Porsche: Strategies and Competitive Analysis

This assignment analyzes Porsche, a German luxury automobile manufacturer. It examines their business model, competitive advantage within the industry (particularly using Porter's Five Forces model), marketing mix, and suggests future strategies to maintain success. The analysis highlights Porsche's strong brand name and innovative approach to vehicle design as key factors in their competitive edge.

PORSCHE

Table of Contents
INTRODUCTION...........................................................................................................................1
Porter's five forces.......................................................................................................................2
Company's profile.......................................................................................................................4
Supply chain of Porsche..............................................................................................................5
Marketing of Porsche..................................................................................................................5
Its position in recent years...........................................................................................................6
My recommendations what it needs to do in next five year.......................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................7

INTRODUCTION
In the present society one of the ways of measuring success of a person is having a
luxurious cars (Dobbs, 2012). One such company that is a bigger brand name in the
manufacturing of luxurious cars is German auto mobile manufacturer named Porsche AG. It is a
abbreviated name for the firm originally named Dr. Ing. h.c.F. Porsche AG. Its other product
range includes high performance SUVs, sports cars and sedan. This company is owned by
Volkswagen and is having its headquarter in stuttgart, Germany. It was founded by Ferdinand
Porsche in the year 1931. It is operating worldwide having the employee strength of approx
24,481. This report highlights the competitive environment of the Porsche and the ways that it
can do so as to have competitive advantage over others.
History
At the starting phase of its establishment it was not producing cars under its own name
rather it was a company that offers services related to motor vehicle development work and
consulting (Lee, Kim and Park, 2012). It first made car was Volkswagen Beetle it gained a lot of
success. At the time of world war it manufactured Tanks named Porsche Tiger. In the later stage
of 1960's it came in the business of Racing cars. It followed 901 nomenclature with the
trademark 'x0x' names.
In the year 1972, company changed its legal form from limited partnership to public
limited firm. It led to establishment of executive board members the comprised members outside
the Porsche family but supervisory board consisted members that largely belonged from the
same family.
In the year 2009, Porsche and Volkswagen reached to an aggrement that their car
manufacturing will be merged by the year 2011 forming Integrated Automotive Group. In which
Porsche will own Volkswagen's 50% share in return management of Volkswagen take
management of Porsche and thereby Volkswagen owned Porsche AG.
Market of Porsche
Porsche operates in the market that deals in the business of Luxury and Sports cars.
Increasing monetary assets of people all around the world has increased the demand of luxury
cars. Hence, Porsche scope of expansion is high. The market that its can cover apart from the
large market that it is covering right now is greater. On the other hand the economic hiccups in
many part of the world has reduced the sale of cars especially luxurious ones. Its target market
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generally includes owners and senior managers of different firms or the people having higher
monetary assets.
Competitors of Porsche: In the Auto mobile industry there are several firms that are is making
the environment more competitive than ever (Roth and et. al., 2011). Some of the Competitors
that Porsche has is BMW, Audi, Tesla Motors, Nissan, Toyota, Lexus, Chevrolet, Honda, Jaguar
and one new but powerful entrant Google.
In order to understand the competition it is facing and its effect on business of Porsche
analysis is done using Porter's five forces.
Porter's five forces
Applying porter five force model helps to make strategic qualitative evaluation of
Porsche's competitive environment. These five forces helps to determine long term industry
profitability and its potential to gain ROI.
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Source 1: Competition in between automobile companies in Canada

Threat of Substitutes: In this industry threat of substitute is less. Many other forms of
transportation are available, but none of them offer the convenience, utility and value offered by
auto mobile. Few other points are as follows:
 The substitute is having lower quality of product and hence the base or the target
customers are not opting for other options.
 Substitutes are performing low in the market due to lower quality of products it has.
 One of the basic advantage that Porsche has is that the number of substitutes are less as
compared to other industries.
Bargaining power of suppliers: The power axis is substantially tipped in the industry's favour
when talking about relationship in the Auto mobile industry and its suppliers (Saracoglu, HCF
Porsche Aktiengesellschaft, 2012). This industry is having powerful buyer's hence the power of
supplier gets reduced. Suppliers transactional power over Porsche remains low. Due to
increasing number of suppliers and their almost similar products have raised the competition for
them. Switching Cost among suppliers are low since many parts are manufactured by the
manufacturers themselves. Similarly the smaller or subordinate suppliers is having a very little
power to bargain.
Bargaining power of buyers:
 Buyers of Porsche is having less transactional power.
 Buyers are facing higher switching cost.
 The only thing that is in favour of buyer is that there are large number of car
manufacturers hence they have more options to choose.
New entrants: In this industry there are few new entrants but very less survives. New entrants
are less threat for the company like Porsche as this industry demands Strong distribution network
which is not present with them. High sink cost makes it difficult for the new competitors to enter
into the market hence competition due to them gets reduced automatically (Scheinhütte, HCF
Porsche Aktiengesellschaft, 2011). Another factor that needs to be considered is that for setting
any such manufacturing plant high amount of capital is required. On the same note Porsche is
having higher brand name and hence the new entrants do not effect the business of such a large
company as people have thrust on the Cited firm. Few other factors that limits the new entrants
are:
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 In the manufacturing of auto mobiles very advanced technology and machines are needed
so as to reduce the cost of manufacturing.
 This industry is requiring higher economies of scale.
Existing rivalry: Since the market that comes under this industry is very large hence multiple
firms have came up in this business. There are many passive price takers in the industry hence
making competition non suitable for business (Steinmetz, hc F. Porsche 2012). This organisation
is facing serious competition from companies like General motors, BMW, Nissan as they also
produce similar products. There are some Japanese company the have highly advanced features
in the cars and are attracting more number of competitors.
Company's profile
Apart from its Brand name there are various things that needs to be studied so as to gain
knowledge about the company.
SWOT analysis of Porsche: For any firm it is important to understand its strength and
weaknesses. It helps to evaluate that what is the position of the company in the industry.
Strength:
 It is having exceptional brand visibility.
 Its driving position and cruse control is good hence providing smoother experience of
driving.
 It is using powerful engines that makes it superior in the market.
 Heavy and classy advertisement models are being used for advertising its products.
 It is having an excellent team of engineers that helps company in the designing cars that
are not only different in look wise but is having distinct features.
 The products of this company is having comfortable interiors (AutomobileSutherland,
2014).
 This company is more agile than its competitors.
 It is operating in the market for around 80 years and hence have larger set of base
customers.
Weaknesses:
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 It has not completely captured the markets that is having high potentials such as south
Asia Pacific.
 Strong competition in the SUV market leading to less market share.
 Its dependency on US market.
 Unionised labours and small size as compared to its competitors.
Opportunities:
 It can expand its product range.
 Can use innovative features that increases its product brand value and helps to face
competition.
 In order to enter into the domestic market it can increase its manufacturing unit.
 It can expand its market share by using its well spread distribution network.
Threat:
 Many regulations by various government is reducing the profit margin of the firm.
 There are many fluctuations in many markets around the world is reducing the sale of the
premium cars.
 Fluctuating foreign currency value is making its business operations slightly difficult.
Supply chain of Porsche
This company is having an excellent supply chain. Through its number of manufacturing
units Europe it is maintaining it supply chain in a best possible way (Tavitiyaman, Qu and
Zhang, 2011). It is having a specialised supply management team so as to maintain it. It has been
able to forecast its supply and demand till now and are producing products accordingly.
Pricing: Porsche believes in strategy of pricing that lets to maintain its brand image. For that it
selects premium pricing strategy and hence its product's price remains on the higher side.
Brand value: It is having higher brand value due too its design and use of advanced
technologies. It has created its name in the years satisfying lot of customers. It has an asset of
around 29.143 billion Euros.
Marketing of Porsche
Its marketing function can be understood by making use of 4p's of marketing. Which is as
follows:
 Product: It is having quality products which is underlined by the fact that 70% of the
cars that was manufactured by the Porsche ever is on the road till now (Varga, HCF
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Porsche Aktiengesellschaft, 2012). Some of its products are 911, Macan, Panamera,
Boxster, SUV like Cayenne etc.
 Price: It is producing cars that has high market price. Its pricing range attracts the strong
economic sections of the society. It also uses psychological pricing strategy where
products are marked with the pricing range 1-2 dollars less than the whole figure. Cited
company do not follow competitor based pricing strategy.
 Place: Its is using direct distribution channel and it has many stores in many parts of the
world where people can go directly and and can buy products.
 Promotion: Porsche generally targets wealthy people as they bring products according to
this premium segment of the society. They also targets customers according to age. It
uses TV channels for advertisement purposes. They do not provide any offers such as
discounts.
Human Resource: This company is have highly skilled labours especially the merger with
Volkswagen has felicitated company with excellent engineers. Their management team is highly
experienced and includes members from many sectors. Human resource management ensures
that proper training is provided to the workers at regular intervals so that any new
implementations can foster development process.
Its position in recent years
 It is generating a revenue of 21.533 billion euros with a profit of 2.33 billion euros in the
year 2015.
 It is owning 52.2% of Volkswagen share.
 It has reached a sale of total 218,983 cars (28,953 inside Germany and 190,030
internationally)
My recommendations what it needs to do in next five year.
Company is doing good business as it can be seen from its annual report of sales. My
recommendations regarding the steps that it must take so as to succeed in this sector:
 It must increase its strategic alliances with the companies that are operating in the local
markets where Porsche can provide them with technology and rest other things are of the
companies from local market. This will help Porsche in capturing larger part of the
market.
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 It can enter into the new and developing markets through alliances especially in the
countries of Asia and Africa.
 New product development with the advanced features can provide assistance to the
company as customer these days are not just looking for the cars that are luxurious but
also the cars that have more advanced features.
 Porsche needs to develop its own green technology so as to manufacture environment
friendly cars as this is the demand of the future in the next 2-5 years.
 Porsche needs to work on reducing the cost of manufacturing and maintenance by
making use of the technology that is far more superior than others.
 Company can make alliances with IT firms such as Apple or Microsoft so as to make cars
that are smarter than today as it will help it in long run.
CONCLUSION
It can be concluded from the report that Porsche is German originated auto mobile
company that deals in the business of manufacturing luxurious cars, SUV and sedan. Porsche is
doing an excellent business in the environment that is extremely competitive. In this industry
there are several big competitors of Porsche like BMW, Audi etc. Porter's five force model
shows that it has competitive advantage over others due to its bigger brand name. It uses its
marketing mix in a perfect way so as to have competitive advantage.
REFERENCES
Books and Journals
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Dobbs, M.E., 2012, January. Porter's five forces in practice: Templates for firm and case
analysis. In Competition Forum (Vol. 10, No. 1, p. 22). American Society for
Competitiveness.
Lee, H., Kim, M.S. and Park, Y., 2012. An analytic network process approach to
operationalization of five forces model. Applied Mathematical Modelling, 36(4),
pp.1783-1795.
Robinson, H., HCF Porsche Aktiengesellschaft, 2013. Motor vehicle, toy and/or replica. U.S.
Patent D673,484.
Roth, M., and et. al., 2011, October. Porsche InnoDrive–an innovative approach for the future of
driving. In 20th Aachen colloquium automobile and engine technology (pp. 1453-1467).
Saracoglu, H., HCF Porsche Aktiengesellschaft, 2012. Motor vehicle, toy, and/or replica. U.S.
Patent D663,239.
Scheinhütte, I., HCF Porsche Aktiengesellschaft, 2011. Wheel for motor vehicle. U.S. Patent
D648,255.
Steinmetz, H.J., hc F. Porsche AG, 2012. Automobile. U.S. Patent D651,944.
Sutherland, E., 2014. Lobbying and litigation in telecommunications markets–reapplying
Porter’s five forces. info, 16(5), pp.1-18.
Tavitiyaman, P., Qu, H. and Zhang, H.Q., 2011. The impact of industry force factors on resource
competitive strategies and hotel performance. International Journal of Hospitality
Management, 30(3), pp.648-657.
Varga, P., HCF Porsche Aktiengesellschaft, 2012. Automobile. U.S. Patent D661,227.
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