RUNNING HEAD: PORSCHE
Porsche AG Group
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PORSCHE
Introduction
Organizational success depends entirely on the strategic plans developed since they are the guiding principles towards attainment of target goals and objectives. Poorly developed strategies will reflect on the performance of the organization hence a competent and knowledgeable strategic team is essential. This is because the plans should be in line with the mission and vision of the organization with a consideration of the financial and operational situation of the organization. Since strategic plans cover a longer duration of time, they may be difficult to steer forward an organization if individuals keep changing them. However, if a problem is anticipated, the plans can be changed to avoid future obstacles by developing viable and effective benchmarks. This paper will focus on Porsche’s plans, strengths, weaknesses, opportunities and threats while evaluating its history and the products, price, place and promotion. It will also examine Porsche’s financial situation and propose a suitable organizational structure.
History
Porsche AG is a multinational company operating in the automobile sector. Since the establishment in 1931 by Dr. Ferdinand Porsche, the company has grown steadily while gaining more reception in the market given its specialization in sporting vehicles. The association of Dr.
Ferdinand with Hitler led to his contract approval for the company to design the Volkswagen
Beetle In 1956 Porsche developed its 10,000 th
vehicle leading to the introduction of a new model, 911 that became a major competitor in the market. A major milestone to the company was in 1973 when it went public. This was a reward for the company because it was sure to compete favorably in the market and be in a position to emerge outstandingly.
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Despite the steady growth, the company recorded low sales in 1992, but to counter the challenge, it had to cut on costs. Four years later, Porsche could not cope with the high demand of their low-priced Boxster that exceeded the production. In order to satisfy their customers, the company had to hasten and widen their production such that their clients would remain loyal
(Gong, 2013). Nevertheless, the company did not compromise on quality despite its need to hasten and increase productions of their low priced products.
Porsche developed its niche by focusing on racing cars for instance the 911 model that became one of the world’s most famous cars. It is clear that for many years Porsche has been successful as compared to other companies in the automobile industry. The founder’s idea for sporting cars was to widen the ability of using Volkswagen engine through incorporation of different valves and cylinder heads while including a fuel injection (Verbeke, 2013). Their maximum utilization of engineering and technology led to its recognition and success. Porsche stood the challenging times of the Second World War hence their contract to work on
Volkswagen as authorized by Hitler. Dr. Ferdinand also landed a job a Hitler’s advisor.
Ferdinand’s association with Hitler and Nazi regime did not go so well since he was arrested in
France (Gong, 2013). Despite all that, Porsche continued to expand and upheld quality and customer satisfaction. This was evident from their development of lightweight vehicles by utilizing several prototypes. At some point, some of its customers and distributors asked for symbols to embellish their machines an aspect that Dr. Ferdinand took it seriously and designed an emblem for Wurttemberg and Stuttgart. Notably, the first emblem was first installed on the steering wheel of Porsche 356 in 1953; this has not changed since then.
4Ps (Product, price, place, promotion)
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Porsche utilizes the marketing mix of product, pricing, promotion and place while designing their services and products. The company focuses on high-end sports cars that are exclusive. High performance and quality are the determinants of their products. These aspects place the company on a high status bar while offers a competitive edge against its competitors.
Pricing is another aspect where Porsche maintains that high price is equal to high quality. Most of its products range between $48,000 and $136,000 a clear indication of a professional class
(Porsche AG, 2014). Product pricing depends on the strategic position of a company, its entry into the market, target individuals and competition.
Promotion is another vital facet Porsche has invested. The company maintains that engineered is magic every day. The caption is catchy thus making it easily recognizable and obtain status. Promotion of products and services shifted to customer-oriented advertisement in order to reach out to several people across the global. The commonly used medias include the television, print, direct and direct mail. Internet marketing and sponsorships have been part of the promotional tools Porsche uses to expand its client base and penetration into new geographical regions (Gong, 2013). Place is a vital aspect that all business companies consider while locating their enterprises. Porsche is widely found in North America hence embracing American norms and expectations.
Current Situation
Currently, Porsche is thriving well in the market as it has designed more products that have received good reception hence its intense competition with the likes of BMW and Toyota
Range Rover. New models that are termed luxuriously include the Panorama series: S, 4S and
Turbo (Business Wire, 2006). The company also enjoys increased sales of units and its growing
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PORSCHE demand in the market. China is considered the largest consumer of Porsche products. Even with the slowing economy in China from 2010, Porsche still recorded a close to thirty percent increase in sales year after year. However, the company was not ready to produce cars in China considering the slowing economy hence opted to do it in Germany only. Fundamentally,
Porsche's products have been utilized globally, and the younger individuals go for them because of the status associated with it. An increased success in terms of utilization is in Canada,
Germany, United Kingdom, Spain, Italy and France.
Financial Performance
According to 2013 annual report, Porsche AG group's total assets were valued at 24,560 million euro that is 8 % higher than what was reported in 2012. Non-current assets went up to
18,392 million euro from 311 million euro. Fixed assets also increased from 7,083 million euro to 8,539 million euro. Current assets rose from 21 percent the previous year to 25 percent in
2013. Revenue amounting to 14,326 million euro was recorded in 2013 financial year as compared to 13865 million euro in 2012 financial year. Its profit after tax was 1,939 million euro in 2013 from 1,833 in 2012 (Porsche AG, 2014). Given the tremendous increase in sales and reduction in operating costs is an indication of successive profit. Porsche is financially stable considering its current profits meaning it is ready to withstand any economic crisis. On the contrary, during the 2008-2009 financial crisis, the company recorded a 25 percent loss. This means that it should not relent and should minimize its expenditure.
SWOT analysis
Strengths: Porsche designs best quality high performance cars in the market. This assures reliability and value for money. Consistency and innovativeness are a strength that
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Porsche has capitalized on hence becoming an excellent automobile company as well as the leading technologically focused company. Merging and forming alliances with leading car manufacturers are strengths. Diversification is a virtue Porsche has adopted and maximized as witnessed from its varied products like the SUV and the 4-door sedan (Business Wire, 2006). It also prides itself with a strong brand and lean production practices. The company that maintains a skilled workforce was hence assuring good customer service hence attaining the loyalty.
Weaknesses: a notable weakness is their weak financial system as observed from their drop in sales during the 2008-2009 economic crises. Frequent conflicts between the management and the executives of Volkswagen and Porsche are another challenge. Porsche concentrates more on exporting its products as opposed to international expansion, licensing and acquisition. It lacks presence in the middle, which is expanding at a fast rate. Again, the company is too small as compared to its competitors.
Opportunities: A distinct opportunity is it being a strong economic support in Germany.
Expansion into China is noble considering the rate at which China is advancing economically.
Porsche has a chance to expand internationally by increasing its market penetration. It can also venture into a global strategy by designing similar products globally to enhance and strengthen its recognition.
Threats: government policies in certain countries do not favor them. The financial crisis is prone to affect its purchasing power. There is high competition from other big automobile companies.
Competitors: Mercedes Benz, Ferrari, Jaguar, Audi and BMW
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From the SWOT analysis, some areas are crucial in the strategic plan of Porsche AG
Group. One of this is the consistency and innovation. Often, companies that remain innovative throughout while upholding consistency in their operation always succeed. Despite the small size of Porsche, it can remain a threat to huge companies because of its innovativeness. Another notable area is the financial strength. An organization that cannot withstand the financial crisis is on the verge of collapsing at any time especially when the situation is massive. Another aspect is forming alliances and merging. Companies that venture in the acquisition of other organization operating in the same industry increase its stock and stability in the market. International expansion is also essential area that acts as a firm foundation for a longer stay in the market for most business companies.
Recommended Organizational Structure
Being a multinational company, Porsche should establish branches in various nations and states globally. Within each branch, clearly defined management structures with each tackling unique tasks to avoid redundancy. Major regions could have manufacturing sites for instance
China whose economy is growing at a faster rate. The organization also needs to develop vehicles that are fuel –efficient so that it can reach a multitude of clients. Marketing and promotion of its products are essential, and it will be ideal if it targets the younger consumers.
This means that using young people to market its products.
Plan to measure success
It is prudent to establish whether the strategic plans are successful. They can be measured by assessing the sales per region against other external factors. Conducting frequent surveys to establish the viability of the plans is mandatory. Another plan is to carry out market research
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References
Business Wire. (2006). Porsche(R) cars introduce Porsche travel club to U.S. (2006, Nov 08).
Business Wire Retrieved from http://search.proquest.com/docview/445137541?accountid=45049
Gong, Y. (2013). Global operations strategy: Fundamentals and practice . Berlin: Springer
Porsche. (2014).Annual Report 2013, Retrieved from < http://www.porsche.com/middleeast/_ghana_/aboutporsche/overview/dataandfacts/ >
Verbeke, A. (2013). International business strategy: Rethinking the foundations of global corporate success. Cambridge University Press
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