Strategies for Porsche - Case Study Example

• Introduction

Managers of an organization must recognize, anticipate and deal with the changes of the external and internal environment of an organization in order to achieve its goals and objectives. It is difficult for the management of an organization to understand that exactly in which area the change will take place but it is certain that the company must be properly equipped to cope with the upcoming changes. Strategic planning includes the process of identification of potential future changes related to the organization and effective modification of the business activities. Internal environment of the organization which can get affected in the long run are human resources, organizational structure, physical assets, management, profit, cash flow and organizational culture. Alternatively, external environment includes climate, economy, technology, political, legal, competition, fashion and media. Changes in external environment of the firm are not under their control while internal environmental changes can be managed to some extent. The thesis statement is “To map out a strategic plan for Porsche AG in order to assist the business to grow in next three years”. Porsche AG is globally famous for its beautiful and innovative automobile designs. Porsche AG, the German automobile company is known for its specialized and high performance cars which include sedans, SUVs and sports car. Headquarter of Porsche AG is in Stuttgart. The products of Porsche are popular amongst the customers around the globe because of both functionality and exclusivity. Moreover, the company’s brand equity and brand image have helped the customers to anchor their social status.

• History of Porsche and its marketing mix
  • History

The founder of Porsche AG is Ferdinand Porsche. Company was founded in the year 1931. Initially, it was an engineering office which dealt with various car designs and provided consultancy to customers. In the year 1934, Adolf Hitler ordered the consultancy to manufacture Volkswagen. Ferdinand Porsche and his team established their first plant of automobiles in the year 1938 after completing documentation and other commencement procedures. Company’s first sports car was made after a decade and rolled out in the market. Porsche AG was witnessing steady growth in the market until United State’s economy faced abrupt disruption. The company came back to the market after they implemented fresh strategies. One of such strategies adopted by Porsche in early 2000 is that they diversified their production to roll out new non-sport cars in the market. Highest profit was recorded by the company in the year 2007 till date.

• • 4 Ps
    • Product

All the products of Porsche AG are known for its quality and design. The range of products of Porsche AG is very high including sports car, SUV and sedan cars. Sports car such as 911 and Boxster roadster are famous amongst the Porsche AG’s customers. Other popular cars include Panamera and Cayenne. The quality study has ranked Porsche AG as one of the top auto mobile companies in terms of quality (Armelini & Villanueva, 2011). Moreover, the products of the organization are high performance oriented. Buyers give preference to those models which have exclusive designs.

• • • Price

Almost all of the products of Porsche AG are highly priced because of advanced technology. Cayenne Porsche’s current price is between $49,000 and $146,000. Even 4.8 liter Cayenne is priced at $66,800. Some strata of people may think that the products of Porsche AG are unrealistically priced but it is clear that their pricing strategy is aimed to capture the elite class customers.

• • • Place

The head office of Porsche AG is in Germany. Company conducts its sales in outlets of America and other countries all over the world.

• • • Promotion

Porsche AG uses direct mail and mobile marketing as their promotional strategy. Cramer-Krasselt also helps Porsche AG to promote their products via online campaigns and television advertisements. During sports tournaments the company promotes their product more than any other times (Barney & Hesterly, 2008). In many instances the customers of Porsche AG have perceived their automobiles as only sports cars. Other times when messages are broadcasted by Porsche AG to promote their products, they remain consistent in approach.

• Current situation of the organization
  • Industry and General environment analysis

The main feature that helped Porsche AG to stand out in the market is their high performance and innovative sports car. One of the biggest competitors of Porsche AG is Toyota both in terms of technology and sales volume (Chattopadhyay, Shivani & Krishnan, 2010). The company has coped with the market competition by implementing various strategies and adopting advanced technology. Porsche AG has recovered from the financial crisis of 2008 and established them as market leaders once more. Company needs to increase their customer base so that their sales volume is increased in the long run. Other giant automobile manufacturers overpower them mainly in terms of production size (Eden & Ackermann, 2013). The company’s profit earning structure is different to that of other companies; they earn more profit per by selling per unit but their sales volume is low. Total sales volume is low because they have targeted only the elite customers.

• • Market

One of the privileges that Porsche AG enjoys is that they have higher number of loyal customers because of their refined services and innovative products. Positive history of Porsche AG makes them aggressive and powerful competitor in their field. Entire structure of global automobile industry has changed after Porsche AG entered the market (Freeman, 2010). For instance, in last two decades vehicle market of China has increased invariably than that of United States market. Even if in recent years China is facing major economic challenges, they have witnessed 28 percent growth annually in their nation. Rising population of China will help Porsche AG to increase their sales volume.

• Financial performance and condition of the organization

Porsche AG’s sales are above average than that of total global automobile industry. In the year 2007, the company’s sales volume was recorded to be highest in comparison to other competitors in the market. The company manufactured only 100,000 vehicles in the year 2007. As a result, that year the company’s financial performance was remarkable. Porsche AG is also ranked as topper in Initial Quality Study. Operating margin of Porsche AG generally remains less than their competitor Toyota. Large stake is owned by Porsche AG in Volkswagen which increases their market share. Initially Porsche AG acquired stakes of Volkswagen in the year 2005. Porsche AG is benefitted by collaboration because its development cost is reduced to a large extent (Hitt, Ireland & Hoskisson, 2012). When the development cost is distributed amongst a large number of cars, then the electronic cost is also reduced invariably. After new models of Porsche SUVs are introduced in the market, its sales volume is expected to remain high. The firm is mapping out new strategies to increase its profit margin and boost its sales. The engineering team of the company has collaborated with the production line so that they can collaboratively implement various strategies. Team concept has allowed Porsche AG to follow strategies of other automobile leaders in the market such as Toyota, BMW and Nissan. Previously they only concentrated on sports car but it’s high time that they will have increase production of sedans and SUVs to increase their sales volume (Hollensen, 2015). The firm’s image is compromised many times when they are unable to provide any rebates during global economy crisis.

• SWOT analysis
  • Strengths

Porsche AG is leading the automobile industry because of various strengths including its substantial advanced technology and beautiful car designs. Production process is boosted because advanced technology has made it easier and faster. Reduction in production costs has helped the organization to increase its profit margin. Advanced technology has also reduced the manual labor’s cost. Furthermore, the customers whoever purchases the products of Porsche AG always comes back to them because of the fine quality (Jones, Clarke-Hill, Comfort & Hillier, 2008). When Porsche AG’s main target market is elite class people. They cannot afford to compromise on their quality of products. The brand name itself is enough to attract a large number of customers around the world in the company’s door step (Lasserre, 2012). As a result, the strong brand name of the company has helped them to grab a large portion of the total global automobile market. They are also recognized as the leading sports car producer in the international market.

• • Weakness

Even if Porsche AG witnessed many victories in terms of establishment in the global automobile industry, they still have scope for significant improvement. Slowly and steadily, people around the world are becoming aware of the pollution that is spread because of vehicles. As a result, many nations’ government has taken initiative to mitigate this problem (Leonidou, Katsikeas & Morgan, 2013). Even some of the products of Porsche AG have been banned in few countries. In future also, Porsche can face similar problems p-pertaining to environment. The company’s technology is yet not developed enough that they can eliminate pollution from the environment. Another weakness of the company is that they do not provide the option to use low priced gas in their cars. Only the customers who use premium range gas in their vehicles can buy products of Porsche AG (Mellahi & Frynas, 2015). Porsche AG’s production unit is comparatively smaller than their other rivals. As a result, the company’s amount of sales and production volume are restricted to a large extent. Pricing structure of the company is also responsible to some extent for its keeping its potential buyers at bay.

• • Opportunities

Porsche AG can capture the potential market if they adapt eco-friendly production modes. Many buyers would like to buy product of a company which does not compromise environmental health at the cost of profit making objective. Adopting green marketing and other green practices would increase the sales volume of the company to large extent. SUV market of Porsche AG has great potential to grow with time if they can tap the appropriate customer base. They can upgrade the 2003 model and expand their SUV production unit in order to give tough completion to their customers (Slack, 2015). It is possible for Porsche AG to grab a larger portion of market share if they can initiate ventures in Hybrid Powered Cars; these cars consume very less energy and also are Music Glamorize cars.

• • Threats

Many times the production process of Porsche AG is hampered when natural disasters occur. Disasters like hurricanes and tornadoes compel the company’s to incur huge loss. It is almost next to impossible to prevent natural disasters and that is why they have come up with the idea of disaster management. Global economy can face recession and in those instances the organization will have to incur huge losses and reduced car sales. Credit lines are also limited for automobile companies as the restriction have been imposed by various moneylenders. From the above information, it can be understood that the company may not perform many operations due to lack of funds. Moreover, if the company readily accepts funds at a higher interest then these interests have to be incurred by end users (Thompson & Martin, 2010). Increase in product prices means decrease in customer base. There can also be imposed restriction by government policies to tap new overseas market by Porsche AG. Alternatively, the company can also face extreme completion from other giant producer of automobile industry while entering new market; competitors include Toyota, Daimler AG and BMW AG.

• Importance of chosen areas in SWOT analysis

Three major areas that are selected from SWOT analysis for mapping out strategic plan are competition, environment friendly production and diversification of products. In an economy where competition does not exist can be witnessed in monopoly businesses. All automobile companies including Porsche AG have to face major competition in the global market (Warren, 2008). If a firm cannot implement proper competitive strategies then they will have to lose higher percentage of market share. The competitors of a company can outperform in terms of marketing techniques, price wars and by producing higher quality products. As a result, it is important for every company to remain at par with their competitors. Porsche AG can remain at par by observing the strategies of their competitors. The company should also engage themselves in various activities where they can disarm the strategies of competitors. The company has to diversify their products in order to increase their customer base. Only a quantum increase in product diversification can significantly enhance sales volume of the company. For example, Porsche AG only focuses on customers who use premium oil; this strategy removes the potential customers from the company’s strategy. Moreover, company produces more number of sports cars but that may not be the priority of many customers. As a result, it can be understood from the above instance that diversification is one of the most important strategies of the company to increase their profit margin. Growing awareness amongst the worldwide customers and the government about the protection of environment can prove to be a threat for an automobile manufacturing company. Even the sea level is increasing because of havoc climate change. As a result, both the individuals and organization are encouraged to adopt eco-friendly techniques in every instances of life. Furthermore, governments of various countries have rolled out many policies and regulations to protect the environment; multinational companies have to adhere to these policies in order to maintain their goodwill in the business and retain their brand image. Conservation of environment is therefore a vital part of the company’s strategy to maintain their position in the market. The company can make strategy to roll out new products in the market which are eco-friendly so that both government of overseas countries and customers understand that the company is not neglecting the environment at the cost of nature and natural resources. Environment friendly techniques of the company should penetrate various aspects including products, production process, et cetera.

• Description of the recommended organization structure

Various regulations pertaining to emission of carbon dioxide will become stringent in Europe and other nations of the world with every passing day. As a result, adopting eco-friendly products and process will help the company to make profit in the long run. Plans to change the structure of the company will include acquisition of new and advanced technologies and giving more power to the automobile engineers of the company. The company will also have to adopt drag-reducing technologies which are lightweight and electrification (Zeithaml, Bitner & Gremler, 2010). Porsche AG will have to increase their investment in e-mobility to keep their market share intact. More diversification is required in order to tap various types of customers around the world. Last but not the least it is necessary for the company to hire proficient and skilled automobile engineers to increase their future sales volume.

• Success of the strategic plan

Success of the strategic plan can be measured in several ways which includes evaluation of the products manufactured; change in the business structure and increase in sales volume. Firstly, the management has to compare between the initial production cost and the net cost incurred by the company. Increase in productivity and reduction of costs will ensure the success of the strategies implemented. Other aspects which can be observed is that increase in number of buyers or purchasers of the company’s product. In order to understand the feasibility of the plan reliability, competence and compliance have to be measured. For instance, competence of the staffs can be evaluated to understand the success of the above strategies.

• Conclusion

The above essay has been discussed on Porsche AG’s history and implementation of strategic plans. These strategic plans have to be updated in order to help the business to flourish. Other things discussed in the essay are marketing mix of Porsche AG, SWOT analysis, current situation of Porsche AG in the market, recommended organizational structure and measurement of the strategic plan’s success.