Discuss, What’s Driving Porsche?
Headquartered in Austria, the history of Porsche can be traced back to June 1948, when the first sports car was rolled out by the company. The rest, as they say, is history and Porsche has never looked back except to view its successes. The challenges of the future are easily met with a strong foothold on the successes of its past, as Porsche continues to mature and grow with vigor. The past fifty years have witnessed the ease with which the German company has defined sports car driving across the world. Despite the mergers witnessed in the past decade, the company is expected to continue its independent and well charted growth in the automobile industry and consolidate its position as a market leader in the premium car segment.
To its credit, Porsche boasts of more than four hundred international models including the 356A and the 356B. The Porsche emblem has remained unchanged from its first appearance in 1953. The company has more than 1,250 workers in its factories and offices; and places high value on quality control. In fact, one in every five employees works on quality control; which adds to the overall performance of not just the car, but also their overall performance in terms of quality and customer service. Its product line including the 911, Cayenne and Panamera have captured the imagination of people across the world. The automobile market was in a boom for Porsche in the 1980s, only to face a major slump in the 1990s (Rao, 1994). Its major competitors are Mercedes Benz, BMW and Audi, all large players in the premium car segment in comparison to the much smaller Porsche.
The global recession left its mark on Porsche alongside all automobile companies. However, being small, the impact was much harder on the smaller Porsche. At its peak, the company sold more than 30,000 sports cars in the United States alone. Unfortunately, by 1992, the sales had dropped drastically to a mere 4,133 cars in the country. In the more than one hundred years of its operations, the company has managed to retain its competitive edge despite all the problems that it has faced over the years. The sense of ownership felt by the employees of the company with regards to the brand has stood it in good stead over the years (Bloemer & Lemmink, 1992).
Porsche has continued to recover both in terms of finances as well as sales, well in line with the global recovery in the premium car market (Batra, 2000). The Cayenne SUV and the Panamera have been a major driver in this recovery process and the company is poised to achieve double digit sales during the first half of the current year. The volatility that was seen in the automobile industry in general and with Porsche in particular are now a matter of history, with the company poised to make up significantly for the slowdown faced during the recession.
The biggest strength of Porsche continues to be the research and development into the engineering marvel that drives each car to leave their premises. Porsche offers the best quality for reasonable prices when compared with its peers. All its high performance cars, SUVs, sedans and trucks are known for their long term reliability. The brand is known for constantly innovating itself and introducing leading technologies. Strategic alliances with the other automobile companies, including its rivals in the industry add to the strength of the product line. A strong brand name and a loyal customer base help boost the sales of the product (Elliott, 1988), even in the most difficult of times.
A highly skilled workforce, emphasis on quality and lean production practices drives the company (Abraham, 2012) and helps ensure that the company continues to grow with vigor. The company continues to diversify into various segments and thus is able to tap newer market segments, thereby ensuring its profits. The technological wealth at Porsche’s disposal has been an important driver to developing world class technologies and innovations seen in its products. The engineering marvels and innovations that set the company apart are evidenced in its loyal customer base across the world.
The Porsche is a small company when compared to some of its peers. The concentration on exports and high quality rather than a spate of acquisitions or expansions has kept the company small in comparison with its peers who have grown significantly in size. Being small in size does have its advantages, however, it also means that the company is unable to fall back on surplus resources in times of need. Brand dilution following the takeover of Volswagan (Henderson & Reavis, 2009); followed by a conflict of interest between executives and management of the two companies has eroded the bottom line considerably and this in turn has weakened the company standing considerably.
Expansion to China and other developing markets works to its advantage. This expansion and export strategy results in an increased market penetration as well as the ability to take advantage of the economies of scale. Venture capital, new acquisitions and constantly increasing incomes of individuals provide larger markets for the brand. The global strategy of having the same model in all the markets helps showcase the brand as being truly international (Hsieh, 2002). This results in a sense of pride on their possession (Oliver & Swan, 1989) from customers, thus increasing their loyal customer base (Aaker, 1992). The merger with the Volswagen group has helped the smaller Porsche to tap the large set of resources available with the former. This move has also helped them in enlarging their product line significantly.
The merger, while not without its benefits, came with some threats as well. The first is the loss of its competitive advantage by sharing its innovative practices with Volswagen. The next threat came in the form of the alienation of its loyal customer base, which resulted from the merger with VW. The rising cost of raw materials, increasing operational costs and external business risks poses a constant threat to the growth of the company. The growing competition and the lower profits are yet another matter of grave concern (Hsieh, 2002). The constantly changing governmental regulations are also a major source of threat to the growth of the company. The expected CAFÉ regulations are an example of this threat. A major blow to Porsche it would result in the company losing its market share in the United States in its entirety.
The merger of Porsche and Volswagen came with a bundled package of advantages and disadvantages (Henderson & Reavis, 2009). Since the company requires significant capital investments to ensure its competitive edge in the present market conditions of high completion, the merger has created significant opportunities for the company (Abraham, 2012). The merger helped strength the financial position of the company and provide it with a solid support on which to plan its future expansion and growth (Klepper, 2002). Following the merger with VW, Porsche is now well equipped wit finances as well as other resources that would help the company continue to maintain its robust growth in the premium car segment.
The constantly changing technological advances coupled with the need for constant innovation (Pauwels, Silva-Risso, Jorge, Srinivasan, & Hanssens, 2004)are the lifeblood of Porsche that have helped the company gain considerable advantage over its rivals in the industry (Klepper, 2002). They need to capitalize on this advantage in order to offset the threats and capitalize on the opportunities before them. The rapid globalization is driving automobile sales in both developed and developing countries (Akram, Merunka, & Akram, 2011). The introduction of at least one more global car in line with the Cayenne, but in the mid-sized segment would be a lucrative option for the company.
References
Aaker, D. A. (1992). The Value of Brand Equity. Journal of Business Strategy, 27-32.
Abraham, S. C. (2012). Strategic Management for Organizations. Bridgepoint Education.
Akram, A., Merunka, D., & Akram, M. (2011). Perceived brand globalness in emerging markets and the moderating role of consumer ethnocentrism’. International Journal of Emerging Markets, 291-303.
Batra, R. R. (2000). ‘Effects of brand local/non-local origin on consumer attitudes in developing countries. Journal of Consumer Psycholog, 83-95.
Bloemer, J. M., & Lemmink, J. G. (1992). The importance of customer satisfaction in explaining brand and dealer loyalty. Journal of Marketing Management, 351-363.
Elliott, R. &. (1988). Brands as symbolic resources for the construction of identity. International Journal of Advertising, 131-144.
Henderson, R., & Reavis, C. (2009, August 25). What’s Driving Porsche? . Retrieved from mitsloan.mit.edu: https://mitsloan.mit.edu/LearningEdge/CaseDocs/08-075-What’s%20Driving%20Porsche.Henderson.pdf
Hsieh, M. H. (2002). Identifying Brand Image Dimensionality and Measuring the Degree of Brand Globalization: A Cross-National Study. Journal of International Marketing, 46-67.
Klepper, S. (2002). The capabilities of new firms and the evolution of the US automobile industry. Industrial and Corporate Change, 645-666.
Oliver, R. L., & Swan, J. E. (1989). Equity and Disconfirmation Perceptions as Influences on Merchant and Product Satisfaction. Journal of Consumer Research, 372-383.
Pauwels, K., Silva-Risso, Jorge, Srinivasan, S., & Hanssens, D. M. (2004). New Products, Sales Promotions, and Firm Value: The Case of the Automobile Industry. Journal of Marketing, 142-156.
Rao, H. (1994). The Social Construction of Reputation: Certification Contests, Legitimation, and the Survival of Organizations in the American Automobile Industry: 1895–1912. Journal of Strategic Management, 29-44.
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