Analysis of Porsche AG
Analysis of Porsche AG
The first car with Porsche as its brand name was rolled out in Austria in 1948. Since then, Porsche AG has become renowned worldwide for its beautiful and innovative automobile designs (“Porsche AG History,” (n. d.)). For example, Porsche 911, which was first launched in 1964, has been among the most recognizable and famous automobiles in the world. The firm has used car racing circuits to improve its products, which have been noted for their outstanding handling and high performance. In 1997, Porsche “introduced the Boxster, a newly designed, lower priced sports car” and, later, announced its plan to develop and produce “a suburban utility vehicle in conjunction with Volkswagen” (“Porsche AG History,” (n. d.)). Since then, Porsche has dedicated itself to its core business of designing and manufacturing various car models, which have gained worldwide popularity due to their remarkable quality.
The early years of Porsche AG began when Ferdinand Porsche and other family members established Porsche Engineering Office in 1931 as a firm for selling different engineering products and services to carmakers. About three years later, Adolf Hitler charged the firm with the task of making “a ‘people’s car’ or ‘volkswagen’” (Henderson & Reavis, 2009, p.2). Consequently, “the VW Type 60,” which preceded “the VW Beetle,” was launched around 1935 (Henderson & Reavis, 2009, p.2). Subsequently, Porsche opened a plant to manufacture the Volkswagen (VW) model. In 1948, Porsche began producing and selling the first sports cars followed by the production of Porsche 356 car series. In 2007, the firm’s innovative production lines earned it the title of “the world’s most profitable automaker on a per unit basis, a feat that was especially impressive considering it produced just over 100,000 automobiles annually” (Henderson & Reavis, 2009, p.2). Nevertheless, Porsche faces intense competition in the car-manufacturing industry. Its principal competitors include: “Bayerische Motoren Werke AG; DaimlerChrysler AG; Fiat S.p.A.; Ford Motor Company; General Motors Corp.; Honda Motor Co. Ltd.;” and Mitsubishi Group” (“Porsche AG History,” (n. d.)).
In recent years, Porsche has begun to mount a significant recovery with regard to financial performance and the sale of cars. The company’s press release reported that the operating profit of Porsche “in the first quarter of its 2010/2011 financial year (FY) between August and October increased more than sevenfold to 395 million euro (US$528 million)” (“Porsche’s Financial Performance,” 2010). Porsche, therefore, has demonstrated a keen interest in presenting itself as a successful company, despite a previously volatile duration after a dauntless and hostile takeover attempt to control the VW Group. The firm’s first-quarter FY results indicate that Porsche “is getting back to its core business and benefiting strongly from the renewal of its best-selling model” (“Porsche’s Financial Performance,” 2010). In addition, the recent return of customer confidence, as well as lending to consumers with adequate collateral, suggests that Porsche’s financial performance will continue to improve.
SWOT Analysis
Strengths
Reliability
Typically, high-performance sports vehicles have low reliability and require constant maintenance. As a result, many sports cars require expensive maintenance and frequent attention in order to perform consistently. In 2010, “J. D. Power and Associates” rated Porsche as the best brand in America in terms of long-term dependability (Elliot, 2010). The designation was truly exceptional because the organization did not make the comparison merely within the segment of high-performance sports vehicles, but extended it to every automobile line. Furthermore, market researchers of the J.D. Power and Associates hailed Porsche’s production factory at Stuttgart as one of the most reliable car manufacturing plants worldwide (Elliot, 2010).
Company Brand
The major factor influencing Porsche’s car-making decisions appears to be the importance that the company attaches to the strategy of engineering and craftsmanship excellence (Henderson & Reavis, 2009). Ultimately, the maintenance of a quality brand image has become more convenient to Porsche than the saving of labor costs, particularly when the costs associated with assembly include a tiny proportion of the total vehicle cost. Consequently, Porsche has emphasized the primacy of marketing, technological innovations, research development and design in the maintenance of its reputation as a center for excellence in the production of quality cars.
Quality at Relatively Low Price
Porsche 911 is currently in competition with brands such as Bentley Continental GT, Lamborghini Murcielago, Aston Martin V12 Vantage, and Ferrari Enzo. Such super cars are well-known for their outstanding performance (Ingram, 2015). Nevertheless, the vehicles are exceedingly expensive with their price tags ranging between $250,000 and $400,000. In contrast, Porsche has managed to produce sports cars with equal prestige and performance, but at comparatively less expensive prices in the range of between $130,000 and $146,000 (“All Porsche Models,” 2016).
Continuous Innovation
Primarily, Porsche uses racing programs to generate innovative technologies. As a result, the company has become a highly successful manufacturer in the field of motorcar racing (“Motorsport,” 2016). With decades of experience in racing, Porsche has gained a wealth of expertise in sports car technology. As a result, the firm has continued to consistently develop class-leading technologies, which most competitors have found difficult to emulate.
Weaknesses
Loss of Administrators
Recently, Porsche implemented various restructuring initiatives including the appointment of Matthias Mueller, a former Audi administrator, as Porsche’s CEO (Telegraph, 2015). In addition, VW management began to move Porsche’s executives into major roles with several other brands in the automotive industry. Unfortunately, the extensive modification of the executive chain has led the company to lose vital expertise and strategy in the car-making business.
Freedom Loss
After VW bought Porsche, the management of Porsche lost the freedom to make decisions and operate freely. During the previous years, the firm was tasked with the role of identifying its preferred market segment, but Porsche’s entry into the umbrella of VW transferred such freedoms to the VW’s management.
Opportunities
Porsche’s management believes that China will form a significant market segment within the next few years. Such optimism indicates that a large proportion of the firm’s customers will emerge from China. In addition, the prevailing political and socioeconomic environment is expected to yield positive impacts on Porsche’s decision to expand its business activities into China. Also, the low threat of emerging entrants in the Chinese automobile industry and the minimal threat of alternative products will secure the company’s expansion in China. Ultimately, the expansion will allow Porsche to generate high profits. Another opportunity that Porsche can exploit successfully is the booming market of luxury cars in India, which has continued to grow rapidly in the recent years.
Threats
Porsche continues to face the threat of high internal competition. In addition, the intense competition experienced in the international automobile market is a significant threat to the success of the company’s business operations. For example, Porsche’s overall production is under threat from the increasing number of car-manufacturers such as Volvo, Toyota, Honda, and Mercedes.
Company Decisions and Recommendations for Improvement
In 2005, Porsche acquired over 18% stake in Volkswagen. Between 2008 and 2009, the company continued to increase its stake in Volkswagen until it acquired a voting share of over 50%, which allowed Porsche to own the majority voting rights in the Volkswagen Group (Volkswagen, 2011). The acquisition turned out to be a highly profitable investment (Henderson & Reavis, 2009). In addition, the strategy gave Porsche the right to influence Volkswagen’s business operations in order to raise its profit. Thus, Porsche made a quality decision when it began investing in VW. Despite Porsche’s dominance, however, the long-term stability of VW’s ownership remains crucial. Therefore, Porsche should continue supplying aid to VW because the two firms are still in the category of small series producers in the global market of sports cars and luxury vehicles.
Conclusion
Since 1948, Porsche has been renowned worldwide for its splendid and innovative automobile designs. Additionally, company reports released in the recent years suggest that Porsche is mounting a considerable recovery with regard to financial performance and car sales. Hence, Porsche has evidenced its keen interest in presenting itself as a successful car-making business. Furthermore, Porsche’s integration with VW has allowed the company to increase its earnings significantly. However, the emergence of other car manufacturers continues to pose a significant threat to Porsche’s business ventures. Nevertheless, the reliability and quality of Porsche’s products, which are sold at relatively low prices, will ensure that Porsche continues to excel in the car-making industry for a long period.
References
All Porsche Models. (2016). Retrieved from http://www.porsche.com/usa/models/
Elliot, H. (2010). Highest Quality Cars of 2010. Retrieved from http://www.forbes.com/2010/06/24/highest-quality-cars-2010-lifestyle-vehicles-jd-power.html
Henderson, R. & Reavis, C. (2009). What Driving Porsche? Retrieved from https://mitsloan.mit.edu/LearningEdge/CaseDocs/08-075-What's%20Driving%20Porsche.Henderson.pdf
Ingram, A. (2015). Five of the best used V12 cars you can buy right now. Retrieved from http://www.evo.co.uk/buying-advice/15370/five-of-the-best-used-v12-cars-you-can-buy-right-now
Motorsport. (2016). Retrieved from http://www.porsche.com/international/motorsportandevents/motorsport/
Porsche AG History (n. d.). Retrieved from http://www.fundinguniverse.com/company-histories/porsche-ag-history/
Porsche’s Financial Performance Continues to Improve with Q1 FY 2010/2011 EBIT of 395 Mil. Euro. (2010). Retrieved from https://www.ihs.com/country-industry-forecasting.html?ID=106599583
Telegraph (2015). Matthias Müller, Volkswagen’s new boss: Profile. Retrieved from http://www.telegraph.co.uk/finance/newsbysector/industry/11890186/Matthias-Muller-the-Porsche-boss-tipped-to-be-VWs-new-CEO.html
Volkswagen (2011). 50 years of the Volkswagen share. Retrieved from http://www.volkswagenag.com/content/vwcorp/info_center/en/themes/2011/04/Volkswagen_Share_celebrates_its_50th_birthday.bin.html/marginalparsys/textandimage/downloadFile/en_06+04+11_Volkswagen+Aktie+50+Jahre.pdf
