Porsche is a reputable global manufacturer of economical sports car and is planning in expanding its operations in to SUV market. The strategy of Porsche has been the fine balance between externalizing the manufacturing of 75% of its components via contracts with suppliers, while maintaining core competencies in design, interiors, engines, and aesthetic values by internalizing the assembly and marketing. This has helped them to differentiate by offering brand value recognition, at the same time allowing them to collaborate design and manufacturing with other product lines, by minimizing their cost of production.
Automobile industry with an ever increasing supplier power and increasing buyer power is a very competitive market, but with creative ways of establishing additional revenue stream in form of royalty by leveraging human capital, coupled by other internal factors like process automation and flexible assembly lines, Porsche has all the right ingredients for a winning strategy. This is evident from the strong financials and analyst estimates of stock price indicating latent potential in the organization, a clear manifestation of the trust and corroboration of the outlook the market shares with the organization.
Porsche Strategy Essay Example
Strategic Issues: With every increasing supplier power, the imminent danger of new entrant and increasing Rivalry is always there. Contractual Theory seems to be the one of the corner stone of this Firms Model, and Porsche has to make sure it has very strong IP and Patenting rights to prevent IP leakage. Though the capitalization of human resource may be a novel way to improve their bottom line, once again Porsche needs to be very cognizant of the attrition rate of the organization as part of the consulting efforts to different clients.
The worst fear will come true if their clients get in to a position to not only absorb their resources, but also come back as a competitor, and with higher Supply Power this can very well be a reality. Thirdly, as Porsche tries to team up with other products like VW, they have to be very careful in making sure that the differentiation in the brand value doesn’t get lost in peoples perspective, and they are not viewed upon as a commodity entity rather than a luxury sports car.
They have to walk a fine line between collaboration and differentiation. They don’t want to get away from consumers having the “Porsche experience”, and with Boxter they have to be extremely cognitive of this. Critical Dynamic Factors are High Supplier Power, High Buyer Power, and Rivalry by low barrier to entry. Also, Porsche seems to have suffered set back with currency rate fluctuations historically, they need to make sure they diversify their operations and market segments to insulate themselves from the same. Is this good?
Porsche thrives by differentiating them as Sports Car company, the introduction of the SUV is a bold move by them to tap in to new market segments. This is certainly a Penetration attempt by the organization with the introduction of a new product. Assuming that Porsche has looked at the demand in this market segment, and sees a strong potential, this can be a great strategy for Porsche if they maintain their core competencies, maintain their differentiators, and provide the same Porsche experience they have been providing in their Sports Car Segment.