Strategy Analysis of Porsche

Strategy Analysis of Porsche Student’s Name Institutional Affiliation Strategy Analysis of Porsche Porsche’s current health in terms of performance, product range, innovation pipeline, and internal resources Performance Porsche is one of the top leading automobile brands that have honorably made it to the top of the automobile industry. The company has a unique and complex history. In terms of performance, 2015 was the best year in the company’s history, after having recorded a 25 percent increase in revenues and profits to $24 billion and $3.8 billion respectively. Also, unit sales increased by 19 percent, selling approximately 225,000 cars worldwide. The sales came ahead of the company’s goal of selling more than 200,000 cars worldwide by the end of 2018 (Amor, 2014). Despite the uniqueness of its automobiles, Porsche’s sales performances and financial gains have been largely attributed to its crossover SUV’s. Globally, the Porsche Macan and Cayenne account for 68 percent of all the company’s sales, with more cars being booked and other undelivered. Despite its success in the automotive industry, the company faces stiff competition. The top competitors include BMW, which generates close to $108.9 billion more revenues than Porsche, Lexus, which generates $99 billion more, and Tesla, which generates close to 107 percent of Porsche’s revenue. Porsche has a high brand recognition, which is contributed by its well-known logo that symbolizes the company’s powerful design and its prestigious cars, which are considered to be a luxury acquisition. The company’s largest market is in China, with approximately 58,000 cars sold and the second largest market is the United States with almost 52,000 car sales. Despite the company being part of the Volkswagen Group family, the brand has managed to disassociate itself and has remained unaffected by its parent company’s operations and scandals. Product Range In terms of product range, Porsche is focused mainly on producing automobiles, by specializing in high-performance sedans, sports cars, and SUV’s. Its popular model, the 911 has sold over a million cars. In recent times, the company recorded the highest profit per unit sold, with the majority of its cars sold in international markets. In 2017, out of the 246,375 cars produced by the company, 97,202 were Macans, 27,942 were Panamera, 63,913 were Cayennes, 25,114 were Boxter, and the 911 constituted 32,197 cars. Porsche’s product lineup includes; 911- In the segment of premium sporty cars 718 Boxter- In the segment of compact premium sporty cars 718 Cayman- In the premium sporty coupe segment Macan- Compact SUV segment 918 Spyder- Segment of sports car with an open top The company’s outstanding reputation and brand image make customers want to pay for the cars at a higher price. For this reason, the company has focused on both the sports car market and the luxury SUVs. In 2017, the company produced a total of 255, 683 vehicles, which was a 7 percent increase compared to the previous year. Innovation Pipeline Porsche’s innovative strategy comprises introducing a combination of sports and non-sports models. The company has expanded its product lineup with the introduction of SUVs but also launching sports cars which directly align with the company’s heritage. The company recently developed its hybrid model, the 918 Spyder Super Sports Car, which combines both racing performance and technology with minimum consumption. This combination gives the company a unique position in the market since no other manufacturer is producing sports cars that have both characteristics. The company has also invested in a wind tunnel, a design studio, and integration center, which is a means of expanding in technology. As part of their strategy 2025, Porsche has also invested in an innovative campaign that is supported by other companies, which is aimed at funding startups with innovative ideas on concepts such as connectivity, digitization, and electrification. These concepts are important in the automotive industry and prototypes will be tested in the company’s Mission-E, which is set to produce the company’s first purely battery operated vehicle. The partnership between Porsche and Volkswagen has also presented the company with a better platform to adopt technology and innovation from the group. The sharing of such technology resulted in the development of the company’s SUV (Amor, 2014). Internal Resources The company’s main resources are its partnership with Volkswagen and unique product line and network. The company’s partnership with VW was strategic for the release of its SUVs. “The joint agreement enables for combined research and development resources, which led to the introduction of their respective models. Porsche has historically relied on the generosity of the German industry, like developing the Cayenne with VW. If they’re going to take the industry on in such a lucrative sector [such as a four-door sedan] why would anyone help them out?” (Farris & Kang, 2008, p. 9). The company’s production line is also fully automated with the latest technology. Its financial capabilities allow the company to switch to the latest technology, which enables Porsche to develop cars with the latest technology. The company’s 911 also serves as its benchmark and enables the company to develop vehicles that have similar features to the models but with slight differences. These capabilities act as an advantage because the model is already well known among its target market. The network of dealers also serves as an internal resource. With over 300 dealers, Porsche has a well-established network in the automotive industry. These groups of dealers are appropriate because it enables the company to eliminate any glut that might result in price wars and eventual down marketing of the company. The dealership is also important for the company given that the luxury segment requires good customer-seller relationships due to higher levels of involvement in the purchasing process. New Strategic Threats and Opportunities Using PESTEL and Porter’s 5-Forces Analysis The company’s products are aging as Porsche continues to uphold its heritage models like the 911. However, this move might prove fatal for the company as competitors are introducing new luxury cars into the market. The growing competition and growing environmental concerns, as well as the size of the market, are the main forces that are pushing for change in Porsche. PESTEL Analysis. Political Analysis Porsche’s engineering capabilities have enabled it to create a variety of products, which cater to its group of customers. However, since the automotive company has a significant presence in most major countries across the world, it is affected by the laws and regulations in these countries. For instance, in the United States and the UK, the countries have set gas regulations that require vehicles to emit a maximum of 39mpgs per car by 2020. These regulations are pushing the company to develop more efficient cars that consume less fuel. These factors act as threats to the company’s production processes. Economic Analysis Oil prices have been unstable in major countries across the globe. The energy market has been experiencing high volatility over the past few years, with prices nearing $70 per barrel over the last months of 2018 (Molinski & Alessi, 2018). The high volatility results in demand for more fuel-efficient vehicles, which pushes the company to manufacture vehicles that consume less fuel. Consumers have also become more price sensitive, and the high rates of unemployment have limited the company’s market. However, developing markets provide greater opportunity for Porsche to expand its market reach. Developing countries in Asia and Africa present good opportunities for the company as more individuals are continuing to gain wealth and an interest in luxury automobiles. Countries such as Kenya, Nigeria, and South Africa are known to produce millionaires at a very high speed. These countries provide opportunities for Porsche. Social Analysis Consumers are more environmentally focused. With more concern for the environment, customers are looking to buy vehicles that are less ha...