Introduction
If any organisation were to succeed in achieving its objectives and targets, it is at the mercy of the strategies that it develops for itself. A lack of strategy will tell on the manner the organisation works. Hence, the team employed to this effect should be efficient and have the required knowledge for the same. Plans should match what the company envisions for itself in the light of its finances and operations. Such plans work in the long run. The more changes occur in them, the more difficult it is for them to move ahead. Realistic yardsticks can be created if one expects difficulties so that strategies can be modified. This essay begins with the history of Porsche and the 4Ps of marketing for it. The current position and financial position are discussed next. A SWOT analysis is made which is followed by key areas for the strategic plan. An ideal organisation structure is provided followed by the metrics for the strategic plan.
History
Porsche AG had its beginnings in 1931 by it founder Ferdinand Porsche. It is known for sporting cars and has grown over the years gaining acceptance in the market. Porsche used his good office with Hitler to create the Volkswagen Beetle. When the 10,000th car rolled out in 1956, the new 911 gave everyone a running for their money. The landmark event was in 1971 when Porsche went public. It could then have a level playing field and reach ahead of its rivals.
Porsche had to cut costs in 1992 when the sales were disappointing, not withstanding its performance till then. By 1996, its low priced version had excess demand that surpassed production levels. To maintain its clientele, it had to broad base its production. This however was not at the expense of quality although there was pressure for more of its low priced versions.
Porsche concentrated on racing cars, the best example for which could be the renowned 911. It succeeded primarily because of the manner in which it employed technology to create the bet cars of the time. Porsche withstood the difficulties of the world war to create the Volkswagen. It had satisfied customers and maintained its high quality at the same time. It created it first emblem in 1953.
Marketing Mix for Porsche
Marketing mix stands for the four pillars of marketing viz. product, place i.e. distribution price, and promotion which together explain the marketing strategy of any company.
Product
Kotler (2000) explain that a product is a commodity that has the ability to satiate an individual’s requirements or wants. Porsche has a reputation as a manufacturer that produces excellent models of cars. 911 and Panamera are just a few among many models introduced by Porsche. It was ranked as the best among various cars in terms of quality. When performance and exclusivity are taken into consideration, customers prefer Porsche over other brands.
Place
Porsche is based in Germany and sells its products all over the world. It has segregated the distribution for Porsche Design and Design Driver’s Selection. In case of Porsche Design, there are exclusive including franchise shops that cater to retail sales. One can also shop for Porsche cars upmarket department stores. Specialist stores also sell Porsche cars.
Price
Porsche has a higher price range for its products when compared to other companies. This is because it is positioned for the elite classes who not only prefer accept such a price but also would like to have cars which are exclusive in the market.
Promotion
Porsche uses different media to promote its cars. It uses TV commercials during the sports season to attract the sports segment. However, this has given it a sports image and hence, people view it as not suitable for general purposes. Porsche is trying to change this notion. It also uses surveys and direct mail campaigns. Video advertising is used to target the luxury segment of customers.
Current Situation of Porsche in the Market
Porsche suffers from stiff competition from other car manufacturers. New models were introduced in the luxury segment (Business Wire, 2006). This is in spite of the superior performance of its cars. It has been inspired by the policies of other brands and has made advance in its own strategies. It now has a wider range of cars than before and could also withstand the recession at the end of the last decade. However, to have a larger sales volume, the production and therefore, the size of its operations needs to be greater. This is the stumbling block in surpassing its competitors. The profit per car is only the sign of its efficiency, which does not translate into higher overall profit. Nevertheless, Porsche retains its name as the foremost as far as the sports car segment is concerned. In the current situation, China has emerged as the greatest buyer of Porsche cars, even surpassing the US. This show promise for Porsche as it gives it a new leash of life.
Financial Performance and Condition of Porsche
Porsche has a healthy profit and sale margin. Its profit after tax increased by 106 million euros in 2014 (Porsche AG, 2014). It stays above the car industry average in both profit and sales. This was a feat that it performed in spite of low production figures that it has adhered to. It could keep competitors like Mercedes behind in this respect. The acquisition of Volkswagen has been a defining moment as it could obtain the desired production and image change that it badly required. It now has a much wider spread of costs than when it had a limited production figure. Volkswagen and Porsche retain their identities under the umbrella company Porsche SE (Henderson and Reavis, 2009) The IT costs have now been shared over the total number of cars produced annually.
Porsche introduced the SUV due to which there is the forecast that demand will remain at a high level. Hence, Porsche tries to increase its profit margin. For this it has targeted its sales. At the same time, Porsche has concentrated on its technical front also. It has tried to streamline its engineering line up so that there is a co-ordinated effort to work with the production line as a whole. In earlier days, each technical head concentrated on his department and had no knowledge of what the other departments were doing. On the other hand, the competitors had an integrated concept to production. The concept of team changed the isolated approach followed earlier. Porsche introduced sedans etc. to expand its line of offering from the previous sport car only concept.
SWOT Analysis
SWOT Analysis is a method employed by the management to discover the reasons behind the present situation of the company and what can be forecast for the future. The strengths and weaknesses of a firm are the internal factors which are inherent to the company. On the other hand, opportunities and threats are external to a company i.e. the company has no control over it. It can however, manage them and react according to the situation to them (Dyson, 2002, p. 632).
Strengths
The company has reaped the benefit of new developments in technology. The production process has been simplified. The process speed has also been increased. This has led to lower cot of production and commensurate increase in revenue. The cost on labour has also come down owing to advanced technology being used. Moreover, the quality of car has also improved considerably. Porsche has a good reputation in the context of quality. Its brand is also firmly embedded in the minds of people who see it as apt for the sports segment. The durability of its products is another advantage as the cars are known to be robust and long lasting. Though Toyota is one of many competitors, people have a particular image of Porsche which the company has carefully cultivated over the years.
Weaknesses
The pollution of the environment is a serious drawback of Porsche. All over the world, there are strict guidelines regarding pollution which government impose on car manufacturers who are seen as creating polluting cars. This has led to restrictions on certain products. Automobile companies have been held responsible due to the high levels of emission by their cars. That more and more people drive cars has only made matters worse. Not only is Porsche able to produce eco-friendly cars, it does not give customers other option to reduce the damage. Those who want to use cleaner fuels in their cars do not have such an option as Porsche does not have such designs being rolled out. When the fuel used in the Porsche is of a high quality which invariably comes at a higher cost, customers will not be attracted to such products and there will be no incentive to buy them. The size of Porsche is relatively small in comparison to its rivals. Hence, the company should expand its size and also review its price if it has to reduce costs and increase revenues.
Opportunities
Hence, Porsche’s weakness can be made into its opportunity. With more green initiatives and awareness, customers are becoming more conscious of the environment and their health. Hence, going green can increase the reputation of Porsche. The SUV market has a good scope of growth for quite some time. Hence, it can expand its production and upgrade its current models to keep up with the times. Hence, Porsche should focus on cleaner fuels for its cars and bring out new models which it can sell to a wide range of customers.
Threats
Nature’s fury is one area which any company has to reckon with. In case of disasters like hurricanes etc. the company has to suffer great losses. This is especially true in case of America, which reels under tornadoes very often. It is not easy to manage such disasters which are very unpredictable and beyond the control of man. Added to this recession has now become a cyclical feature in the world economy. This is one of the side effects of globalisation.
Finance companies have placed various limitations to the amount of credit that Porsche can avail of. Plans to expand the operations of Porsche will be stalled if sufficient funds cannot be obtained. If interest is sourced at a greater rate of interest, Porsche will have no other option but to shift this burden to the buyers. This is enough for its competitors to pounce on the opportunity and cause the downfall of the company.
SWOT and the Strategic Plan
The very idea of SWOT analysis is to understand the inner and outer aspect of a firm. Hence, we can select important aspects that are thrown up by the analysis for inclusion in the strategic plan. Out of many such areas three areas viz. expansion, green initiative and managing rivals which stand out for inclusion in the strategic plan.
Expansion
Porsche should not be limited to the mall number of car that it produces for a limited number of models. This has not allowed it to increase its sales. The high quality oil used by Porsche has been a great setback in its revenue generating initiatives. It should allow for different types of fuel to be used. Customers look at not only the design and initial price of the car but also on the recurring expenses on the car. Hence, they would like to utilise inexpensive fuel after paying an initially high price for the car.
Moreover, one should not put all eggs in one basket. If the sports segment were to disappear one fine day or suffer a setback, Porsche would be the auto maker most affected. Hence, Porsche should look beyond the sports car segment and cater to many more segments to create a buffer in times of need. Hence, diversification is of great importance for Porsche.
Green Initiative
Green lobbying is becoming stronger by the day. While they have not been able to capture the political landscape, there are green elements in every party. The awareness of individuals toward environmental issue means that people also play a role in areas which they can influence the most. One such area is the market where people can patronise or shun any product.
The continued advocacy of green adherents has had the effect of governments going tough on regulations and policy making with regards to ecological issues. Porsche has no other option to comply wit national regulations if it wants to be in the market as a long term player. Global warming is a key factor in the strict attitude of nations. The lesser the emission, the more favourable governments are to a car maker and better the image of the company in the public. Hence, the production planning and design should incorporate environmental concerns into it.
Managing Rivals
In the connected and global economy, there is bound to be fierce competition. If a company need a lion share of the market, it should be efficient in terms of production and sales. If the opposite were true, it would be out of the market or be sidelined by the rest of the companies in the rat race.
Not only the price but marketing strategies can also edge out a company. Hence, Porsche should manage its rivals by beating them to their own game. Since customers are quality conscious, it is necessary to maintain a reasonably high degree of quality. Hence, Porsche’s strategy should reflect that of all its competitors to a certain extent if Porsche should hold its own in the market. There is a need to observe the actions of competitors in order to incorporate the superior aspects of their policies.
The Recommended Organizational Structure
The organisational structure of Porsche needs fundamental changes in its approach to certain issues which are outlined below. This would bring an overall change in the management of Porsche.
1. High quality Oil: As long as Porsche is fixated on oil of high grade, it will not be able to break the barrier of low sales. There should be the flexibility to use high quality oil and other grades of oil so that more price conscious customers will buy the car of Porsche.
2. More Variety: Though Porsche has moved into non-sports segment (Gong, 2013), much more need to be done. Today’s customer is very discerning and looks for different design and new feature in the cars. Mileage and pickup are no longer the only criteria that customers look for. Hence, more models with newer additional features should be introduced in various price ranges.
3. Carbon Footprint: In the final reckoning there is no other alternative to going green. Reducing the carbon emissions of its cars is vital to the existence of the company. Porsche should in fact steal a march over its competitors by being able to declare its green measure in it offerings before the competitors can do so.
Metrics of the Plan
1. Greater Revenue: If the company has greater sales, it can mean a combination of one or more items. The productivity of the company has increased due to an expansion in operations.
2. More profits: The cost per car has come down, thus increasing the overall profit. This is because the costs are shared when more cars are manufactured.
3. Reduced Labour Costs: The labour to output ratio will no longer be unfavourable to labour costs as the fixed costs on labour for e.g. on design etc. remain constant irrespective of the number of cars manufactured.
4. Greater sales: have many implications. Either the competition is behind or Porsche is ahead of its rivals. Similarly, the use of premium oil could have been done away with if this is the case. There could also be greater awareness of customer needs which translates into creation of newer models according to the tastes of customers.
There could also be better compliance with ecological regulations which increases the reputation of Porsche and hence, brings in the environment friendly customers to Porsche.
4. Better Management: hints at better human resources at Porsche. If there are competent people manning the various departments, and the lower level employees are committed to make Porsche a top class company, it reflects in the performance of Porsche.
Conclusions
Porsche has come a long way from its beginnings during the Second World War. Porsche started out as a traditional company of the earlier days when competition was not stiff and it made sense to concentrate on sports cars. Due to the quality associated with Porsche, a higher price did not make a huge difference. However, situations change and are always fluid. There is the need to have a team that is aware of the other departments. The days of serial production are over and Porsche recognises this fact.
References
Business Wire. (2006). Porsche(R) cars introduce Porsche travel club to U.S. (2006, Nov 08). Business Wire. Retrieved from http://search.proquest.com/docview/445137541?accountid=45049
Dyson, R.G. (2002). Strategic development and SWOT analysis at the University of Warwick. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.101.5093&rep=rep1&type=pdf
Henderson, R & Reavis C. (2009). What’s driving Porsche?
Kotler P. (2000). Marketing Management, Millenium Edition. retrieved from
http://dl.ueb.edu.vn/bitstream/1247/2250/1/Marketing_Management_-_Millenium_Edition.pdf
Porsche. (2014). Annual Report 2013 Retrieved from http://www.porsche.com/middle-east/_ghana_/aboutporsche/overview/dataandfacts/
