Porsche Case Analysis Summary: Automobiles, Mainly Luxury Vehicles

Porsche Case Study
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Porsche was founded in 1931 by Ferdinand Porsche. The company deals in automobiles, mainly luxury vehicles. The company has continued providing high end cars to its customers, and has been one of the most profitable in the automobile industry. The company suffered a massive hit in its business in the 80s, as its sales plummeted dramatically, rising fears of bankruptcy and possible takeover. However, in a strategic twist, the company managed to turn around its situation and retake the market share it once proudly owned. This case study is going to look at how the company has continued being a market leader, and how it managed to stay at the top even after its merger with Volkswagen. In essence, an analysis of the company’s business strategy and how it has managed to remain competitive is going to be addressed.
Porsche’s business model is one that is rather anomalous in the automobile industry. Whereas the other companies are focusing their business on volume for profitability and reduction in production costs, Porsche on the other hand has mainly focused on style and healthy profits. The company has the highest profits per unit, among all the companies in the industry. In the year 2007 for example, Porsche was outright the planet’s most profitable vehicle manufacturer per unit. The company focuses much of its efforts on producing few but very profitable units. This has been its main strategy, and one that has ensured it remains afloat the extremely competitive global auto industry.
Due to the fact that the company has the highest profits per unit, it is evident that it places emphasis on the quality of vehicles it produces. The company therefore, places much focus on its research and development (R&D) wing, to ensure that it produces machines that have very few problems. According to Reavis and Henderson (2009), the company invests as much as 12% of its total revenue on research and development. This is double the industry average. Subsequently, Porsche also apportions a significantly higher number of employees in the R&D, for the main purpose of ensuring quality is produced (Hitt et.al, 2007).For example, it employs thrice as many employees in R&D compared to Volkswagen. The merger between the two companies was bound to cause some logistical headache.
The company focuses on lean production strategy. Ever since its crisis in the 80s, the company opted to go for the lean production, where cost-cutting for profit maximization was the key. This was combined with synchronized engineering, where there was some form of regulation on what the engineers were making. This not only made the company to come up with a more ...