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Porsche History, Products and Competitors

After reading this article, I learned more about Porsche that I did not know yesterday. It is important to learn and understand different organizations and businesses to get a better idea of how they operate and increase revenue. According to Henderson and Reavis (2009), Porsche was founded in 1931 by Ferdinand Porsche with his son-in-law Anton Piech, who is the father of VW Chairman Ferdinand Piech. Unbeknownst to many, Porsche did not start out as an automobile company, it started out as a firm that sold designs and offered engineering services to other carmakers. It wasn’t until 1934 when Adolf Hitler had Porsche make a “people’s car”, called th VW Type 60 which hit the road in the mid-1930’s. The first plant was opened in 1938 for automobile production. Porsche incorporated their first sports car in 1948 known as the Porsche 356. The Porsche Group also consists of passenger vehicles, commercial vehicles, sport luxury and utility vehicles.

According to Henderson and Reavis (2009), engineering and design was considered the hallmarks of Porsches competitive advantage. PEG (Porsche Engineering Group) was the crème de la crème of Porsche, which allowed them to bring in more engineers, allowing them to have an advantage in product development. Porsche acquired VW in March of 2008, and raised their holding to 50% which enabled them to have the majority stake and the voting power. Prosceh’s competition consisted of Acura, Audi, BMW, Mercedes, Land Rover, Volvo, Lexus, Infiniti, Jaguar, Ferrari, Lamborghini and Lotus.

Financial Performance and Condition

It was known, that in 2007, Porsche was the world’s most profitable auto production company on a per unit basis. This was an incredible number due to the fact that they only produced slightly over 100,000 cars on a yearly basis. “The company’s recorded average revenue per car of €62,568 ($91,974) dwarfed that of Mercedes’s €40,445 ($59,454), BMW’s €34,766 ($51,106) and was nearly 2.5 times Audi’s €27,500 ($40,425)”. As of December 2015, the total assets of the Porsche AG Group rose 12% than the prior year reporting date. After perusing the Porsche website and looking at different financial analysis, Porsche is operating at a steady and growing rate. In 2014, sales revenue was 17.2 million and jumped to 21.5 million in 2015. It is to my knowledge that Porsche spent countless amounts of hours on R&D, that their cars have the least amount of problems. Porsche is big on customer satisfaction and it shows in their numbers. “Sales of the company's cars in the United States had climbed back to 18,200 for fiscal 1998, with total sales of vehicles worldwide topping 38,000. The company reported profits of DM 324.4 million on sales of DM 4.9 billion for the fiscal year” (fundinguniverse.com).

Strengths

· High profitability and revenue

· Distribution and sales

· High growth rate

· Integration with Volkswagen

· Customer loyalty

· Engineering and design

“This assessment is easy to do superficially, which is often the case, but difficult to do candidly and realistically” (Abraham, 2012). The main strength I want to touch basis on is the integration with Volkswagen. This was a strategical move on Porsche’s behalf. By doing this, they were able to strengthen their business structure and magnify its rate of return. This integration was fully legitimate in August 2012. Volkswagen already has a number of passenger cars under its belt like Audi, Bentley, Bugatti and Lamborghini to name a few. The operation side was allotted to VW at different points in time; 2009 and 2012 as a cash and stock transaction, turning Porsche into the main shareholder of Volkswagen. This integration led to a financially drum tight holding organization along with making it a global powerhouse. Customer loyalty is also a great strength. By listening to the customer and being attentive to their every need and comfort level, this has allowed Porsche to become the leader in customer satisfaction.

Weaknesses

· Legal issues

· Product quality

· Brand portfolio

· Possible high loan rates

What really stands out to me is the legal issues and product quality. In 2012, Porsche recalled 1,500 vehicles worldwide because of a potential turbocharger defect. “The legal battles are causing numerous problems for Porsche that go beyond a simple delay or a cancellation of the merger” (Schafer, 2011). This issue affected the Panamera sedans, and the Cayenne turbo sport utility vehicle. Also in 2012, they recalled 1,232 Porsche 911’s due to a potential fire risk. All this negativity could tarnish the brand, affect the business investors and put a damper in the confidence of the consumer. This can lead to a decrease in sales and cause revenue and profit to drop tremendously if this problem isn’t addressed accordingly. Another weakness plaguing Porsche are the legal battles they are facing. In February 2012, an investment group alleged Porsche of false and deceitful statement leading up to the acquisition of Volkswagen in 2008. Another class action suit was filed in September 2012, accusing Porsche of omitting pertinent and inaccurate information which led to loss of funds. These types of setbacks and legal issues could upsurge the operating expense and negatively impact company profits and the overall image of Porsche AG.

Opportunities

· Growing demand

· Global markets

· Income levels

· New markets

· Growth rates

I believe that there are many opportunities for Porsche to grow. China is currently their largest market. In 2012 they built a production facility to produce 300,000 vehicles annually. “In addition, to meet the increasing demand of powertrains resulting from th expansion of vehicle production in China, the Volkswagen group is building four engine manufacturing sites at different locations, which will produce the latest generation of engines from 2013 onwards.

Threats

· EPA regulations

· Substitute vehicles

Just as easy as Porsche rose its way to the top, it can easily make its way to the bottom. The most obvious threat would be substitute vehicles. If customers are not happy, they will take their money and business to the next best thing rolling. It is just that simple. If you keep your customers happy, they will surely tell all their friends and colleagues to buy Porsche.

I am thoroughly impressed with Porsche’s decisions and how they run their company. With their current numbers and leadership abilities, there aren’t too many recommendations to give them; however, there is always room for improvement. Going over the weaknesses, I would recommend Porsche conduct a more thorough investigation when it comes to their product. Instead of running ten quality assurance tests, run multiple to ensure that the product is safe and does not require recalling. I would also come up with an idea to cut the pollution in half by producing electric/hybrid vehicles. Production costs may rise but so will sales. I would also recommend conducting surveys globally to get a clearer and exact idea if they should expand services in a particular region. Another recommendation would be to produce a more affordable vehicle that appeals to the average blue collar worker.

References

Porsche Automobil Holding SE. (2013). Porsche Automobil Holding SE MarketLine Company Profile, 1-21. Business Source Elite, EBSCOhost (accessed November 29, 2016).