Porsche Analysis

Ferdinand Porsche founded Porsche Engineering Office, a firm selling engineering services and designs to other automakers in 1931. In 1934, Adolf Hitler commissioned Porsche to make a people’s car, ‘the Volkswagen’, and the VW Type 60 was on the road by the mid-1930s. In 1938, the first manufacturing plant dedicated to the production of VW opened in Germany. However, it was not until 1948 that Porsche released a Porsche branded sports car. Also, Henderson says that in 1956 the company produced its 10,000 cars and went for an IPO in 1973. By 2007, Porsche as the world’s most profitable automaker on a per unit basis with 100,000 cars manufactured annually (Henderson, 2009). In the 1970s, the company had grown into a multinational manufacturer with revenues hitting DM 900 million coupled with expanded employee numbers. The company was still largely family owned by Dr. Ferry Porsche and his sister Louise Piech being the company head. In a bid to streamline operations and work as a single organization with a centralized administration, the company went public in 1973. The company expanded the research and development to include engine development, metrology, and vibrations, metal processing, plastics, welding, and bonding techniques. According to the Funding Universe website, Porsche’s competitors include Bayerische Motoren Werke AG; DaimlerChrysler AG; Fiat S.p.A.; Ford Motor Company; General Motors Corp.; Honda Motor Co. Ltd.; Mazda Motor Corp.; Mitsubishi Group; Nissan Motor Co. Ltd.; PSA Peugeot Citroen S.A.; Renault S.A.; Saab Automobile AB; Volkswagen AG.

The company witnessed dwindling sales in the early 1990s owing it to the financial crisis and harsh economic times. For instance, between 1986 and 1993 the sales had fallen from 50,000 units to 14,000 units (Henderson, 2009). Also, from a peak 30,471 sports cars sold in the United States in 1986, Porsches sales stood at $4,400 in 1991. The company hired Wendelin Wiedeking as the new chief executive to turnaround the company back to profitability, reduce production costs, and increase efficiency. The new Chief Executive eliminated overtime for company employees, brought in Japanese consultants who helped streamline the production process. For instance, there was an implementation of the “just in time” part procurement. In 2007, Porsche recorded average revenue per car of $62,568 with income topping $9.4 billion on revenue of $10 billion. The company used 11.8% of their revenues on research and development. As of 2016, the company has assets worth over $32 billion and profit was at $14 billion. “Porsche CEO Wendelin Wiedeking has ordered efficiency measures in all departments. The internal goal is to achieve the 5 percent cost reduction in less than a year” (Ostle, 2003). Part of the turnaround implemented by Wiedeking involved the diversification of the company’s products to include other car models rather than focusing on the sports car segment. For instance, in 2003 the company introduced the Cayenne an SUV competing with BMW, Audi, Mercedes, and Lexus. It launched the Panamera, a luxury sedan, to compete with Aston Martin and Audi. The diversification strategy led to increased revenues and profits for the company.

The company has strengths in the desirability and popularity of the cars. It has a high brand presence and a global reputation for the production of quality cars. For instance, the introduction of the Cayenne saw vehicle production rise from 50,000 units to 70,000 units owing to the customers’ belief in the brand (Henderson, 2009). Also, Porsche appeals to the ultra-rich customers with their vehicles averaging between $50,000 and $150,000. Furthermore, the company has a vast workforce comprising of engineers and technicians that work to provide quality cars for the customers. In the United States, Porsche operates an engineering unit outsourced to other clients, and this adds to the expertise of the production team. Henderson says that the company had nearly 600 graduate interns working with the staff engineers and retained about 10% of them. However, Porsche has a weakness in failing to produce cars that focus on the middle-income segment. The Funding Universe website cites the high prices of $40,000 to $100,000 as the cause of the financial stagnation witnessed in the early 1990s. In addition, Porsche cars have high maintenance and running costs thus prompting users to go for cheaper mass-produced vehicles from Toyota, Mazda, and Audi.

Besides, the company has opportunities to capitalize on the exclusivity of the products to increase sales. The brand has global recognition and the ‘Made in Germany’ tag edges it ahead of the competition thus Porsche can maximize this gap to increase profit margin. Furthermore, Porsche enjoys a wide employee base that spreads across the globe. On top of that, there are emerging markets in Asia, Middle East, and Africa that the company can sell their luxury vehicles. Porsche attempts to create concept cars for the future with the investment in electric cars. The mergers and acquisitions present the company to new markets thus presenting an opportunity to grow revenues. However, Porsche faces a threat from other companies such as Toyota and BMW that produce cheaper SUV and sports cars. Also, there is a prediction for a global economic recession, and this would reduce the purchasing power of the luxurious good consumers. Furthermore, the protests from environmentalists concerning the carbon emissions and the development of electric cars threaten Porsche’s prospects.

Porsche has continually acquired a share in VW with the recent 100% take up. Henderson says that in 2005, Porsche acquire 20% in VW and in 2007, it upped the stake to 31%. Porsche made annual sales of 100,000 cars while VW sold over 6 million cars (Henderson, 2009). For Porsche, the sales focus on the sports and luxury car segment while VW sells vehicles for all categories. In addition, VW enjoys a workforce of 340,000 workers and the prices of the car’s range between $18,000 and $250,000. The decision was beneficial to Porsche because it reduces the production overheads. The units Porsche produced annually gobbled a huge sum of the R&D capital as well as the importation of spare part. The VW merger ensures the spreading of the costs by making equipment cheaper as the vehicles use similar parts such as electronics. Porsche should diversify the market by using the VW’s established market structures. The merger will help protect Porsche intellectual designs for future growth.

There are things that any global company selling automobiles should focus on for it to become the best company (Mohammad Arabzad an, 2012). Porsche’s financial prowess and other strengths like brand name are key to making it succeed in the industry. However, for them to make it there has to be a strategic plan that the company must adopt and implement. The organization a wide range of advantages over its competitors in the market. There are more than three areas that are already mentioned in the SWOT analysis that are important in the implementation of the strategic plan (Balasubramanian, 2009). The areas if well handled, will see the company commanding a larger share of the market share. One of the areas that are mentioned is brand presence and strong global recognition. It’s only natural that a company with good reputation in the market will have more of the market share. A brand name can be a selling point as consumers prefer more recognized brands in the market.

Brand presence is one thing that always helps to create awareness among consumers of a certain product in the market. Porsche’s name is known all over as one of the best automobile companies in the world. Its major strategy is to ensure that they possess strong products which are preferred by most of the consumers worldwide. A brand in the market that is known for providing poor quality things will have to fail terribly as people tend to go for a product that is performing. Global companies have to ensure that their brand name is taken care of as they are doing business. This will help most companies maintain the quality of products that they are providing hence a good brand name. Maintaining the brand name is important as they will have loyal customers to buy their products. Porsche as a company should ensure that maintaining their brand name and making it even grow should be a priority in the strategic plan poised to work in a span of three years. The strategy to ensure diversification of their products to suit the consumer’s needs should take into account maintaining a brand name that gives it customers from time to time.

Besides brand presence and global recognition, maintaining a vast workforce that can deliver good results is also something the company should be able to note when it comes to implementing their strategic plan. This is a point of concern as there is a need for a company with a good reputation globally to ensure they have qualified staff that is able to handle issues professionally and in a business-minded way. Failure to ensure this in their strategic plan will see the company implementing a substandard plan something that can make losses for them. Porsche has a strong financial prowess that can be able to pay their workers handsome wages.

Another reason why maintaining a vast workforce with experience is to ensure that there is a quality product that meets the standards of the consumer’s expectation. Production of low-quality products will lead to a bad reputation for the company risking their position in business. There is a need for any company with aspirations of becoming the best in the world to ensure that the quality standards in the production sector are well met. Having the best employees in the job market can sometimes play an important part in the growth of the company. Globally, Porsche’s overall performance indicates that their staff is well qualified and this should help in the implementation of the strategic plan.

Creativity and innovation are required in the company so that the quality can be improved over time as the company grows. This makes it a necessity to ensure first-class employees in the market who will help the company with coming up with something new. Technological advancements are the order of the day and there is a need for new technology to be adopted in all the processes that the company takes part in. technological advancements require inventions and innovations which will make more quality products. Employees should be top and most importantly take part in the company’s strategic plan so as to improve their brand name and global recognition.

The third essential area of the SWOT analysis that is important in implementing Porsche’s strategic plan is the production of affordable cars. Most people in the world are middle-class earners who prefer cheap cars that they can be able to maintain. Most of the products that Porsche company has been able to unleash to the market are either expensive for many to buy or are equally expensive to maintain. This calls for the need for the company to adopt a way of coming up with products for the common people who earn way less than first class earners in the world. The competition amongst the existing automobile companies poses a great threat as they offer lower prices which are affordable by many. In the strategic plan, it’s important that crucial points reflected on the SWOT analysis be taken into account. High maintenance costs are also becoming an issue for many. The company will have to look for a way of handling this or at least lower the costs. Some people in the world fear much costs when it comes to cars which makes them opt to go for other brands. To increase customer base is an important thing and to do so, the company has to lower their costs to manageable levels.

Recommendations for Porsche as a company

One recommendation for the company is much reflected above, to ensure that they produce products affordable to many/ maintenance costs should be much lower so as to enable them to acquire a larger share of the market as compared to their competitors. As far as automobile industry is involved, there are quite a good number firms which are producing quality products for consumers. In such a case, companies with lower maintenance cost cars will have to take a large part of the market share. For Porsche, a brand name with lower maintenance costs will be an added advantage which will make them sell even more. There is a need for the company to see into this so that they can take care of the large population that earns low.

The second recommendation for the company to work on is to ensure they innovate cars which do not pollute the environment to a larger extent. There have been complaints and environmental concerns relating to emission of gases caused by Porsche company’s products. Many environmentalists will advocate for more efficient cars which do not end up polluting the environment (Bennett,2016). This calls for more innovation and invention in the same industry. This should be a challenge for Porsche as a company right now. Most people in the world are becoming concerned as this emissions lead to various problems in the environment and at the same time affect individuals health-wise.

A strategic plan can be well measured with the help of an assessment methods for all employees. This will enable the company is able to ensure and administer efficiently. Keeping a track record of each of them is important for the company as they will ensure proper service. Appraisals for employees who have performed better in the office should also be considered as a way of ensuring company success is measured. Without proper employee assessment methods, the company can really fail to implement its strategic plan properly. When employees are checked from time to time, they become more active and this will mean delivery. Bad service delivery should be discouraged and dealt with in a way that will ensure improvement. This means that those who do extra good than what they are expected to should get rewarded in a special way. Employees also should be encouraged from time to time so that they get psyched up for proper service delivery.

Reviews from customers who receive company services are important too as the company can be able to improve on areas where they have done badly as well as maintain high in areas that they are exemplary. Let there be the setting of goals for the company that every single employee of the company should fight to improve so as to ensure high-level service delivery to all consumers. A platform which enables customers to give feedback immediately should be implemented as this will help the company improve on the weaknesses. This can be done by ensuring that an online platform that directly takes customer reviews about a product released by the company. Any criticism should be welcome as it will help the company determine points where they require more effort so as to better service delivery. Increase in the market share as time goes by should be a good indicator of how much the success the company is gaining at every particular moment. Porsche should take advantage of their brand name and expand to greater heights in the automobile industry.

In conclusion, Porsche is a global company that has been operating in the market for some time now. They produce first-hand cars in the market and are doing competitively well in the industry. However their prices and maintenance costs being higher than most of competitor one’s in the market, there is a challenge that will have to be addressed. There is a need for the company to measure success for its strategic plan for all that time it is being implemented. This will help in ensuring efficiency for their resources and value for their time in the industry. As a stable company in the industry, Porsche can be able to attract highly qualified staff who will enable them to achieve their goals. To achieve this, Porsche will have to offer high wages so as to attract top professionals. In its strategic plan, more focus should be given to the customer and how to satisfy their needs. Many customers have different needs as to what kind of product that they want in the market. This makes them the central point of the business hence the need to satisfy them in a way that makes them loyalty.

References

AG, P. (2017). History of Porsche AG – FundingUniverse. Fundinguniverse.com. Retrieved December 3, 2017 from http://www.fundinguniverse.com/company-histories/porsche-ag-history/.

Balasubramanian, S. (2009). BPO: A Swot Analysis. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.1457838

Bennett, N. (2016). Using perceptions as evidence to improve conservation and environmental management. Conservation Biology, 30(3), 582-592. http://dx.doi.org/10.1111/cobi.12681

Henderson, R. and Reavis, C. (2009). What’s Driving Porsche?. Mitsloan.mit.edu. Retrieved December 4, 2017 from https://mitsloan.mit.edu/LearningEdge/CaseDocs/08-075-What%27s%20Driving%20Porsche.Henderson.pdf.

Mohammad Arabzad an, S. (2012). Improving Project Management Process in Municipality Based on SWOT Analysis. International Journal Of Engineering And Technology, 4(5), 607-612. http://dx.doi.org/10.7763/ijet.2012.v4.443

Ostle, D. (2003). Porsche’s strategy shifts to cost cutting. Automotive News Europe, 8(16), 7.