Published on March 11, 2014
PORSCHE Presented by: Abdilahi Abdi Karim G1224243 Issa Muktar Adan G1235591 Musliza Musa G1236556 Siti Maisawah Sewandi G1237154
Outlines 3 • Porsche’s background • Case summary • Issues highlight • SWOT analysis • TOWS analysis • 5 forces model • Recommendation/ future outlook • References
4 Porsche’s Background
Porsche’s Background History of Porsche “I couldn’t find the sports car of my dreams, so I built it myself” (Ferdinand Porsche) Ferdinand Porsche founded the company in 1931, with main offices in the centre of Stuttgart, Germany. Initially, the company offered motor vehicle development work and consulting, but did not build any cars under its own name. 5
Porsche’s Background 6 One of the first assignments – from the German government to design a car for the people, the "Volkswagen". This resulted in the Volkswagen Beetle, one of the most successful car designs of all time. The Porsche 64 was developed in 1939 used many components from the Beetle. On 15 December 1945, Ferdinand was arrested for war crimes, but not tried.
Porsche’s Background 7 During his 20-month imprisonment, Ferdinand Porsche's son, Ferry Porsche, decided to build his own car, because he could not find an existing one that he wanted to buy. He also had to steer the company through some of its most difficult days until his father's release in August 1947. The first models of what was to become the 356 were built in a small sawmill in Gmünd, Austria. Tagline: “Porsche. There is no substitute”
Porsche’s Background 8 Our Mission Statement: We are committed to provide impeccable service to our demanding clientele of premium cars. Pay our customers with the greatest possible attention and care in all aspects of the business. To create a connection in the workplace, with shared passion for our vision and goals. To have motivated, hard working and empowered employees. Maintain commitment to our corporate social responsibility.
Porsche’s Background 9 Our Vision: ‘Look towards the future with the knowledge of our past.’ Passion - our commitment touches our hearts and minds to develop our company further with time. Leadership - the courage to shape a better future and be flexible and proactive. Innovation - we search, we imagine, we create , we delight but at the same time honour and protect the traditions and policies of our franchises. Our vision for the future is to represent both volume and premium brands and be the number one company in terms of after sales and customer service.
Porsche’s Background 10 Our Values: Responsibility: Our responsibility is care for our customers and value our employees and be sensitive towards social and environmental issues. Trust: Work hard daily to build mutual trust with our colleagues and partners. Teamwork: Respecting and valuing our employees and creating a positive work environment.
11 Case Summary
Case Summary 12 Porsche – independent and successful car maker for over 100 years Fell victim to the 2008 financial crisis – failed to secure the capital needed to acquire a controlling stake in VW Auto Group. In 2010 reverse takeover – Porsche forced to hand over keys to VW By 2011 produced 5 models with a combined total of 40 different trim levels Increased diversification brought higher shareholder returns.
Case Summary 13 Global economy struggle and recession, unemployment in US and Europe have made consumers extremely sensitive. Climate for most automakers in 2007 was challenging, same for Porsche Porsche competes in a market segment where relatively few can compete Requires sizable capital investments Porsche has a accumulated a wealth of technology expertise and employs some of the brightest engineering minds in the world Porsche has consistently developed class-leading technologies that competitors find difficult to imitate
Case Summary 14 Porsche has been diversifying its international scope. Porsche has been providing the best long-term reliability of any brand in the US Porsche has forged strategic partnerships with other automakers to keep its business on the cutting edge Customers buy Porsche because of its innovative features, exceptional styling, and European origin Porsche has been able to produce equal performance and prestige, yet at more affordable prices range compared to BMW M6, Mercedes-Benz SL-class, etc
Case Summary 15 VW’s plan is to integrate the Porsche brand into the group by the end of 2011 via a multi-stage transaction: Porsche is expected to contribute to the group synergy and help other brands Porsche would no longer solely focus on it is traditional target customer Porsche would instead be forced to appeal multiple consumer segment Porsche faces risk of diluting its brand, alienating its customer base.
16 Issues Highlight The Cayenne
Issues Highlight 17 Porsche is under financial crisis because in 2008 it failed to secure the capital needed to acquire Volkswagen, instead in 2010, there was a reverse takeover and Porsche was acquired by VW. Porsche will face a problem of moving its executives and experienced management by VW into key roles with other automotive brands as part of integration plan into VW Family.
Issues Highlight 18 Potential Brand dilution will happen since its switching from focus approach to broader market to extend the Porsche product line. How the market would react to multiple sports cars offerings from Audi, Lamborghini, Porsche…etc. Porsche’s greatest challenge would be the impeding CAFÉ regulations (regulations that could spell an end to Porsche’s sales in its number one market, US).
19 PESTLE Analysis
PESTLE Analysis 20 POLITIC/LEGAL: Creating more fuel efficient sport cars. New regulation, such as CAFE in the US and government control in communist/socialist countries. Under the direction of President Obama, the National Highway Traffic Safety Administration and the EPA increased the mpg requirements for all cars in the US through an old emissions policy known as Corporate Average Fuel Economy (CAFÉ). ECONOMIC: Global recession in US and Europe and increase in fuel prices. Oil prices were at record highs, topping $100 a barrel. Consumers were extremely price sensitive and unemployment in the US hovered around 10%
PESTLE Analysis 21 SOCIAL/ENVIRONMENT: More environmentally conscious population TECHNOLOGY: The seven-gear Porsche Doppelkupplung (PDK) system The Porsche Torque Vectoring (PTV) system Equity interest in MHP-IT Technology group Leader in R&D, constant pressure from other sports’ car manufacturers
SWOT Analysis 22
SWOT Analysis 23 STRENGTHS 1. Best quality for comparatively low prices – long-term reliability for high-performance cars, sedans, SUVs, trucks, etc 2. Stuttgart plant – the best car factory in the world 3. Consistently innovative with class-leading technologies 4. Strategic alliances with other automakers 5. Diversification – SUV (Cayenne), 4-door sedan (Panamera) 6. Strong brand image 7. Customer loyalty – those who value innovation and independence 8. Lean production practices 9. All models (except Boxster/Cayman) are produced in Germany 10. Skilled workforce WEAKNESSES 1. Concentrates more on exportation vs international expansion, acquisition and licensing 2. Small compared to competitors 3. Weak financially – victim of 2008 financial crisis 4. Brand dilution 5. Conflict between the executives and management of Porsche and VW
SWOT Analysis 24 OPPORTUNITIES 1. Strong economic support in homeland Germany 2. Supportive manufacturing infrastructure in Germany 3. Expansion to China 4. Efficient international expansion – greater economies of scale, increases market penetration 5. Global strategy – same models for the whole world leads to bigger international market 6. Wealth of resources upon joining the VW group THREATS 1. Alienation of customer base 2. Losing competitive advantage 3. CAFÉ regulations to be enforced in 2020 will cause Porsche to lose its US market share
25 TOWS Analysis
TOWS Analysis 26 STRENGTHS S2. Stuttgart plant – the best car factory in the world S3. Consistently innovative with class leading technologies S6. Strong brand image S8. Lean production practices S10. Skilled workforce OPPORTUNITIES O1. Strong economic support in homeland Germany O2. Supportive manufacturing infrastructure in Germany O6. Wealth of resources upon joining the VW group SO STRATEGY 1: Maintain and improve product quality of current models and develop new models through continued innovation and technological advancement
TOWS Analysis 27 STRENGTHS: S1. Best quality for comparatively low prices – long-term reliability for high-performance cars, sedans, SUVs, trucks, etc S4. Strategic alliances with other automakers S5. Diversification – SUV (Cayenne), 4-door sedan (Panamera) S7. Customer loyalty – those who value innovation and independence S9. All models (except Boxster/Cayman) are produced in Germany OPPORTUNITIES O3. Expansion to China O4. Efficient international expansion – greater economies of scale, increases market penetration O5. Global strategy – same models for the whole world leads to bigger international market O6. Wealth of resources upon joining the VW group SO STRATEGY 2 Increase efforts into emerging markets especially China and expand product line to match untapped customer bases’ preference
TOWS Analysis 28 STRENGTHS S3. Consistently innovative with class- leading technologies S4. Strategic alliances with other automakers S10. Skilled workforce THREATS T2. Alienation of customer base ST STRATEGY 1 Continuous improvement of quality through technological advancement to maintain and improve the brand’s prestige
TOWS Analysis 29 STRENGTHS S2. Stuttgart plant – the best car factory in the world S3. Consistently innovative with class- leading technologies S4.Strategic alliances with other automakers S6. Strong brand image S7. Customer loyalty – those who value innovation and independence S8. Lean production practices S10. Skilled workforce THREATS T3. Losing competitive advantage T4. CAFÉ regulations to be enforced in 2020 will cause Porsche to lose its US market share ST STRATEGY 2 Innovate and focus on fuel efficiency through hybrid and electric vehicles
TOWS Analysis 30 WEAKNESSES W1. Concentrates more on exportation vs international expansion, acquisition and licensing W2. Small compared to competitors W3. Weak financially – victim of 2008 financial crisis OPPORTUNITIES O1. Strong economic support in homeland Germany O2. Supportive manufacturing infrastructure in Germany O3. Expansion to China O4. Efficient international expansion – greater economies of scale, increases market penetration O5. Global strategy – same models for the whole world leads to bigger international market O6. Wealth of resources upon joining the VW group WO STRATEGY 1 Develop sister companies that focus on affordable sports car for middle class customers
TOWS Analysis 31 WEAKNESSES W5. Conflict between the executives and management of Porsche and VW OPPORTUNITIES O6. Wealth of resources upon joining the VW group WO STRATEGY 2 Create a comprehensive group agreement with Volkswagen
TOWS Analysis 32 WEAKNESSES W1. Concentrates more on exportation vs international expansion, acquisition and licensing W2. Small compared to competitors W3. Weak financially – victim of 2008 financial crisis W4. Dilution of brand THREATS T1. Alienation of customer base T2. Losing competitive advantage T3. CAFÉ regulations to be enforced in 2020 will cause Porsche to lose its US market share WT STRATEGY Maintain focus on niche market segment and producing current models
33 5 Forces Model
5 Forces Model 34 1) THREAT OF NEW ENTRANTS (LOW) The threat of new entrants is very low in the automobile industry. The industry is very mature and it has successfully reached economies of scale. Barriers to Entry (High) Capital Requirement Brand equity Knowledge (Technology) Product differentiation. Large economies of scale
5 Forces Model 35 2) SUPPLIER BARGAINING POWER (LOW) The automotive industry is composed of powerful buyers who are generally able to dictate terms to their suppliers. Although supplier products are vital to production, their transactional power over Porsche is usually low. Competition between suppliers is high as a contract with Porsche represents a significant opportunity. Porsche make their own engine parts and partnership by large suppliers (such as VW), which provide core components, could reduce Porsche potential to exercise bargaining power.
5 Forces Model 36 3) BARGAINING POWER OF BUYERS (MODERATELY HIGH) The buyers also are a significant portion of the industries revenue. If they can not keep their buyers happy then they risk losing them to their competitors. The reasons why the power is not completely high is that the buyers are not large and few in number. Finally customers are willing to pay premium for the brand.
5 Forces Model 37 4) THE THREAT OF SUBSTITUTES (MEDIUM) Direct substitute for Porsche in luxury sport car industry For examples: 1) BMW X6 M is slightly faster than the Cayenne Turbo 2) Mercedes-Benz ML63 is less expensive than the Cayenne but slower 3) Audi Q7 is the slowest of the Pack but has more interior space and torque However each model has its own distinct advantage and disadvantages when compared.
5 Forces Model 38 4) THE THREAT OF SUBSTITUTES (MEDIUM) In these areas, the other substitutes available (e.g., walking, mass transit, bicycles.) can be less costly than automobiles and thus alternative modes of transportation are often preferred. However, substitute do not offer the same quality as Porsche. Porsche has been able to produce equal performance and prestige yet at more affordable prices
5 Forces Model 39 5) INTENSITY OF RIVALRY AMONG COMPETITORS (HIGH) The level of rivalry in the industry is extremely high, luxury Sports car industry produces a naturally competitive environment. The industry brings together global giants (Ferrari, Lamborghini, Mercedes Benz SL-Class, and Porsche ).
40 Strategy 2018
VW’s Strategy 2018 41 To become : “The most successful and fascinating automaker by 2018” Porsche will help VW achieve its goals by sharing its technology with other VW brands, increasing production and diversifying the Porsche product line VW has seen the success of Porsche’s recent diversification and is looking for an even broader offering.
VW’s Strategy 2018 Volkswagen intends to deploy intelligent innovations and technologies to become a world leader in customer satisfaction and quality. The goal is to increase unit sales to more than 10 million vehicles a year; in particular, VW intends to capture an above- average share of growth in the major growth markets. Volkswagen’s aim is a sustainable return on sales before tax of at least 8% so as to ensure that the Group’s solid financial position and ability to act are guaranteed even in difficult market periods. Volkswagen aims to become the top employer across all brands, in all companies and regions; this is necessary in order to build a first-class team. 42
VW’s Strategy 2018 43
Porsche’s Strategy 2018 44 We’ve always been ambitious. And we’ll make sure it stays that way.
Porsche’s Strategy 2018 45 The focus of our company has always been on people – whether it’s our customers or employees. At the same time, the core element of our corporate objectives is value- creating growth. This provides us with the means to invest in innovative technologies, new products and, above all, in our workforce. Our aim is to be market leader. We want to grow profitably the Porsche way – with enthusiastic customers and as an excellent, social and family-friendly employer. We will also improve our processes and develop new ones, while ensuring a good rate of return. We have everything we need to achieve these goals: emerging markets, fascinating vehicles and highly motivated staff. Talking of our workforce, this is another area where we are looking to significantly grow by 2018. This also includes expanding the infrastructure accordingly.
1. Maintain and improve product quality of current models and develop new models through continued innovation and technological advancement Utilization of wealth of resources Technology transfer between brands under VW Group Audi’s tagline ‘Vorsprung durch Technik‘‘ which means Advancement through Technology ~ applicable to Porsche now Example: First ever fully automatic GT3, critisms from purists but selling fast! 2. Increase efforts into emerging markets especially China and expand product line to match untapped customer bases’ preference Research on prospective customer’s preference & tastes through surveys, in- depth interview. Especially to China and Asia Pacific (increase of percentage of sales and units sold) 47 Recommendations
3. Continuous improvement of quality through technological advancement to maintain and improve the brand’s prestige Matured loyal customers will further appreciate that the brand name remains prestigious 4. Innovate Focus on fuel efficiency through hybrid and electric vehicles R & D: Create a team specifically to study and develop hybrid & electric vehicles Average mpg rating of 39 for cars as the target before 2020 5. Develop sister companies that focus on affordable sports car for middle class customers Volkswagen, Audi: for middle to high income group Seat, Skoda: for low to middle income group 48 Recommendations
6. Create a comprehensive group agreement with Volkswagen Under this agreement; Volkswagen's solid financial base and Porsche's independence will be preserved High growth, earnings and synergy potential accompanied by job security. 7. Maintain focus on niche market segment and producing current models Minimizing all of Porsche’s weaknesses and avoiding any possible threats 49 Recommendations
R. Duane Ireland et..al (2013). The Management of Strategy Concepts and Cases.10th Edition http://www.mbaskool.com/brandguide/automobiles/1822- porsche-automobile-holding-se.html https://itunes.apple.com/us/app/911-porsche-world- magazine/id537660792?mt=8 http://www.strategicmanagementinsight.com/tools/porters- five-forces.html http://www.porsche.com/usa/aboutporsche/overview/strateg y2018/ http://www.volkswagenag.com/content/vwcorp/content/en/in vestor_relations/Warum_Volkswagen/Strategy.html References
51 Thank You
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