Porsche has a long history dating back to 1931. It struggled financially during the 2008 crisis but was acquired by Volkswagen in 2010. Volkswagen's plan is to fully integrate Porsche by 2011, which risks diluting the brand. Porsche faces challenges retaining executives and customers as it expands its product line under Volkswagen ownership. It must also address tightening emissions regulations that threaten its US market. Porsche will help Volkswagen achieve its strategic goal of becoming the top automaker by 2018 through technology sharing and diversification, but maintaining its brand strength and customer loyalty will be critical.

1. PORSCHE
Presented by:
 Abdilahi Abdi Karim G1224243
 Issa Muktar Adan G1235591
 Musliza Musa G1236556
 Siti Maisawah Sewandi G1237154

2. 2

3. Outlines
3
• Porsche’s background
• Case summary
• Issues highlight
• SWOT analysis
• TOWS analysis
• 5 forces model
• Recommendation/ future
outlook
• References

4. 4
Porsche’s
Background

5. Porsche’s Background
History of Porsche
“I couldn’t find the sports car of
my dreams, so I built it myself”
(Ferdinand Porsche)
 Ferdinand Porsche founded the company in 1931, with
main offices in the centre of Stuttgart, Germany.
 Initially, the company offered motor vehicle development
work and consulting, but did not build any cars under its
own name.
5

6. Porsche’s Background
6
 One of the first assignments – from the German
government to design a car for the people, the
"Volkswagen".
 This resulted in the Volkswagen Beetle, one of the most
successful car designs of all time. The Porsche 64 was
developed in 1939 used many components from the
Beetle.
 On 15 December 1945, Ferdinand was arrested for war
crimes, but not tried.

7. Porsche’s Background
7
 During his 20-month imprisonment, Ferdinand Porsche's
son, Ferry Porsche, decided to build his own car, because
he could not find an existing one that he wanted to buy.
 He also had to steer the company through some of its most
difficult days until his father's release in August 1947.
 The first models of what was to become the 356 were built
in a small sawmill in Gmünd, Austria.
Tagline: “Porsche. There is no substitute”

8. Porsche’s Background
8
Our Mission Statement:
 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.

9. Porsche’s Background
9
Our 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.

10. Porsche’s Background
10
Our 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
Case Summary

12. Case Summary
12
 Porsche – independent and successful car maker for over
100 years
 Fell victim to the 2008 financial crisis – failed to secure
the capital needed to acquire a controlling stake in VW Auto
Group.
 In 2010 reverse takeover – Porsche forced to hand over
keys to VW
 By 2011 produced 5 models with a combined total of 40
different trim levels
 Increased diversification brought higher shareholder
returns.

13. Case Summary
13
 Global economy struggle and recession, unemployment in
US and Europe have made consumers extremely sensitive.
 Climate for most automakers in 2007 was challenging, same
for Porsche
 Porsche competes in a market segment where relatively few
can compete
 Requires sizable capital investments
 Porsche has a accumulated a wealth of technology expertise
and employs some of the brightest engineering minds in the
world
 Porsche has consistently developed class-leading
technologies that competitors find difficult to imitate

14. Case Summary
14
 Porsche has been diversifying its international scope.
 Porsche has been providing the best long-term reliability
of any brand in the US
 Porsche has forged strategic partnerships with other
automakers to keep its business on the cutting edge
 Customers buy Porsche because of its innovative features,
exceptional styling, and European origin
 Porsche has been able to produce equal performance and
prestige, yet at more affordable prices range compared to
BMW M6, Mercedes-Benz SL-class, etc

15. Case Summary
15
 VW’s plan is to integrate the Porsche brand into the group
by the end of 2011 via a multi-stage transaction:
 Porsche is expected to contribute to the group synergy
and help other brands
 Porsche would no longer solely focus on it is traditional
target customer
 Porsche would instead be forced to appeal multiple
consumer segment
 Porsche faces risk of diluting its brand, alienating its
customer base.

16. 16
Issues Highlight
The Cayenne

17. Issues Highlight
17
 Porsche is under financial crisis because in 2008 it failed
to secure the capital needed to acquire Volkswagen,
instead in 2010, there was a reverse takeover and
Porsche was acquired by VW.
 Porsche will face a problem of moving its executives and
experienced management by VW into key roles with other
automotive brands as part of integration plan into VW
Family.

18. Issues Highlight
18
 Potential Brand dilution will happen since its switching
from focus approach to broader market to extend the
Porsche product line.
 How the market would react to multiple sports cars
offerings from Audi, Lamborghini, Porsche…etc.
 Porsche’s greatest challenge would be the impeding
CAFÉ regulations (regulations that could spell an end to
Porsche’s sales in its number one market, US).

19. 19
PESTLE Analysis

20. PESTLE Analysis
20
POLITIC/LEGAL:
 Creating more fuel efficient sport cars.
 New regulation, such as CAFE in the US and government control in
communist/socialist countries. Under the direction of President Obama,
the National Highway Traffic Safety Administration and the EPA
increased the mpg requirements for all cars in the US through an old
emissions policy known as Corporate Average Fuel Economy (CAFÉ).
ECONOMIC:
 Global recession in US and Europe and increase in fuel prices. Oil
prices were at record highs, topping $100 a barrel.
 Consumers were extremely price sensitive and unemployment in the
US hovered around 10%

21. PESTLE Analysis
21
SOCIAL/ENVIRONMENT:
 More environmentally conscious population
TECHNOLOGY:
 The seven-gear Porsche Doppelkupplung (PDK) system
 The Porsche Torque Vectoring (PTV) system
 Equity interest in MHP-IT Technology group
 Leader in R&D, constant pressure from other sports’ car
manufacturers

22. SWOT
Analysis
22

23. SWOT Analysis
23
STRENGTHS
1. Best quality for comparatively low prices – long-term
reliability for high-performance cars, sedans, SUVs, trucks,
etc
2. Stuttgart plant – the best car factory in the world
3. Consistently innovative with class-leading technologies
4. Strategic alliances with other automakers
5. Diversification – SUV (Cayenne), 4-door sedan
(Panamera)
6. Strong brand image
7. Customer loyalty – those who value innovation and
independence
8. Lean production practices
9. All models (except Boxster/Cayman) are produced in
Germany
10. Skilled workforce
WEAKNESSES
1. Concentrates more on
exportation vs international
expansion, acquisition and
licensing
2. Small compared to
competitors
3. Weak financially – victim
of 2008 financial crisis
4. Brand dilution
5. Conflict between the
executives and management
of Porsche and VW

24. SWOT Analysis
24
OPPORTUNITIES
1. Strong economic support in
homeland Germany
2. Supportive manufacturing
infrastructure in Germany
3. Expansion to China
4. Efficient international expansion –
greater economies of scale, increases
market penetration
5. Global strategy – same models for
the whole world leads to bigger
international market
6. Wealth of resources upon joining the
VW group
THREATS
1. Alienation of customer base
2. Losing competitive advantage
3. CAFÉ regulations to be enforced
in 2020 will cause Porsche to lose
its US market share

25. 25
TOWS
Analysis

26. TOWS Analysis
26
STRENGTHS
S2. Stuttgart plant – the best car
factory in the world
S3. Consistently innovative with class
leading technologies
S6. Strong brand image
S8. Lean production practices
S10. Skilled workforce
OPPORTUNITIES
O1. Strong economic support in
homeland Germany
O2. Supportive manufacturing
infrastructure in Germany
O6. Wealth of resources upon joining
the VW group
SO STRATEGY 1:
Maintain and improve product quality of current models and develop new
models through continued innovation and technological advancement

27. TOWS Analysis
27
STRENGTHS:
S1. Best quality for comparatively low prices
– long-term reliability for high-performance
cars, sedans, SUVs, trucks, etc
S4. Strategic alliances with other automakers
S5. Diversification – SUV (Cayenne), 4-door
sedan (Panamera)
S7. Customer loyalty – those who value
innovation and independence
S9. All models (except Boxster/Cayman) are
produced in Germany
OPPORTUNITIES
O3. Expansion to China
O4. Efficient international
expansion – greater economies
of scale, increases market
penetration
O5. Global strategy – same
models for the whole world leads
to bigger international market
O6. Wealth of resources upon
joining the VW group
SO STRATEGY 2
Increase efforts into emerging markets especially China and expand
product line to match untapped customer bases’ preference

28. TOWS Analysis
28
STRENGTHS
S3. Consistently innovative with class-
leading technologies
S4. Strategic alliances with other
automakers
S10. Skilled workforce
THREATS
T2. Alienation of customer base
ST STRATEGY 1
Continuous improvement of quality through technological advancement
to maintain and improve the brand’s prestige

29. TOWS Analysis
29
STRENGTHS
S2. Stuttgart plant – the best car factory in
the world
S3. Consistently innovative with class-
leading technologies
S4.Strategic alliances with other automakers
S6. Strong brand image
S7. Customer loyalty – those who value
innovation and independence
S8. Lean production practices
S10. Skilled workforce
THREATS
T3. Losing competitive advantage
T4. CAFÉ regulations to be
enforced in 2020 will cause
Porsche to lose its US market
share
ST STRATEGY 2
Innovate and focus on fuel efficiency through hybrid and electric
vehicles

30. TOWS Analysis
30
WEAKNESSES
W1. Concentrates more on
exportation vs international
expansion, acquisition and licensing
W2. Small compared to competitors
W3. Weak financially – victim of 2008
financial crisis
OPPORTUNITIES
O1. Strong economic support in homeland Germany
O2. Supportive manufacturing infrastructure in
Germany
O3. Expansion to China
O4. Efficient international expansion – greater
economies of scale, increases market penetration
O5. Global strategy – same models for the whole
world leads to bigger international market
O6. Wealth of resources upon joining the VW group
WO STRATEGY 1
Develop sister companies that focus on affordable sports car for middle class
customers

31. TOWS Analysis
31
WEAKNESSES
W5. Conflict between the executives
and management of Porsche and VW
OPPORTUNITIES
O6. Wealth of resources upon joining the VW group
WO STRATEGY 2
Create a comprehensive group agreement with Volkswagen

32. TOWS Analysis
32
WEAKNESSES
W1. Concentrates more on exportation
vs international expansion, acquisition
and licensing
W2. Small compared to competitors
W3. Weak financially – victim of 2008
financial crisis
W4. Dilution of brand
THREATS
T1. Alienation of customer base
T2. Losing competitive advantage
T3. CAFÉ regulations to be enforced in
2020 will cause Porsche to lose its US
market share
WT STRATEGY
Maintain focus on niche market segment and producing current models

33. 33
5 Forces
Model

34. 5 Forces Model
34
1) THREAT OF NEW ENTRANTS (LOW)
 The threat of new entrants is very low in the automobile
industry. The industry is very mature and it has successfully
reached economies of scale.
Barriers to Entry (High)
 Capital Requirement
 Brand equity
 Knowledge (Technology)
 Product differentiation.
 Large economies of scale

35. 5 Forces Model
35
2) SUPPLIER BARGAINING POWER (LOW)
 The automotive industry is composed of powerful buyers
who are generally able to dictate terms to their suppliers.
Although supplier products are vital to production, their
transactional power over Porsche is usually low.
 Competition between suppliers is high as a contract with
Porsche represents a significant opportunity.
 Porsche make their own engine parts and partnership by
large suppliers (such as VW), which provide core
components, could reduce Porsche potential to exercise
bargaining power.

36. 5 Forces Model
36
3) BARGAINING POWER OF BUYERS
(MODERATELY HIGH)
 The buyers also are a significant portion of the industries
revenue. If they can not keep their buyers happy then
they risk losing them to their competitors.
 The reasons why the power is not completely high is that
the buyers are not large and few in number. Finally
customers are willing to pay premium for the brand.

37. 5 Forces Model
37
4) THE THREAT OF SUBSTITUTES (MEDIUM)
 Direct substitute for Porsche in luxury sport car industry
For examples:
1) BMW X6 M is slightly faster than the Cayenne Turbo
2) Mercedes-Benz ML63 is less expensive than the
Cayenne but slower
3) Audi Q7 is the slowest of the Pack but has more interior
space and torque
 However each model has its own distinct advantage and
disadvantages when compared.

38. 5 Forces Model
38
4) THE THREAT OF SUBSTITUTES (MEDIUM)
 In these areas, the other substitutes available (e.g.,
walking, mass transit, bicycles.) can be less costly than
automobiles and thus alternative modes of transportation
are often preferred.
 However, substitute do not offer the same quality as
Porsche.
 Porsche has been able to produce equal performance and
prestige yet at more affordable prices

39. 5 Forces Model
39
5) INTENSITY OF RIVALRY AMONG COMPETITORS
(HIGH)
 The level of rivalry in the industry is extremely high,
luxury Sports car industry produces a naturally
competitive environment.
 The industry brings together global giants (Ferrari,
Lamborghini, Mercedes Benz SL-Class, and Porsche ).

40. 40
Strategy 2018

41. VW’s Strategy 2018
41
 To become : “The most successful and fascinating
automaker by 2018”
 Porsche will help VW achieve its goals by sharing its
technology with other VW brands, increasing production
and diversifying the Porsche product line
 VW has seen the success of Porsche’s recent
diversification and is looking for an even broader
offering.

42. VW’s Strategy 2018
 Volkswagen intends to deploy intelligent innovations and
technologies to become a world leader in customer
satisfaction and quality.
 The goal is to increase unit sales to more than 10 million
vehicles a year; in particular, VW intends to capture an above-
average share of growth in the major growth markets.
 Volkswagen’s aim is a sustainable return on sales before
tax of at least 8% so as to ensure that the Group’s solid
financial position and ability to act are guaranteed even in
difficult market periods.
 Volkswagen aims to become the top employer across all
brands, in all companies and regions; this is necessary in
order to build a first-class team.
42

43. VW’s Strategy 2018
43

44. Porsche’s Strategy
2018
44
We’ve always been ambitious.
And we’ll make sure it stays that way.

45. Porsche’s Strategy
2018
45
 The focus of our company has always been on people – whether it’s our
customers or employees.
 At the same time, the core element of our corporate objectives is value-
creating growth. This provides us with the means to invest in innovative
technologies, new products and, above all, in our workforce. Our aim is to be
market leader. We want to grow profitably the Porsche way – with
enthusiastic customers and as an excellent, social and family-friendly
employer.
 We will also improve our processes and develop new ones, while
ensuring a good rate of return. We have everything we need to achieve these
goals: emerging markets, fascinating vehicles and highly motivated
staff.
 Talking of our workforce, this is another area where we are looking to
significantly grow by 2018. This also includes expanding the infrastructure
accordingly.

46. 46
Recommendations

47. 1. Maintain and improve product quality of current models and develop
new models through continued innovation and technological
advancement
 Utilization of wealth of resources
 Technology transfer between brands under VW Group
 Audi’s tagline ‘Vorsprung durch Technik‘‘ which means Advancement through
Technology ~ applicable to Porsche now
 Example: First ever fully automatic GT3, critisms from purists but selling fast!
2. Increase efforts into emerging markets especially China and expand
product line to match untapped customer bases’ preference
 Research on prospective customer’s preference & tastes through surveys, in-
depth interview.
 Especially to China and Asia Pacific (increase of percentage of sales and
units sold)
47
Recommendations

48. 3. Continuous improvement of quality through technological advancement to
maintain and improve the brand’s prestige
 Matured loyal customers will further appreciate that the brand name remains
prestigious
4. Innovate Focus on fuel efficiency through hybrid and electric vehicles
 R & D: Create a team specifically to study and develop hybrid & electric
vehicles
 Average mpg rating of 39 for cars as the target before 2020
5. Develop sister companies that focus on affordable sports car for middle
class customers
 Volkswagen, Audi: for middle to high income group
 Seat, Skoda: for low to middle income group
48
Recommendations

49. 6. Create a comprehensive group agreement with Volkswagen
 Under this agreement;
 Volkswagen's solid financial base and Porsche's independence will be
preserved
 High growth, earnings and synergy potential accompanied by job security.
7. Maintain focus on niche market segment and producing current models
 Minimizing all of Porsche’s weaknesses and avoiding any possible threats
49
Recommendations

50. R. Duane Ireland et..al (2013). The Management of Strategy
Concepts and Cases.10th Edition
http://www.mbaskool.com/brandguide/automobiles/1822-
porsche-automobile-holding-se.html
https://itunes.apple.com/us/app/911-porsche-world-
magazine/id537660792?mt=8
http://www.strategicmanagementinsight.com/tools/porters-
five-forces.html
http://www.porsche.com/usa/aboutporsche/overview/strateg
y2018/
http://www.volkswagenag.com/content/vwcorp/content/en/in
vestor_relations/Warum_Volkswagen/Strategy.html
References

51. 51
Thank You 