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Analysis of Ferrari and Porsche

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An extensive product portfolio analysis on market requirements for developing, launching and positioning new products with a comparative case study for Porsche and Ferrari in branding strategies according to market opportunities and threats of luxury automotive industry in Europe.

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Analysis of Ferrari and Porsche

  1. 1. Page 0 April 2014 DE1208 Design Management | Sharimar Leman | W13034546 AN ANALYSIS OF FERRARI and PORSCHE IN DESIGN STRATEGY
  2. 2. Ferrari and Porsche 2014 1 CONTENTS 1 Background Ferrari Product................................................................................2 Porsche Product...............................................................................3 Group Structure Ferrari and Fiat...................................................................... 5 Porsche and Volkswagen............................................................6 Mission, Vision and Values..........................................................7 2 Design and Brand Strategy Design in Ferrari............................................................................. 11 Design in Porsche........................................................................... 13 Total Process of Design within the Management....................................... 14 Branding by Design......................................................................... 16 Brand Identity Prism...................................................................... 18 Ferrari’s Brand and Marketing Communications Strategy........................... 24 Porsche’s Evolutionary Design Strategy in Marketing and Communications........ 25 Culture of Creativity in Human Resources............................................ .26 3 Research and Design Development Environmental Sustainability and Hybrid Technology................................. 30 Design in Education......................................................................... 32 4 Finance 5 Design Strategy Implementation a. Ansoff Matrix.........................................................................36 b. PESTLE................................................................................38 c. Porter’s Five Forces.................................................................40 d. SWOT Analysis........................................................................42 6 Summary Observations and analysis...................................................................44 Recommendations............................................................................50 Conclusions....................................................................................52 References.................................................................................... 53
  3. 3. Ferrari and Porsche 2014 2 Background Ferrari Product Ferrari is a product-oriented luxury brand that offers high performance super cars. Ferrari is also heavily into branding and merchandising. History Ferrari is founded by Enzo Ferrari in 1929, and its headquarters is based in Maranello, Italy. Figure 1 Above L-R: LaFerrari(hybrid),California,Berlinetta Below L-R: FF, Spider and Italia Pricing Ferrari’s price starts at USD $200,000. Place Ferrari has exclusive dealerships in over 52 countries. Process Ferrari‘s research and development, innovation and technology process are continuously evolving and adapting with what the environment around them demands. Market Segmentation Ferrari focuses on differentiation in luxury brand segment based on design, engine performance and Formula 1.
  4. 4. Ferrari and Porsche 2014 3 Porsche Product Porsche is a customer oriented luxury car brand, aligned with its parent company Volkswagen’s signature taglineto design a car for the people1 . History Porsche was founded by Dr.Dr.Ing. h.c. F. Porsche, and it is located in Stuttgart, Germany. Figure 2 Current product line. Above (L-R) :911, Boxter, Cayman, Panamera (hybrid) and Cayenne (SUV). Below (L-R): 918 Spyder ,Macan (SUV) Pricing Porsche prices start at USD$46,475 and can go well over USD$200,000 Prototyping Porsche has an independent design engineering office where prototypes demonstrated the feasibility of radical new studies to the automobile industry. Market Segmentation Porsche has appealed to a focused differentiation of market segment of financially successful people and succeeded in establishing a loyal brand community that is unique in the automotive world. 1 Porsche (2013) Annual Report
  5. 5. Ferrari and Porsche 2014 4 Group Structure Ferrari and Fiat Fiat Group’s functions in Ferrari2 :  Design, engineering, development, manufacturing, distribution and sale of luxury sport cars under the Ferrari brand management of the Ferrari racing team and supply of financial services offered in conjunction with the sale of Ferrari branded cars.  Fiat Group’s investment in luxury automotive innovation in a sustainable manner is essential to strengthening its positions. Strategic Design Management in Ferrari/FIAT:  Ferrari is the high competitor in motorsport and a catalyst for change and diversification to the overall scope and direction of Fiat in general.  Ferrari influences Fiat’s direction in terms of Ferrari’s brand extension, engineering and R&D structure as part of their corporate strategy process.  The link between the management of design of Ferrari and the management of corporate strategy of Fiat creates value and makes Ferrari visible and profitable in the luxury market. 2 Fiat (2013) Annual Report
  6. 6. Ferrari and Porsche 2014 5 Ferrari Organisational triangle3 3 Ferrari (2014) Official website Senior Vice President, Entertainmen t & Events Senior Vice President, Commercial & Marketing Senior Vice President, Communication Chief Technology Officer Senior Vice President, Human Resources Senior Vice President, Design CEO, Ferrari Brand Senior Vice President, Production Processes Competitiveness Senior Vice President, Digital/IT Board of Directors Senior Management Chairman Vice Chairman Luca di Montezemolo Piero Ferrari AmedeoFelisa Marco Mattiacci Matteo Anversa Enrico Galliera Stefano Cigarini Stefano Lai Michael Leiters Mario Mairano FlavioManzoni Andrea Perrone ErvinoRiccobon PaoploTacconi Senior Vice President, F1 CEO Senior Vice President, Administration, Finance & Control
  7. 7. Ferrari and Porsche 2014 6 Porsche and Volkswagen Porsche’s position in Volkswagen’s Group Structure4 4 Porsche (2013) Annual Report Head of Design CEO, Porsche Design (Merchandise) President, Strategy and Corporate Development Deputy Chairman of the Executive Board-Human Resources Member of the Executive Board - Research and Development Member of the Executive Board - Production and Logistics Member of the Executive Board - Sales and Marketing Member of the Executive Board - Finance and IT Member of the Executive Board - Procurement Matthias Müller Thomas Edig Wolfgang Hatz Dr. Oliver Blume Bernhard Maier Lutz Meschke Uwe-KarstenStädter Executive Board Michael Muller JuergenGessler
  8. 8. Ferrari and Porsche 2014 7 Missions, Visions and Values Ferrari and Fiat Group5 5 Fiat (2014) Official website Mission: To grow and create value by supplying innovative products and services for maximum customer satisfaction with due respect to the legitimate interests of all categories of stakeholders. Vision: Born to innovate, stuck on sustainable development. Values:  To create an efficient, competitive global automaker through the sharing of industrial and technological know-how, resources, projects, targets and ambitions.  Integrity, commitment to maintaining promises, transparency, respect, rigor, reliability and passion.  Core principles of leadership in leading people and leading change.  Rewarding merit is a manifest and acknowledged principle at all levels.  Embrace and relish competition and constantly strive for the very best.  We aim to achieve best-in-class performance.  Delivering on promises is fundamental to our goal of being a credible and reliable organization. Mission: To make unique sports cars that represents the finest in Italian design and craftsmanship, both on the track and on the road. Vision: To be the best in its class. Values:  Tradition and Innovation  Individual and Team  Passion and Sport Spirit  Territorial and Internationality  Ethics and Profit  Excellence and Speed
  9. 9. Ferrari and Porsche 2014 8 Where are we now? Ferrari’s independent missions Where we want to be? 2015  Increasing profit margins  Building greater brand equity  Exploiting the premium exclusivity positioning of Ferrari. How do we get there?  Reduce car production until 2015  To carry out more research and development on packaging and design innovations.  Maintaining focus on sustaining current car models, products, F1 and brand extensions in the niche market segment.  Continuous R&D on product innovation with environmental improvements such as enhancing current hybrid engines and safety. Three year plan strategy 2013-2015
  10. 10. Ferrari and Porsche 2014 9 Porsche and Volkswagen Group6 6 VW (2013) Annual Report Mission: To offer attractive, safe and environmentally sound vehicles which can compete in an increasingly tough market and set world standards in their respective class. Vision:  To be the most successful, fascinating and sustainable automaker in the world. Values:  Innovative.  Offering enduring value.  Responsible. Mission:  We are committed to provide impeccable service to our demanding clientele of premium cars.  Pay our customers with the greatest possible attention and care in all aspects of the business.  To create a connection in the workplace, with shared passion for our vision and goals.  To have motivated, hard working and empowered employees.  Maintain commitment to our corporate social responsibility. Vision:  ‘Look towards the future with the knowledge of our past.’  Passion - our commitment touches our hearts and minds to develop our company further with time.  Leadership - the courage to shape a better future and be flexible and proactive.  Innovation - we search, we imagine, we create, we delight but at the same time honour and protect the traditions and policies of our franchises.  Our vision for the future is to represent both volume and premium brands and be the number one company in terms of after sales and customer service. Values:  Responsibility: Our responsibility is care for our customers and value our employees and be sensitive towards social and environmental issues.  Trust: Work hard daily to build mutual trust with our colleagues and partners.  Teamwork: Respecting and valuing our employees and creating a positive work environment.
  11. 11. Ferrari and Porsche 2014 10 Where are we now? VW and Porsche incorporated Missions Where we want to be? Strategy 2018  Secure band strength  Increase product attractiveness  Maintain profitability  Master complexity  Win the best employees and increase loyalty  Strengthen solid finances  Value enhancing integration into the VW group How do we get there?  Expansion of the exclusive customer experience  Staying true to Porsche identity  Cope with tighter CO2 requirements aligned with brand positioning  Maintaining focus on costs and flexibility  Implement cycle plan whilst maintaining profitability standards  Design and implement the use of the modular toolkit system  Ensure quality within growth  Encourage achievers  Find the right employees at the right time  Eliminating debt  Solid funding of growth based on robust balance sheet  Ensure minimum liquidity as economic cycle buffer  Realize synergies without diluting the brand identity. Integration Growth and technological change
  12. 12. Ferrari and Porsche 2014 11 Design Strategy Design in Ferrari  Ferrari's design office is located at Maranello headquarters which is the centre for all of Ferrari design and production areas7 .  The design office is currently working on Ferrari’s 2014 Formula 1 car.  Ferrari uses autodesk 3D modelling software during the early phases of design development prior to prototyping. Innovation strategy approach  Emphasis on comfort, speed, and enjoyment.  All Ferrari vehicles can be customized by clients in almost every level of detail, which can be explored on Ferrari’s website. Ideation of Concept in Ferrari design  The concept behind Ferrari is to maintain a level of exclusivity and high performance.  More sustainable car for Ferrari’s future.  Towards lightweight materials. 7 Designboom (2011) Ferrari factory tour: design Figure 3(a)-(c)Custom interior in Ferrari cars
  13. 13. Ferrari and Porsche 2014 12 Figure 4.Ferrari factory at Maranello Figure 5. Department layout planning at the design office Figure 7.The design process of Ferrari cars in Ferrari’s design office Figure 6.Ferrari car models at the design office entrance
  14. 14. Ferrari and Porsche 2014 13 Design in Porsche Figure 8. The design process of Porsche cars in Porsche's design studio  Porsche applies experimentation in developing new design to acquire new knowledge for future innovations8 .  Converting a vision into reality based on the feasibility of the idea from both the automobile industry‘s and the target market. Key challenges and problem solving9  Stays true to the brand's identity  Engineered luxury by combining of design, function, and craftsmanship  To balance the appeal of traditional retail channels experience by building brand awareness along with innovative online channels.  To remain flexible, stay abreast of trends and adapt quickly to new requirements and standards.  From 2003 to 2007, the company tried to position itself as a 'men only' brand. In 2010 Porsche Design expanded the market to female customers. 8 Shamiyeh, M. (2013) Porsche Principle Innovation 9 Tsang, Jacqueline(2014) Porsche Design’s CEO JuergenGessler keeps brand at the forefront of luxury
  15. 15. Ferrari and Porsche 2014 14 Total Process of Design within the management (Ferrari)10 10 Walters, David and Lancaster, Geoff (2000) Implementing value strategy through the value chain. Cooper, R. and Press, M. (1995) The Design Agenda: A Guide to Successful Design Management. Group/Corporate Objectives/Project Management Design & Concept R&D/New Product Development Centre Manufacturing & Design Process/Engineering Logistics Branding , Sales & Marketing Design, Innovation and Technology, Design Engineering Design functions at the Operational level Assembly, Production, Distribution Creative advertising, Product launch, After sales service Creativity & Design Thinking in Human Resources, Financial Services, Information Systems Design Brief,Proposals Design Strategy, Creative Direction, Group Strategic Planning Reassess, perceived value, customers’ feedback Distribution FRAME BUILD MarketResponse DISCOVER IDEATE Design&Development
  16. 16. Ferrari and Porsche 2014 15 Total Process of Design within the Management (Porsche) Porsche shared product development with Volkswagen, built a flexible supply chain program for the vehicle, and outsourced most of the components to update and optimize the pricing, performance, quality and promotion.Volkswagen and Porsche are at the most profitable at pushing new products through their value chain in synchronizing the processes of product development, supply chain, and the customer operations of marketing, sales and services11 . 11 Deloitte Research (2005) Mastering Innovation: Exploiting Ideas for Profitable Growth FRAME BUILD Customer, Market, Sell , Service, After sales service Plan, Source, Make ,Deliver Design, Innovate, Develop, Transition Design Brief, Proposals Design, Styling, Innovation and Technology, Production Engineering Logistics Reassess, perceived value , customers feedback Assembly, Production, Distribution Design Strategy, Creative Direction, Group Strategic Planning Embodiment MarketResponse Design&Development IDEATE DISCOVER Corporate Strategy/ Project Management Design Process and Product Transition R&D/New Product Development Centre Quality, Manufacturing & Engineering Supply chain Branding , Sales & Marketing
  17. 17. Ferrari and Porsche 2014 16 Branding by Design Ferrari Brand Value12 12 Interbrand (2013)Best Global Brands by Sector Brand Essence Brand Personality Emotional Benefits Functional Benefits Features and Attributes Core Concepts  The essence of speed  Italian luxury heritage  Loud, aggressive, fantasy  Strong statement on design  Exclusivity  Passion  Imposing presence and identity in motorsports and niche market  High performance  Quality material and engines
  18. 18. Ferrari and Porsche 2014 17 Porsche Brand Value13 13 Interbrand (2013) Best Global Brands by Sector Brand Essence Brand Personality Emotional Benefits Functional Benefits Features and Attributes Core Concepts  Germany heritage and automotive icon  Sophisticated  Classic luxury  Accomplishment, successful  Freedom and independent  Imposing prestigious sporty car in luxury market  Excellence innovation in design engineering technology  Dream and aspiration
  19. 19. Ferrari and Porsche 2014 18 Brand Identity Prism Ferrari Design Identity Prism14 Porsche Branding Identity Prism 14 Kapferer, J.N (2012) The New Strategic Brand Management: Advanced Insights and Strategic Thinking Classy Ambitious Athletic Dominant Flamboyant Formula 1 Luxury Italian Elite The best in its class Wealthy Middle age Showing off Social status Famous Exclusive Bonding Prancing horse Red Italian flag Yellow shield Self-image Culture Personality Physique Relationship Reflection Physique Culture Masculine Upper class Charming Made in Germany Excellent quality Tradition Achievement Obligation to push the limitsMale Snobbish Arrogant High income Dream Aspiration Dynamism Excitement Flagship product- Porsche 911 Relationship Personality Self-image Reflection
  20. 20. Ferrari and Porsche 2014 19 Brand Strategy Ferrari Expanding to new markets as well as versatility in design, such as the hatchback FF.In 2013, Ferrari began to implement their three year plan to reduce car production until at least 2015 to focus on increasing profit margins15 . Brand exclusivity Ferrari cultivates exclusivity by limiting production and enforcing wait lists. Limiting supply was a deliberate strategy to maintain a high level of exclusivity and increase Ferrari cars’ value over time. Brand Awareness and Promotional Strategy The strongest promotion for Ferrari is in its merchandising that comes from the brand itself such as the stores, theme parks, museum, royalty and license basis to other brands (Eg. Puma selling Ferrari-Puma branded shoes). Physical presence i. Ferrari Store - Key target markets in London, Abu Dhabi and Dubai stores were created in major shopping destinations to ensure maximum visibility and to strengthen brand equity. ii. Formula 1 15 Physioc, Felice (2013) Keeping the Dream Alive: Ferrari’s Strategy to Success
  21. 21. Ferrari and Porsche 2014 20 Sport sponsorship is proven helpful as Ferrari’s main communication platform for selling its cars:16  Creates an internal source of mobilization (brands are made by people)  Creates good image in the immediate environment(social, political, economic)  Boosts its image of social responsibility  Provides a source of PR invitations for VIPs.  Formula 1 is a medium whose business model is based on broadcasting rights and sponsors.  Brand values – Exclusivity, Customizability, Luxury,F1 Experience 16 Kapferer, J.N (2012) The New Strategic Brand Management: Advanced Insights and Strategic Thinking Figure 11. Collaboration with Vertu smartphones Figure 9. Ferrari store in London Figure 10. Some Ferrari merchandise
  22. 22. Ferrari and Porsche 2014 21 Ferrari theme park Abu Dhabi Ferrari grows its business and delivers higher revenues and margins with theme park at Abu Dhabi17 .  Target audience – Families, fans and enthusiasts.  Brand strategy throughout the park including the largest Ferrari red roof logo.  Promoting Italian cuisine and tourism through Italian dining experience. Future strategy and brand extensions  Ferrari‘s second theme park and first hotel will be opened at PortAventura, Spain in 2016 as part of their branding extension strategy. 17 Interbrand (2013) Best Global Brands Figure 12(b). Ferrari’s proposed hotel in Barcelona Spain Figure 12(a). Ferrari theme park, Abu Dhabi
  23. 23. Ferrari and Porsche 2014 22 Porsche Design Branding Strategy Porsche designs a range of Porsche merchandise products including watches, eyewear, luggage and sports equipment. Porsche Design has started to cut down the licenses under the Porsche Design name to sharpen the image for its brand core18 . Strategic alliances19  Shares distribution network for Volkswagen and Porsche.  Secures Porsche‘s basic funding without external investors.  Porsche strengthens its brand essence strategy by increasing control over its competitors with mergers, acquisitions and take overs. Figure 13.Porsche Design store, Los Angeles Tourism as Marketing Medium  The Porsche visitors’ centre creates ‘consumption experiences’ in support of its retail dealerships and Leipzig city as a potential urban tourism destination.  Porsche Travel Club is not exclusively reserved for Porsche owners. Figure 15.Porsche Travel Club 18 Tsang, Jacqueline(2014) Porsche Design’s CEO Juergen Gessler keeps brand at the forefront of luxury 19 Shamiyeh, M. (2013) Porsche Principle Innovation Figure 14. Porsche Pavilion in Wolfsburg, Germany
  24. 24. Ferrari and Porsche 2014 23 Partnership Figure 17. Porsche's engineered built in system Figure 18. Porsche's limited edition Blackberry Porsche’s engineered built in system in its car models is called Porsche Communication Management(PCM) with all latest technology features such as ipod, touch screen, USB, audio, and navigation. Other collaboration including the limited edition Blackberry smartphone. Figure 16(a) and (b) Porsche Museum
  25. 25. Ferrari and Porsche 2014 24 Marketing and Communications Marketing and Innovation Strategy  Ferrari incorporates design into its marketing strategy.  It follows strategies based on market dominance by which the company became the leader amongst its competitors.  The world's fastest Ferrari, the F60, constituted as an innovation strategy for Ferrari. Product Life Cycle  In the growth phase, Ferrari attracts its customers by using a lot of marketing strategies such as manufacturing a limited edition, which increases the interest of the consumers. Ferrari's Brand and Marketing Communication Strategy Formula 1 Sponsorships and Competitions Merchandising/ Brand licensing Limited edition/brand exclusivity Design, speed and luxury
  26. 26. Ferrari and Porsche 2014 25 Porsche brand evolution20 The core business of Porsche is the development, production, and marketing of performance cars. Porsche provides complete solutions for the car market and has constructed products such as aeroplane engines, forklift trucks, billboard systems in their evolutionary design strategy. (Marketwatch, 2006). 20 Zhechev, V. (2013) The Impact of Brand Extensions on Brand Image Dilution Related to Nichemanship Porsche's Evolutionary Design Strategy Brand identity Differentiation Conservative and matured buyers Sportiness and Performance Product Diversification Complete vehicle competence
  27. 27. Ferrari and Porsche 2014 26 Creativity in Human Resources Ferrari Creativity in Ferrari’s Human Resources21 1. Formula Uomo  An internal initiative launched in 2001 to improve the lives and work of Ferrari people. Formula Uomo covers three basic areas:  Work places and structures  Professional training and international growth  Personal and family benefits It is designed to stimulate creativity across the business by offering participation in company events such as launching of new car models, VIP seats at various Grand Prix, sports groups, and discounts with different parties. 2. Ferrari Creative Club Most popular initiatives that bring together artists, painters, sculptors, musicians and writers to introduce new skills and encouraging employees to think more creatively. 21 Fisk, P. (2010) Customer Genius
  28. 28. Ferrari and Porsche 2014 27 Porsche Human Resources Strategy  New training center at its Stuttgart-Zuffenhausen headquarters22 .  Expanding the human resources infrastructure.  Collaborations and culture of innovation.  Each member represented a step in the design process to value both excellence and individuality to think creatively and cooperatively.  Recruitment strategy by hiring another 3,000 new employees in the next few years. Figure 19.Porsche headquarters in Wolfsburg 22 Porsche (2013) Annual Report 13,159 15,307 17,502 2010 2011 2012 Number of Employees in the Porsche Group as of 31 December 2012
  29. 29. Ferrari and Porsche 2014 28 Research and Design Development New Product Development Centre - Operational level strategy23 Ferrari undergoes and applies various operation strategies such as: i. Internal growth / expansion strategy  Under intensification strategy Ferrari undergoes product development policy.  Under diversification strategy Ferrari follows vertical diversification in terms of forward integration as it manufactures and sells its cars only via their own car showroom outlets across numerous nations in different continents. ii. External growth In 1997, Ferrari merged with Maserati. This was the only merger that Ferrari had in the last two decades. iii. Assembly Line  Implementing new photovoltaic and trigeneration systems  Fully self-sufficient in terms of energy production and has reduced its overall CO2 emissions by around 40%. iv. Ferrari’s involvement of research and development facilities  NASA with its Facility Building at Cape Canaveral  DOE (Department of Energy of the United States).  German EnOB.  Ferrari also invested in sound strategy where its engine tones are composed by a musician24 . Figure 20.The Fiorano track 23 Ferrari (2012) Annual Report 24 Alderman, Liz (2011)‘Sex on Wheels’? Now It’s ‘Room for Groceries,’ Too
  30. 30. Ferrari and Porsche 2014 29 Porsche Research and Development Centre25  Porsche’s research and development center is located in Weissach.  The objectives are not just to provide advice and develop mature products but also using technologies that are designed to improve efficiency without detracting from performance. New Product Development To improve the product development processes and develops new ones, while ensuring a good rate of return on investment, Porsche is implementing these strategies:  emerging markets  fascinating vehicles  highly motivated staff Porsche Operational level Strategy Porsche’s medium term strategy including developing a mid-range model using the classic Porsche 959 design from the 1980s to compete Ferrari26 and to increase cooperation with its parent company Volkswagen.Some of the ongoing R&D projects include:  New design center at the Weissach Development Center  Modernization of the main production facility in Zuffenhausen.  The construction of a new manufacturing plant at the existing premises in Leipzig  Producing the Macan sport utility vehicle in Saxony.  Using Audi LED technology27 . 25 Porsche (2013) Annual Report 26 The Local (2011) Porsche wants piece of Ferrari market 27 Callow, Ed (2014) Bentley and Porsche set to use Audi LED technology
  31. 31. Ferrari and Porsche 2014 30 Environmental Sustainability and Hybrid Technology Ferrari  To innovate and develop solutions to produce environmental benefits along with engine performance28 .  New photovoltaic system-under manufacturing and enginnering division.  Installation of a tri-generation plant to cut CO2 emmissions by 25-30% compared to the present levels.  Investments of green area at the workplace and factory buildings. Products and Awards  Awarded ISO14001 certification and Integrated Environmental Authorisation in 2007.  Best Performance Engine of the Year”, for the third consecutive year, for Berlinetta.  ‘Supercar of the Year’ from Top Gear for the 458 Speciale. Future goals with car models and hybrid As announced by Fiat CEO in 2012, Fiat planned to launch 6 new Ferrari cars by 2013, one or two new models annually and add a hybrid by 2015 (Ferrari AR 2012). This plan might have been contradicted with Ferrari’s strategy on low volume to maintain its exclusivity. To date, Ferrari has retained four core models 458 Italia, California, 599 Fiorano GTO and 612 Scaglietti. Consequently, Ferrari had launched its first hybrid of using HY-KERS technology with LaFerrari in 2013, and planning to expand its long term hybrid technology with a revised 612 Scagletti. 28 Fiat (2013) Annual Report
  32. 32. Ferrari and Porsche 2014 31 Porsche Long term strategy for future hybrid  Porsche Principle Cayenne S Hybrid.  Porsche Panamera SE-Hybrid  911 GT3 R  918 Spyder. Figure 21.Hybrid technology that aligned with Volkswagen’s strategy 2010-2013 Innovative concept product Figure 22. 919 Spyder super sports car that entices with the performance and efficiency of its plug-in hybrid drive.
  33. 33. Ferrari and Porsche 2014 32 Design in Education Ferrari Collaboration with academic institutions  Ferrari World Design Contest29 in 2010-2011 for design students of universities and schools from around the world. Ferrari Millechili30  Collaboration on ‘Mille Chilli’ Laboratory with the Engineering Department at University of Modena and Reggio Emilia, Italy which is related to the research and development projects of new models, weight reduction and less fuel consumption and reduced emissions.  Ferrari finances six scholarships in the area of research by young graduates/undergraduates in Engineering, Physics, Architecture and Human Studies at Italian and international universities to increase the value of creativity and competence. Figure 23. Collaboration on ‘Mille Chilli’ Laboratory with the Engineering Department at University of Modena and Reggio Emilia, Italy 29 Designboom (2011) Ferrari World Design Contest 30 Joseph, Noah (2009) Ferrari establishes lightweight research lab at Italian university
  34. 34. Ferrari and Porsche 2014 33 Porsche Collaborations with academic and research institutions  Collaboration with The Institute of Applied Arts and Design – Turin, Italy MSc. in Transportation Design31 .  Under the long-standing collaboration between Porsche China and the Sichuan Fine Arts Institute (SFAI), the Porsche "Empowering the Future" Art Contest32 .  Five-year partnership with the School of Engineering at Ngee Ann Polytechnic, Porsche Centre Singapore will provide internship placements for students and industrial attachment opportunities for staff of Ngee Ann Polytechnic to spend periods of time working in its offices33 . 31 Car Body Design (2013) IAAD Master 2013-2014: details and scholarships 32 Shanghai Daily (2012) Porsche empowers young talented artists 33 Tam, Joel (2013) Stuttgart Auto Supports Automotive Education In Singapore
  35. 35. Ferrari and Porsche 2014 34 Finance Ferrari Ferrari Financial Services provides car financing to customers in Europe, North America and Japan through its subsidiaries FFS S.p.A.(Italy), FFS AG (Germany, U.K., Switzerland, France, Belgium and Austria), FFS Inc. (U.S. and Canada) and FFS KK (Japan)34 . Ferrari production was down last year, consistent with the 2013 announcement that production would be maintained below the prior year’s level to preserve brand exclusivity. Since record sales in 2012 the company’s strategy has been to increase the value of its products by limiting their numbers. USA is the largest market for Ferrari, with 1, 800 cars, and is followed by Germany, UK, and China. 34 Fiat (2013) Annual Report
  36. 36. Ferrari and Porsche 2014 35 Porsche Porsche 2013 Sales35 Fiscal year 2012 was the most successful year in its history of Porsche with sales of 143,096 vehicles, which was 22 percent more than the previous year, sales of euro 13.9 billion, which represented a 27 percent increase over the previous year. 35 Interbrand (2013)
  37. 37. Ferrari and Porsche 2014 36 a. Ansoff’s Matrix Ferrari Market/Customers New Current Product/Service Current New Focus on sustaining current car models, products, F1 and brand extensions in the niche market segment. Continuous R&D on product innovation with environmental improvements such as enhancing current hybrid engines and safety. Geographic expansion and targeting new segment e.g. cultural proximity in identifying groups which take Ferrari heritage/leaders as their aspirations. Expansion of potential collaboration with universities e.g. design engineering course of Ferrari in developing design knowledge. Market Penetration Product Development Market Development Diversification
  38. 38. Ferrari and Porsche 2014 37 Porsche Product/Service Market/Customers NewCurrent Market Development Diversification Current New Market Penetration Product Development Maintain and improve product quality of current models and develop new models through continued innovation and technological advancement R&D and innovation focusing on fuel efficiency through hybrid and electric vehicles Increase efforts into emerging markets especially China and Asia Pacific and expand product line to match new customer bases’ preference. Primary focus back on niche market segment and further brand extensions to challenge competitors- matured loyal customers will further appreciate that the brand name remains prestigious, and this strategy will attract newyoung customers e.g. billionaires under 35.
  39. 39. Ferrari and Porsche 2014 38 b. PESTLE Ferrari and Porsche In general, Ferrari and Porsche compete in a focused market segment where relatively few competitors can compete in short and medium term due to their established and successful luxury brands in automotive industry. Political / Legal  Political climate in different countries producing buying automobiles regarding policies on import, export and manufacture of automobiles and automobile components.  Policies on allowing setting up of manufacturing plants by foreign companies.  Stability of governments and future conditions in a country.  New Corporate Average Fuel Economy (CAFE) regulation that will affect the automotive industry US market. Under the regulation made by the US Congress, the National Highway Traffic Safety Administration and the EPA increased the mpg requirements for all cars in the US through CAFE policy36 . Economic  Global economy struggle and recession, unemployment in US and Europe have made consumers extremely sensitive about car prices.  Taxation policies.  Global recession in US and Europe and increase in fuel prices. Sociological  Current customers’ demands are high technology features and built in systems, reliable, comfortable and stylish design.  Trends, lifestyles and preferences of people that impact their choices of cars.  Some consumers also consider that the cars should be environment friendly. 36 NHTSA (2014) Corporate Average Fuel Economy
  40. 40. Ferrari and Porsche 2014 39 Technology  Continuous R&D on technology and keep up-to-date of the technological change in the automotive industry because technological shifts can affect costs, quality, and lead to innovation. Ecological  More environmentally conscious population Co2 emissions. In brief,the key success for every PESTLE strategy is designed to meet objectives and achieve targets in the industry. In turbulent times, auto companies must have strategies that are flexible, focused, responsive, variable and resilient in other areas as well such as brand identity and preserving the brand while pushing innovation37 . 37 CNBC (2011) Ferrari’s Business Strategy
  41. 41. Ferrari and Porsche 2014 40 c. Porter’s Five Forces Ferrari
  42. 42. Ferrari and Porsche 2014 41 Porsche
  43. 43. Ferrari and Porsche 2014 42 SWOT Analysis Ferrari 38 38 Bevolo, M. et al. ( 2011) Premium by Design: How to understand, Design and Market High End Product. Hoffmann, Jonas; Coste-Manière, Ivan (2012) Luxury Strategy in Action. Basingstoke : Palgrave Macmillan STRENGTHS WEAKNESSES OPPORTUNITIES THREATS Strong brand image in luxury market and sportracingworld. Low volumes despite more demand is present in the luxury marketsegment. Growth in the luxury market for high performance supercarsdue toeconomic growthanddevelopingnations. To keep up with the automotive policies in some countries on the emission norms of 130g/km of CO2 due to the performance oriented nature of the enginesbuiltbytheFerrari. Product combination of design and performance. Losing out to competitors due to waitinglistmodels Expansionofthebrandthroughentering new market i.e. India where Porsche havealreadysetupamarketinIndia. Toughcompetitionfrom Porsche in frugalengineering andproductinnovations. Luxury status symbol- lifestyle. Growing concern of fuel efficiency and emmisions over the environment. Expansion of customerbase in entering hybrid and hatch back market segment withuserfriendlyengines. A competing brand like Porsche does not follow the same low volumes and high on exclusivity which is practisingbyFerrariandthereforeitcansellalotmore of its product andcapture alarge portionof theluxury automotivemarket. Innovation and engine technology are key drivers in everyproduct. Extremelyhighpriced. Differentiating its product portfolio to accommodatevariants. Porsche is expanding its product range to high performance SUVs i.e. Porsche's Cayenne hybrid, whereas Ferrari has not annouced any plan for SUV range. FERRARI
  44. 44. Ferrari and Porsche 2014 43 Porsche39 39 Bevolo, M. et al. (2011) Premium by Design: How to understand, Design and Market High End Products STRENGTHS WEAKNESSES OPPORTUNITIES THREATS Best quality for comparatively low prices – long-term reliability for high- performance cars, sedans, SUVs and trucks. Legal contingencies andlitigations. Strong economic support in homeland Germany. Alienationofcustomerbase. Diversification – SUV (Cayenne), 4-door sedan(Panamera) Brandequitydilution Expansion of Volkswagen business in China. Competitionintheglobalautomotivemarket. Customer loyalty – those who value innovation and independence Lapses in product quality impacts the reputation. Global strategy – same models for the whole world leads to bigger internationalmarket. CAFÉ regulations to be enforced in 2020 will cause PorschetoloseitsUSmarketshare. Strategic integration withVolkswagen. Limited decision power due to acquiring control by Volkswagen. Wealth of resources upon joining the Volkswagen. Environmentalprotectionregulations. PORSCHE
  45. 45. Ferrari and Porsche 2014 44 Summary Observations and analysis Design as framework for value This is an analysis of Ferrari and Porsche brands that play a key role in the automotive world’s corporate strategies, agendas and actions of present and future direction using design and innovation, and how design adds value to these prestige brands. Another way to look at the brands is to assess their level of volume40 versus one another. Ferrari volumes against Porsche (2013)41 40 Interbrand (2013) Best Global Brands by Sector
  46. 46. Ferrari and Porsche 2014 45 Ferrari and Porsche fall in all of these segments where design generates brands, and meets premium and luxury.The four segments of premium and luxury customers are:42  Experience, which is the reward.  Exclusivity and fun.  Status through style.  Perception of craftsmanship which creates emotions. Distinctive design characteristics  There are certain distinctive characteristics such as the matte-metallic feel used in most Porsche design products, while red is an important element for a Ferrari car.  Both Ferrari and Porsche are identifiable products through their design and workmanship and appearance. 41 Interbrand (2013) Best Global Brands by Sector 42 Gofman, Alex, Howard R. Moskowitz, Marco Bevolo, Tõnis Mets (2010) Decoding consumer perceptions of premium products with rule-developing experimentation
  47. 47. Ferrari and Porsche 2014 46 Design Engineering Process a. Breakthrough-engineering orientation43 These brands hold that a winning product is one that is innovative, stylish, commands a premium price and is able to sell itself. b. Cultural Creativity orientation Porsche and Ferrari are product-innovation companies that believe employees need creativity and risk taking to produce the diversity of concepts and outstanding results. c. Visionary and entrepreneurial orientation Visionary, entrepreneurial companies like Ferrari and Porsche strive to change the luxury automotive market through product innovation as their root source of success. d. Commodity-marketing orientation  Product functionality and standards are clear.  Product styling and branding also become important differentiators for both Ferrari and Porsche. e. Creativity is the most important leadership quality Ferrari and Porsche’s parents namely Fiat and Volkswagen encourage experimentation, plan to make deeper business model changes to realize their strategies, take more calculated risks and keep innovating in how they lead and communicate. f. Embody creative leadership Fiat and Volkswagen appear to be taking advantage of the ongoing trends such as hybrid technology, fuel emission,social media and government policies to make changes in their brands, organizations and governance. 43 IBM (2010) Capitalizing on Complexity : Insights from the Global Chief Executive Officer Study
  48. 48. Ferrari and Porsche 2014 47 Creative Leadership, Strategic Design Management and Design Driven Innovation Creative Leadership44 Ferrari and Porsche have embraced the idea of creative leadership by building culture of creativity and experiment with arts to improvise their car designs. Strategic Design Management45 Catalyst –applying design management to control a creative process, and to think and plan for the future. Evaluator – Design management should be an advocate of new designs in both automotive brands. Strategic Implementation – at the end of the project, design management should be able to transform tested prototypes into final productto align with corporate strategy. Design Driven Innovation46 Continuous research and development is defined in every step of Fiat and Volkswagen design management and process by interpreting design concepts, being faithful to the corporate visions and invested in radical innovations through designto improvise innovation and technology. 44 IBM (2010) Capitalizing on Complexity : Insights from the Global Chief Executive Officer Study 45 Walton, T. and Lockwood, T. (2008) Building Design Strategy: Using Design to Achieve Key Business Objectives 46 Verganti, R. (2009) Design-driven Innovation Creative Leadership •Embrace ambiguity •Building a culture of creativity •Leadership as an improvisational and experimental art Strategic Design Management •Catalyst •Evaluator •Implementor Design Driven Innovation •Interpreting design concepts •Faithful to the vision •Investing in radical innovations through design
  49. 49. Ferrari and Porsche 2014 48 Differentiation strategy To stay leaders, Ferrari and Porsche need to improve differentiation strategies to take positions on a scale of value and competitive advantage47 . Differentiation strategies involve revaluing product, positioning ideas through design-driven researchwhere the skill, experience and creativity of design team are used to generate designs which address the identified needs of the clients and the users to create a ‘wow factor’48 , and approaching suppliers/segments in a creative way, either individually or in combination for product development. Both Ferrari and Porsche possess some of the following attributes:  production efficiency  focused strategy  well-respected brands and products Production efficiency has played a significant role in making Ferrari and Porsche as the two key players in the automotive world. Ferrari, on brand image communication, stays away from daily use approach, to differentiate from Porsche49 . Focused strategy seems to be an essential principle of these two brands.  Porsche, for example is not able to compete with Ferrari in the car racing sport due to Ferrari’ brand name and prestige. However, recognizing this limitation, Porsche has instead focused their efforts on producing reliable, relatively luxury sedans and SUVs. 47 AIC Forum (2013) Differentiation as a strategy for the automotive industry 48 Industrial Design Consultancy Ltd (2014) Concept Generation 49 Bradley, D. et al. (2005) Automotive Industry Analysis •Idea focus •Design-driven research Positioning •Concept generation Expectations •Product development Mandatory Elements
  50. 50. Ferrari and Porsche 2014 49  Ferrari does not plan to compete with Porsche in the SUV market because of Porsche’s strong consumers’ loyalty with Volkswagen’s strong image. There are also clear examples of the effectiveness of identifying and exploiting niche markets50 :  Both brands have established by being one of the first luxury brands to develop hybrid vehicles.  Ferrari strategy which focuses on producing fewer cars to maintain its exclusivity responsiveness and consumer needs has proven successful.  It is necessary that luxury automotive companies produce well-respected brands and products since automobiles are expensive long-term consumer investments. Brand loyalty takes time to build, but it can be done as evidenced by the successes of Ferrari or Porsche luxury brand market.  Volkswagen’s revenues have steadily increased over recent years and demand for its vehicles has also been on the rise. It is also focusing on expanding into emerging markets worldwide. These positive aspects suggest that Porsche is in a good position for future success.  Porsche while not as revolutionary or trend-setting as Ferrari, has presented steady, reliable growth within Volkswagen Group.  Porsche‘s aligned vision with Volkswagen’s goal of creating the ‘people’s car’ is thought to be popular. 50 Bradley, D. et al. (2005) Automotive Industry Analysis
  51. 51. Ferrari and Porsche 2014 50 Recommendations Recommendations for Ferrari  Ferrari has to decrease the standard 12 months waiting list to meet growing output demand, without compromising on quality. Therefore it needs a very responsive and flexible manufacturing setup, supported by agile business technology and innovation that could help the company achieve its targets for new production output.  A separate division has to be set up quickly to handle its growing brand activities because Ferrari is based on product-oriented luxury brand.  Ferrari’s chief designer admitted Ferrari’s lack of built in system features, infotainment technologies, connectivity, and navigation compared to Porsche is intentionally because they want to focus on engine performance, design and speed which are the key essentials to the Ferrari brand as it is not designed for daily use51 . Nevertheless, Ferrari needs to be a fast follower to build their image on existing clients by embracing and to innovate the latest technology. 51 Horrell, Paul (2013) Ferrari Interview: On SUVs, Suppressing Sales Volume, NA V-12s
  52. 52. Ferrari and Porsche 2014 51 Recommendations for Porsche Porsche represents a transformation of its niche strategy, which has a major impact on the image of the brand52 . Although Porsche is traditionally associated with the production of sports cars, throughout the last two decades it has evolved from a single-product company to a broad, market-oriented sports car manufacturer which targets a larger customer base. There is brand image dilution in Porsche, given the remarkable business transition in the framework of many changes in core company values. Porsche has put its brand heritage at high risk by introducing the four-door Panamera. Success is believed to come from two main reasons - a strong focus on performance sports cars, and sole control over its operations. Both these factors are now undergoing transformation, and the question of whether the company can sustain its image persists. Porsche needs to maintain its image within a reasonable scope with significant market changes caused by globalisation and further catalysed by the internationalisation by creating new market segments, rethinking of marketing and brand extension strategies. 52 Zhechev, V. (2013) The Impact of Brand Extensions on Brand Image Dilution Related to nichemanship
  53. 53. Ferrari and Porsche 2014 52 Conclusions There are some common themes that characterise most successful, sustainable manufacturing in the core design knowledge and capability within luxury automotive businesses that drives differentiation in the market, and focus on keeping this to world-class standards:  A strong focus on R&D.  Focusing on design knowledge, not just products.  Strong partnerships throughout the value chain, with suppliers, customers, and competitors. Be a champion for the business and the industry Luxury automotive brands increasingly visible role.In recent years the European government has taken an increasingly visible role in seeking to support automotive manufacturing. At an Automotive Summit in January 200953 , for example, UK Business Secretary Lord Mandelson stated that UK needs ‘less financial engineering and more real engineering’. Awareness on the three major trends that are already reshaping global manufacturing • The growing importance of investment in intangibles, such as design, branding,innovation and R&D. • An increased recognition of the importance of investment in people and skills. • The move to a low-carbon economy, as climate change creates new risks and opportunities. 53 PricewaterhouseCoopers (2009) The future of UK manufacturing: Reports of its death are greatly exaggerated
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  60. 60. Ferrari and Porsche 2014 59 Wheeler,A. (2013) Designing Brand Identity : an essential guide for the whole branding team. 4th Ed. Hoboken, N.J. : Wiley ; Chichester : John Wiley [distributor] Winterkorn, Prof.Dr. Martin (2014) Speech at the Annual Media Conference and Investor Conference[online] At: http://www.volkswagenag.com/content/vwcorp/info_center/en/talks_and_presentations/2014/0 3/JPK_1.bin.html/binarystorageitem/file2/02+Rede+Prof.+Winterkorn+englisch.pdf (Accessed on 10.04.2014) Zhechev, V. (2013)The Impact of Brand Extensions on Brand Image Dilution Related to Nichemanship: An Example of Porsche in Bulgaria In: International Journal of Professional Management Volume 8, Issue 6, pp.1-35 List of Illustrations Figure 1.LaFerrari(hybrid),California,Berlinetta FF, Spider and Italia[Photographs] At:http://www.autoevolution.com/ferrari/ Figure 2.Current product line.911, Boxter, Cayman, Panamera(hybrid) and Cayenne (SUV)918 Spyder , Macan (SUV)[Photographs] At:http://www.porsche-mania.com/porsche- models/ Figure 3(a)-(c).Custom interior in Ferrari car.[Photograph] At:http://www.designboom.com/design/ferrari-factory-tour-design Figure 4.Ferrari factory at Maranello[Photograph] At:http://www.designboom.com/design/ferrari-factory-tour-design Figure 5.Department layout planning at the design office[Photograph] At:http://www.designboom.com/design/ferrari-factory-tour-design Figure 6.Ferrari car models at the design office entrance. [Photograph] At:http://www.designboom.com/design/ferrari-factory-tour-design Figure 7.The design process of Ferrari cars in Ferrari’s design office.[Photograph] At:http://www.designboom.com/design/ferrari-factory-tour-design Figure 8.Porsche design studio[Photograph] At:http://www.auto- medienportal.net/artikel/detail/7044 Figure 9.Ferrari store in London.[Photograph] At:http://www.autoweek.com/article/20130417/CARNEWS01/130419853
  61. 61. Ferrari and Porsche 2014 60 Figure 10.Some Ferrari merchandise.[Photograph] At:http://www.celcomgroup.co.za/index_f1%20racing%20retail.html Figure 11.Collaboration with Vertu smartphones.[Photograph] At:http://www.n-droid.de/vertu- ti-ferrari-android-4-0-smartphone-fur-11-400-euro-anyone.html Figure 12(a). Ferrari theme park, Abu Dhabi.[Photograph] At:http://www.prlog.org/11368249- ferrari-branded-products-ferrari-theme-park-in-abu-dhabi.html Figure 12(b). Ferrari’s proposed hotel in Barcelona, Spain. [Illustration] At:http://www.businessinsider.com/ferrari-hotel-barcelona-2014-4 Figure 13.Porsche Design store, Los Angeles.[Photograph] At:http://retail- mannequindisplay.blogspot.co.uk/2012/07/porsche-design_26.html#!/2012/07/porsche- design_26.html Figure 14. Porsche Pavilion in Wolfsburg, Germany. [Photograph] At:http://www.autoblog.com/2012/06/17/porsche-gets-its-own-pavilion-at-autostadt/ Figure 15.Porsche Travel Club.[Photographs] At: http://www.porsche.com/international/motorsportandevents/travelclub/tours/provence/ Figure 16(a) and (b).Porsche Museum. [Photograph] At:http://press.porsche.com/news/release.php?id=460 Figure 17.Porsche's engineered built in system. [Photograph] At:http://www.cardekho.com/interior-pictures/porsche-911/steerio-57.htm Figure 18. Porsche's limited edition Blackberry. [Photograph] At:http://allyoucanlove.com/2012/01/backberry-back-with-porsche-designed-p9981/ Figure 19.Porsche headquarters in Wolfsburg. [Photograph] At:http://teamspeed.com/forums/porsches-past-general-porsche-news/72388-porsche-fefi- coming-late-2015-a.html Figure 20.The Fiorano track. [Photograph] At:http://www.designboom.com/design/ferrari- factory-tour-design Figure 21.Hybrid technology that aligned with Volkswagen’s strategy 2010- 2013.[Photographs] At:http://www.volkswagenag.com/content/vwcorp/info_center/en/talks_and_presentations/201 4/03/JPK_1.bin.html/binarystorageitem/file2/02+Rede+Prof.+Winterkorn+englisch.pdf (Accessed on 10.04.2014)
  62. 62. Ferrari and Porsche 2014 61 Figure 22. 919 Spyder super sports car that entices with the performance and efficiency of its plug-in hybrid drive.[Photograph] At:http://www.hybridcars.com/porsche- 919-hybrid-race-car-unveiled-in-geneva/ Figure 23.Collaboration on ‘Mille Chilli’ Laboratory with the Engineering Department at University of Modena and Reggio Emilia, Italy.[Photograph] At:http://www.autoblog.com/2009/02/19/a-balanced-education-ferrari-dedicates-mille-chili- lab-at-loc/

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