I. Strategic Profile and Case Analysis Purpose
Porsche is an automobile company which is highly successful in the manufacturing of high quality sports cars. In 2010, the organisation of Porsche faced a major change after a hostile takeover by Volkswagen Auto Group (VW). It also owns other companies such as Audi, Bentley, and Lamborghini making it the third world’s largest automobile manufacturer in the world. Volkswagen plans to gain the top position using a platform called Strategy 2018. To achieve this, VW plans to increase the limited production of Porsche through the development of new product lines such as sedans and SUVs aside from sports cars. It also wants to absorb the technology and innovation of Porsche and apply them to other automobile brands owned by VW. However, these plans represent a potential risk for the brand image of Porsche since these can negatively affect the perception of quality and loyalty among Porsche customers. Thus, Matthias Mueller, the new CEO of Porsche, needs to make a significant strategic decision. Muller has to decide effectively whether Porsche should diversify its production or focus on delivering its core competency which is the production of sports cars. In addition, Muller also needs to create a strategy that will prevent the potential brand dilution of Porsche.
II. Situation Analysis
General Environment
The economic environment where the automobile industry operates is highly unstable and volatile. This is a result of the financial crisis and economic recession emerging in different countries. This situation can greatly affect the purchasing decision of customers.
Industry Environment
Sports cars are a specialised segment in the automobile industry with a very specific target market which are the affluent race car enthusiasts. Even though there is a small market for this segment, each purchase constitutes very high profit margin. For this reason, a lot of automobile companies are also designing and manufacturing sports cars. This led to the increased competition for this segment in the industry. Porsche is the leading brand for sports cars in the world. On the other hand, Sedan and SUVs are also generating increased demand from the global market. This represents an opportunity that differentiated car manufacturers can take advantage. However, this segment already has numerous competitors. In general, there is increased competition in the automobile industry since buyers incur low switching cost as a result of high availability of various automobiles.
Competitor Environment
Volkswagen Auto Group is facing intense competition from Toyota and General Motors in terms of market share and revenues. These companies also have their own high end sports cars and luxury cars which directly compete with Porsche and other sports cars owned by VW. This requires VW to design effectively and market their products in a superior way compared to its competitors.
III. SWOT Analysis of Porsche
Strengths
Porsche is the world’s strongest sports car brand which denotes high loyalty and high quality perception among its customers. It also has a strong culture for technology and innovation which makes its cars highly reliable. In effect, Porsche consistently experiences very high sales from all its models of sports and race cars.
Weakness
Although Porsche has proven itself in the market for sports cars, the company has not yet gained a strong reputation for manufacturing other segments such as sedans and SUVs. This makes it difficult for Porsche to position itself effectively in the new market segments.
Opportunity
There is an increased demand for SUVs and Sedans in the global market. This is an opportunity for Porsche to increase its revenues by diversifying its product lines for a broader market segment.
Threat
T he plan of the Volkswagen to let Porsche manufacture a new product lines aside from sports cars can lead to a risk of brand dilution for Porsche. There is a possibility that the perceived quality and high differentiation that Porsche was able to position to the market will be reduced. There is also a risk that the loyal customers of Porsche will shift to other automobile companies which are solely committed in the manufacturing of high quality and unique sports cars.
IV. Strategy Formulation
Strategic Alternatives
1. Diversification
The new CEO of Porsche can choose to take advantage of higher revenue opportunity by developing new product lines other than sports cars to support the goals of the mother company Volkswagen. This will require a transition of focus from the sports car enthusiasts to a broader market segment.
2. Product Differentiation
The new CEO can also choose to focus in the production of high quality sports cars for its original target market to prevent brand dilution and retain customer loyalty. Alternative Evaluation
| Advantages |
Disadvantage |
|
| increased revenue opportunities |
the threat of brand dilution |
Diversification |
| protects Porsche brand image |
loss of revenue opportunities |
Product Differentiation |
Alternative Choice
Based on the analysis of the advantages and disadvantages, product differentiation is the most appropriate strategic action of Porsche. By focusing on providing high satisfaction to its loyal customers, Porsche can still experience high profitability in the automobile industry. Moreover, it can prevent the dilution of the strong brand image of Porsche among its target market. Since high quality brand is the most valuable asset of a company, it is very significant that Porsche will protect this competitive advantage.
Strategy Implementation
To increase the differentiation of its sports cars, Porsche will continue to study latest technology and apply it to its models. It will also study the latest trend in car racing in order to efficiently respond to the needs of its target market. Since Porsche will ensure that all its models are a product of rigorous study, Porsche will continue to release limited models of quality and highly reliable sports cars. This will ensure superior customer satisfaction and increased profitability.
