Porsche AG SWOT Analysis
Introduction/ Porsche history, products, and major competitors
Porsche AG is a global mobile automobile industry founded in 1931 the legendary engineer, Professor Ferdinand Porsche. Porsche AG keeps changing in terms of new business challenges and strategic priorities. The company specializes in high-performance super cars, hyper cars, sports cars, terrain vehicles, and most recently, SUVs and sedans. The Porsche headquarters reside in Stuttgart, Germany. Among the latest models include Booxster, Panamera, Macan, 911, and the 918. For survival, the company has to respond to heavy challenges affecting the market in an effective and efficient manner. The company has to apply new strategies that guarantee success in a short period. The presence of the company’s products in automobile markets includes availability in major places such as U.S., Europe, and Asia. Among the causes of the large success of the company is the ability to deliver efficient and quality products for the luxurious customers. The organization incorporates innovations and new technologies in the products in order to achieve effectiveness and efficiency.
The continued success only shows the long process and trouble the company has gone through to be where it is. For example, the company started off as a motor vehicle development tasks and consulting without making any cars recorded with its name. The breakthrough came when the German government approached the company to create a car for the people (Burt, 2002). The resultant vehicle, ‘the Volkswagen’ was a big success. In fact, the Volkswagen beetle is acknowledged as among the most successful cars of all time. The company has seen better times as it has participated in the WWII. The military version of the Volkswagen Beetle, the Kubelwagen, and the Schwimmwagen helped the German troops with over 52,000 vehicles produced (Mantle, 1996).
The engineering capabilities of the company help it target niche markets in effective and efficient manners and maintain a high level of productivity and quality. Though the company is very productive, it needs to diversify its products as well as penetrate new markets in order to guarantee a brighter future. This is because the company operates in a very competitive automobile industry. Therefore, the company needs to have precise and clear goals in order to gain and maintain a strategic advantage over all competitors. The company needs to implement the strategy of penetrating new and emerging markets like India, Russia, China, and Brazil. These markets have a high level of demand in terms of vehicles. Delivering non-sports cars in such nations would be very helpful to the productivity of the company. In addition, the company should concentrate on the key competitive advantages it has in order to achieve the primary targets within a short time. Developing and implementing a comprehensive strategy should guarantee the company success in the long term.
The major competitors in the automotive industry include UK based Hawtal Whiting, Italy based Stola, and US based Modern Engineering Inc. and MSX international Inc. these companies post revenues ranging from $100 and $500 million. Lotus Engineering even competed with Porsche for outsourced engineering business. The results of the enthusiasm of the company shows in terms of the record revenues the business gets per year. For example, the company recorded E7, 122.8 millions in revenue during the 2006 fiscal year, which is an increase of 52% from the previous year. The net profit in 2006 was E1, 387 million, an increase of 74% over 2005.
The economic recession of 2008 exposed Porsche AG to external economic factors e.g. more conservative consumer spending, high unemployment, increased cost of raw materials, and stringent emission standards. Internally, the company experienced factors such as aging product line, and the introduction of Panamera, Cayenne, and 911. The company subsequently allied with Volkswagen and shared the technology and innovation in order to develop the SUV. These among other strategic issues hugely affected the performance of the company. Therefore, there is need to use a SWOT analysis in order to assess the productivity of the company and develop new strategies in order to remain competitive.
High profitability and revenue
Well performing brands
Established loyal fans such as film, radio, and music stars Cars not environment friendly
Cost of raw materials and manufacture
Premium gas only
Pollution environmental issues
High reliance on US markets
Changing customer needs
Increasing global demand
Increasing fuel prices
New markets such as Chinese
Small size and niche markets New emission standards
Fluctuating fuel prices
Rising raw material prices
Advanced technologies employed by the company helps them create high value and up-to-date products that can cater to the short-term needs of the company. In addition, using the high technologies helps in reducing the cost of production. Reduction is production costs leads to increased profit. High technology is a qualitative factor that gives the competing institutions hard time trying to overcome. The company has a perfect global presence as it operates in very many countries worldwide. The global presence is a competitive advantage that the company can utilize in order to keep off competitors and maintain high sales of products. The company also has a strong brand portfolio selling different brands of commercial vehicles. Having a wide range of product models satisfies the needs of the very many customers. It also benefits the organization as it provides access to the immense customer market. Other important factors include a strong presence worldwide and well performing brands.
An established brand name is a symbol of unmatched style, quality, technical skills, and performance. In 2006, Luxury Institute named Porsche the most prestigious automobile brand. Porsche has preserved its image as the leading manufacturer of great sports cars, a trend that has been around for half a century. The desire to grow, however, conflicts with the original niche strategy. However, in a mission to expand beyond the niche market and increase the revenues, the company has introduced the SUV. Any further growth would mean leaving its niche, which endangers the perfect image built in the course of fifty years.
Attending to the weaknesses and building strategies to utilize the opportunities would help the company meet its product objectives of introducing new special models of each product line annually? Such accomplishments would lead to a wider variety that caters to the more comfort-oriented customer, as well as the purist. The motor industry keeps changing, which goes along with changing customer needs. Therefore, the company has to keep on building new models and terminating the unprofitable low-volume models. In addition, the company has to search for new car models in order to expand product line as well as reduce exclusive dependence on the cyclic sports car market.
Porsche markets are mainly Europe and US. Therefore, extending to other markets of interest outside the usual base would mean lower levels of rivalry. The Chinese economy is expected to grow drastically over the next ten years. Therefore, considering the open market in China would promote growth of the existing models and the new ones to come.
One big problem that affects the vehicles in the fact they are not environment-friendly. The products produce a large amount of CO2. They are also fuel inefficient. Among the leading opportunities, include the ever-changing customer needs. The company should introduce car models that are more environment-friendly. They should introduce cars that emit less carbon dioxide, thus meeting the customer needs. Increasing fuel prices might also act to the advantage of the company as many customers are sensitive to the price of rising fuels. High fuel prices go hand in hand with high sales of hybrid and fuel-efficient cars.
One key opportunity comes with the small size and niche markets. However, the internal and internal environment variables keep transforming the organization’s business approach because of globalization, which deregulates foreign markets. Globalization also enables consumers to have better and broader choices with respect to the selection of automobiles.
The leading threats include the new emission standards that call for manufacturing of cars that emit less CO2. If these standards are put into place, it would mean that the company has to invest heavily in order to make engines that emit less carbon dioxide. Porsche Company has to cater to rising fuel prices, government regulations, environmental protection concerns, and major economic recessions such as the heavy blow in 2008, which led to the collapse of many industries.
In order to reduce the cost of raw materials and the manufacturing process, the company should implement strategies such as using common parts for as many cars as possible. Other strategies include increased parts outsourcing and more efficient supply management, which would force the reduction of the number of suppliers. In addition, the company can reduce the size of the workforce and cooperate with other firms. The company should deal with the declining core sports markets by replacing the cyclical current models with better versions and models. This strategy has worked well in the past with new models such as Boxster and 911. Porsche should also consider diversifying geographically in order successfully to exploit other growing markets in Taiwan, China, Asia, and Korea. Positioning in these markets would include introducing new products in order to capitalize the market potential fully.
The company should also continue with the production of cars that use less fuel, which shall go along with solving environmental pollution issues as well as meeting the required standards. In order to maintain the high performance for many more years, the company needs to have expertise, experience, and talent in order to create better products faster and at a lower cost (Warren, 2009).
Burt ,W (2002). Volkswagen Beetle. MotorBooks/MBII Publishing Company. P.14.
Mantle, J. (1996). Car Wars: Fifty Years of Greed, Treachery, and Skulduggery in the Global market. Arcade Publishing. P. 216.
Warren, H. (2009). Engineering Services Outsourcing. PR newswire. Retrieved November 22, 2014.