserati, and other brands that can rework their marketing strategies or improve the functionality of their products acquiring a larger share of the market base. The car industry is a large field and it allows for an easy entry of new players. New players most of the times emerge in the market to fill loopholes that existing companies have not exploited. When such loopholes are exploited, customers can easily switch from existing products to the new brand. Key areas Three areas from the SWOT analysis are essential in designing the organizational structure. Green production should form an essential feature of Porsche’s production since the environment is a significant concern in the twenty-first century. Due to carbon emission, considerable damage has occurred to the environment. This occurs as carbon dioxide damages the ozone layer. The threat of increase in temperatures may trigger flooding and destructive climate change that compromises on the survival of the current habitat. In this sense, the company has to initiate given changes that will ensure the survival of the company. The idea of sustainable production ensures that the future generations inherit an environment that can satisfy the production of items that ensure their survival. To begin with, the company may participate in the production of hybrid cars. A hybrid car entail an internal combustion engine and an electric motor (Ottman, 2011). A hybrid car does not seek to eliminate the use of petroleum fuels, but it combines electrical energy with combustion energy in order to maintain efficiency. In addition, the vehicle should participate in the production of electric vehicles and mechanical powered cars. This, especially, is helpful in the case of congested cities such as New York whereby high speed is not a key requirement in cars. Mechanical car machines will minimize on the costs of owning cars. In this frame, Porsche can capitalize on the market of low-income consumers. The threat of alternative products and new entrants provides a considerable reason for Porsche to embark on consultancy services. Innovation has led towards the production of premium quality goods and services. In turn, consumers possess significant expectations about the quality of products. The car industry entail entrenched competition as companies develop impacting brands and quality cars. In this sense, it becomes difficult to form a product that survives through different generations of consumers. Consultancy services are profitable in an age of green consumption, efficiency, and high competition (Nieuwenhuis & Wells, 2003). Porsche has the one of the largest R&D departments that specialize in engineering processes and enhancing functionality. The company should steer research that inspire new ways of limiting emission. This is a prospective idea in the case of race cars that require continuous development. Porsche, by utilizing its history in developing engineering processes, should develop engine standards for race cars. In addition, such an opportunity could be modified to fit into different situations. For instance, consultancy is necessary in designing cars that serve ordinary lifestyles. Globalization has made the market an intricate place. In addition, the market involves risks that arise out of spontaneous behavior by different players. Integration in the market place requires the services of intermediaries such as banks that possess divergent goals as compared to ordinary firms. The banks’ unpredictable behavior, for instance, triggered the development of the 2008 financial crisis. In this perspective, Porsche needs to invest in data analysis and forecasting. It is ineffective to assume and predict the behavior of consumers in age of intensive marketing. Forecasting helps determine the evolving tastes and preferences of consumers. Consumer research is also helpful in maintaining brand loyalty. In addition, it helps the company makes associations between different factors such as research and revenues. In this sense, Porsche can make mindful investment in ideas that generate revenues and profits. Assessment There are notable ways of measuring the growth of such recommendations. To begin with, Porsche should maintain correspondence with the consumer base. The development of internet and communication technologies enable immediate feedback and quick response to customers’ complaints. This is one of the most objective ways of measuring the effectiveness of programs such as the development of green cars. In the end, consumers’ opinions and tastes are influential in designing cars that they use. In addition, the company should assess its performance through examining revenues, sales, and profits. Companies solely exist for profit making and this is one of the most effective ways of measuring the success of programs. Investment in data analysis, however, dot not only examine current data but also forecast the future of the industry and a company. References Asongu, J.J. (2007). Strategic corporate social responsibility in practice. Lawrenceville, GR: Greenview Publishing Company. Henderson, R., & Reavis, C. (August 25, 2009). What’s Driving Porsche? MITS. Retrieved from https://mitsloan.mit.edu/LearningEdge/CaseDocs/08-075-What%27s%20Driving%20Porsche.Henderson.pdf. Nieuwenhuis, P., & Wells, P. (2003). The automotive industry and the environment: a technical, business and social future. Cambridge, UK: Woodhead Publ. Ottman, J. A. (2011). The new rules of green marketing: strategies, tools, and inspiration for sustainable branding. Sheffield, UK: Greenleaf Pub. Porsche (2014). Porsche AG History. Porsche. Retrieved from ww.porsche.com/international/aboutporsche/principleporsche/tradition/. Wimmer, E., & Muni, A. (2012). Motoring the future: VW and Toyota vying for pole position. Hampshire, UK: Palgrave Macmillan. Read More