Good Porsche Term Paper Example
What’s driving a Porsche
Most Porsche cars are luxury vehicles that some people drive just for the attention one gets from it. The experience is amazing since a Porsche is known for producing the best-built vehicles in the world. To get the driving experience especially for those who cannot afford this vehicle, one can visit the Porsche world roadshow (DeMuro, 2014).
History of Porsche AG- Funding Universe
In 1948 in Gmund, Austria, the first Porsche car was manufactured. Dr. Ferdinand Porsche was the founder of this company. By 1930, he had established an engineering and design firm which got a reputation for innovative car designs. Ferdinand was once requested by Adolf Hitler to find a solution to the technical difficulties that were experienced in the production of Volkswagen. In the Porsche firm, the Volkswagen was created and in 1935, a special sports version of the car was designed. Porsche idea for a car was to expand the capacity of the Volkswagen engine by using different cylinder heads and valves. The car also had an enlarged wheelbase and a unique aerodynamic body design. In 1939, three prototypes of the car were built. Ferdinand was imprisoned for his alleged involvement with Hitler and the Nazi regime
In 1946, Ferdinand’s son, Ferry Porsche took over, and he carried out research to determine the number of people in the market who would buy an expensive, handmade, high-performance sports car. A number of Swiss financiers agreed to fund the production. By March 1948, a prototype of Porsche sports car was on the road. At the end of 1948, Porsche signed an agreement with Volkswagen that allowed them to use the company’s service organization throughout Germany and Austria. Porsche also moved its production facilities from Gmund to Stuttgart that provided them with more space and they were able to produce more cars. By March 1951, Porsche had manufactured its 500th car, and six month later they had delivered their 1000th car. In 1960, Porsche expanded its manufacturing plant and increased the number of employees. They also added a sales department, spare parts center, service shop and car delivery department. They produced 39,774 cars by the end of the year, and each earned certificates for the engine, general vehicle examination, transmission, and measurements. They also reported revenues of 108 million dollars.
Japan became one of the most important foreign markets for Porsche in the 1970s. The sale of Porsche cars increased from 122 in 1973 to 500 in 1976 and by 1978, they were selling more than 900 cars in Japan. In the 1980s, the company had a change in management but they still had an increase in production and revenues. The revenues reached 1.5 billion by 1981. The company exported 70 percent of the cars manufactured, and the United States accounted for 40 percent of the sales. The success continued throughout the decade. United States had become one of the most important market for Porsche by the end of the decade.
In the 1990s, the market collapsed. It had a decreased from 30,471 cars sold to the United States in 1986 to 4400 in 1991. They blamed the decrease on the slowdown of the United States economy and its negative impact on car imports. Competition also increased from other car manufacturers such as Jaguar and Mazda. In 1992, the company hired Wendelin Wiedeking, who was an engineering and manufacturing expert as the chief executive. The new executive eliminated overtime employees and reduced workers’ working hours. After three years, the company had broken even and made profits in 1996. In 1998, the company celebrated its golden anniversary, and it formed a joint venture with Volkswagen to build Suburban Utility Vehicles (SUVs). Porsche is one of the few independent automobiles manufacturers and hopes to remain competitive (Funding Universe, 2015).
Product is a service or item that people purchase to satisfy a need or a want. It includes all features and the combination of goods and related services offered by a company to its customers. For Porsche, it is not only the different car models but also the body parts such as engines, seats and nut bolts. After sale services are also part of the product since they are related services. The product is one of the most important aspects of the market. A product expresses a company’s productive capabilities, and it is the link of the company to the customer. Product policy and strategy, therefore, are an important part of an enterprise, and product decisions show the company’s direction and scope. The profits, sales, image, reputation, market share and stature of the Porsche Company depend on its manufactured products. Porsche is known for its luxury cars and its production now includes not only sports cars but also SUVs (Papers4You, 2007).
Price is the amount a customer pays for the product. The price of a product whether high or low affects how well the product sells. Setting the price of a product is not a simple task. Most people think that low prices attract more customers than higher ones. That is not a valid argument because customers respond to more than the product’s price. There are two main parts of a pricing strategy which are Price Determination and Price Administration. Price Determination is the processes and activities used to arrive at a price for the product. It is important to consider the relative prices of related products and how different the product is with similar products in terms of quality. Price Administration is the activities used to get basic prices in different sale situations such as geographic location, distribution members, and other special sales. Porsche cars are priced according to their quality and the amount of work put in their production. The industry uses the best tools to manufacture these cars, and it employs people with the best talents and skills to get such quality outcomes. They are expensive cars that are related to other luxury cars such as Jaguar and Ferrari (Papers4You, 2007).
Place is the location where a customer can purchase the product. Place can be a physical store or a virtual store on the internet. Most automobile industries such as Ford and Ferrari use dealers to make their products available to their customers. When selecting a placement strategy, companies consider different channels including direct access to customers or using middlemen, length of distribution channel. They also consider single or multiple distribution channels, types of intermediaries, numbers of distributors and which distributor to use in terms of quality. Porsche industry like most automobile industries, it makes it products available through dealers who have showrooms displaying the different models. The company is very keen on their selection, and they do research before trying out new markets.
Companies communicate with their customers through promotion such as advertising, sales promotion, and public relations. The means of communication are meant to reach out to targeted customers to persuade them to buy the products. Like most companies, Porsche uses advertisement as its main means of promotion (Papers4You, 2007).
Current Situation of the Organization in the Market
2013 was a very successful year for Porsche since they achieved their goals and surpassed them. They attributed the success to the commitment and motivation of the company’s employees. Porsche enjoys a very high employer appeal especially to experienced engineers and business graduates. In 2013, the number of applicants increased to 70,000 from 58,171 in the previous year. The percentage of female applicants rose from 26 percent to 30 percent. The company intends to continue increasing its competitiveness and attractiveness as an employer. Porsche not only creates an excellent working environment for its employees, it also helps them enjoy high quality life. For example, the number of child care centers has increased at company’s sites. The industry has also focused on flexible working hours for employees.
Porsche has also created the environment for equal treatment and advancement of women in the industry. They have a goal to increase the percentage of women employees by 2018. The increase is being achieved through training measures such as workshops and seminars. In 2001, the company joined with Femtec that is a corporation intended to promote female professionals.
In 2013, the company introduced an employee survey that 9,000 employees used to express their opinions on issues about the quality of work, provision of information and collaboration with employees and supervisors. The company put implemented measures aimed at strengthening the employer’s image. The industry highly prioritizes employee safety. The employees were prepared for potential hazards and emergencies through regular instructions followed by realistic exercises. The exercises showed that the employees were ready for such situations. Also identified were areas of improvement such as paying attention to visitors and external personnel. New trainees were introduced to the topic of occupational safety, and more than 120 trainees were provided with information on industrial accidents and occupational illnesses.
Porsche AG supports projects aimed at making Germany the lead provider for electromobility by 2020. In a coalition with the government, the industry has set goals of expanding electromobility. It includes earning marked funding and user-oriented incentives to support the market for electric vehicles. The main goal is to have around one million electric cars in Germany by 2020.
Environmental protection and conservation are the company’s primary goals and they apply in the development, production and sale of the vehicles. The industry assumes responsibility for environmental protection, and it intends to align the company’s environmental and energy management with future requirements. Porsche has established environmental and energy management systems at all its sites. The company takes into account the environment and energy related aspects entrepreneurial decisions such as construction projects. In its Zuffenhausen facility, an annual environmental statement is published as part of EMAS validation. The statement shows the production process, environmental activities and environmental impact of the production plant. The industry also encourages open dialog on environmental issues with government agencies, neighbors, and interest groups.
Financial Performance and Condition of the Organization
As of December 2013, Porsche AG had assets worth 24,650 million euro that was 8 percent higher than the previous year. Non-current assets had also increased from 311 million to 18,392 million, and it was attributed to fixed assets. The equity of the industry increased to 9,039 million compared to the previous year. Cash flows from operating activities totaled to 2,917 million which was an increase compared to 2,692 million in the previous year. There was a significant increase in profits and higher funds tied up in working capital that was mainly attributed to leased assets. Investments in intangible assets increased from 819 million to 901 million. Investments in property and equipment increased to 1,337 compared to 1,055 in the previous year. There was a change in cash flows from financing activities from minus 960 million to minus 197 million in the previous year. The low cash outflow was attributed to the balance from raising and repaying bonds that increased in the current year and to the cash paid to shareholders in the previous year. The net available liquidity of the automotive design improved from 1,870 million to 899 million.
Porsche AG group’s profit after tax increased from 1,833 million to 1,939 million. The group’s revenue was 14,326 million compared to 13,865 of the previous year. The industry also sold 155,094 vehicles that were an increase in 8 percent compared to the previous year. The Boxster and 911 model series were the main contributors to the increase in unit sales and revenue. The revenues also increased in the North America regions. The small increase in revenue compared to sales was as a result of major changes in the US dollar exchange rate with Japanese yen and the changes in product mix. The slight decrease in gross margin from 30 to 29 was as a result of the exchange rate effects, change in the product mix and increased expenses in research and development. Distribution expenses increased from 1,014 million to 1,075 million as a result of an increase in sales. Administrative expenses increased from 753 million to 792 million. Personnel expenses in the Porsche AG group increased from 1,658 million to 1,865 million (Porsche, 2013).
Porsche key strength is its outstanding brand because of its aggressive marketing strategies. The company’s products are known to be robust, powerful and elegant. Porsche has enhanced engineering capabilities that enable it to introduce dynamic products meant to cater to its diverse customers. Porsche also has a loyal customer base which is also a key strength. Unlike it competitors, Porsche is known to be agile, and it is also known to form partnerships with key industry players to improve its operational capabilities (Amor, 2013).
Porsche strategy is to sell cars that are fast and more fun to drive than any other. It as well uses the newest possible technology and backs up the cars with a storied culture making it difficult to imitate. Most car companies compromise to follow laws for their environmental impact and to sell more cars. Porsche differentiates itself from the rest, and it is better because it does not change its priorities. Performance always comes first. The company differentiates itself from the rest as being the only one that combines the newest technology and different product types.
Competitors are also the key to the company’s strategy. Automakers such as Ferrari, BMW have been rivals with Porsche for years. Rivals can be distinguished by their brand, and they give cars an image that their customers become attached. ‘There is no substitute’ is the company’s slogan that is true since competing companies cannot produce anything close to an interchangeable product. Porsche gains its strength from being the best at ‘less important’ factors but still puts performance first, and the consistent style makes the cars timeless (A.G, 2012).
Porsche has been able to capture the emerging market in countries like India and China. The company entered into a contract with Volkswagen to produce SUVs. There is a strong competition in SUV market from other industries making the market share limited. The company also highly relies on the US market. Such reliance affects them greatly if there are changes in the United States economy. For example, in 2013 there was a slight decrease in gross margin because of changes in the United States dollar and Japanese Yen exchange rates. In the 1990s, when the company had major losses, it was attributed to the slowing down of the United States economy that led to a decrease in the importation of cars. Compared to its competitors, Porsche is smaller in size and terms of revenue (Chiyangwa, 2008).
Porsche still has an opportunity to increase its market. The company can leverage the brand and expand its product line. It can also implement innovative features and make use of new technology in order to face its competition. The company has an opportunity to increasing its manufacturing units by tapping domestic markets. Porsche has started testing out new markets including African countries such as Kenya. Improving its marketing strategies give the company an opportunity to make more profits (Chiyangwa, 2008).
Porsche faces a threat of intense competition from other automobile companies that also cater to the elite class such as Ferrari. The company also has a threat from the different government regulations and policies in the different countries where it markets its products. Foreign currency fluctuations are also of great threat to the industry especially in regions where it has a high number of sales such as United States. The economy is at times unpredictable, and any impending recession would decrease the purchasing power of the elite (Chiyangwa, 2008).
Areas that offer opportunities for change
One of the industry’s strengths is in its competition. Porsche has managed to maintain its brand that continually distinguishes it from its competitors. Porsche should continue this trend and make it easy for its consumers to not only remain loyal but to continue identifying with their products. The company should also not fear trying out other product especially after conducting research on the market. It should also continue putting performance first and keeping its style consistent (A.G, 2012).
The company has a threat of not having a diversified market. It is important that in its next strategic plan, Porsche should consider diversifying its market. History has shown so far that having one region as the main customer is not smart strategy since it can lead to great losses. Porsche should also invest more in market research. The results are meant to help in planning what markets to consider, to know the customers’ feedbacks as well as know what product are most preferred and why.
Measuring the Success of the Strategic Plan
A strategic plan is a document that helps link the organization’s goals, actions needed to achieve the goals and other critical elements. There exist various ways to measure the success of a strategy plan. The chosen method should be applicable to the goal and strategy and should be capable of being tracked over time. Efficiency measures evaluate the productivity and cost effectiveness in terms of outputs per inputs. Outcomes measures are used to evaluate the result that determines if the proposed targets or standards indicate any impact and benefit of activities. Quality measures evaluate the effectiveness of expectations and show improvement in reliability, compliance, and responsiveness. Project measures evaluate the progress against an initiative that has a terminus (Olsen, 2015).
A.G. (2012). Porsche: There is no Substitute. Retrieved from https://files.nyu.edu/adg356/public/Porsche_%20There%20Is%20No%20Substitute.html
Amor, A. (2013). A Detailed Analysis of Porsche AG and its Industry Segment. Retrieved from http://www.grin.com/en/e-book/269113/a-detailed-analysis-of-porsche-ag-and-its-industry-segment
Chiyangwa, C. (2008). Strategic Analysis of Porsche. Retrieved from http://www.slideshare.net/tharota/strategic-analysis-of-porsche-cleopas-chiyangwa
DeMuro, D. (2014). I Spent a Day Driving a Porsche 911 Gt3, and It Was Awesome. Retrieved from http://jalopnik.com/i-spent-a-day-driving-a-porsche-911-gt3-and-it-was-awe-1643930570
Funding Universe. (2015). Porsche AG History. Retrieved from http://www.fundinguniverse.com/company-histories/porsche-ag-history/
Olsen, E. (2015). How to Measure Your Strategic Plan’s Success. Retrieved from http://www.dummies.com/how-to/content/how-to-measure-your-strategic-plans-success.html
Papers4You. (2007). Marketing Mix. Retrieved from http://university-essays.tripod.com/marketing_mix.html
Porsche. (2013). Annual Report Porsche AG 2013. Retrieved from http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2014/03/Porsche_AR_2013.bin.html/binarystorageitem/file/Porsche-Download-e.pdf