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porsche_corrected2.docxPorsche Analysis 3
Introduction The Porsche Automotive Group (AG) is a car-manufacturing company specialized in making luxurious vehicles. The company was found in 1931 in Stuttgart, Germany by Ferdinand Porsche. The company generates its income from selling of luxurious cars and selling of developed aviation technology. Based on the previous financial reports, Porsche has remained a successful company. Because of its existence in its operations over the past hundred years, Porsche is a reputable company, using suitable business models and generation of high revenues, and it is also indicated in its financial reports its consistent success. As the vice president of the company, this report is a strategic plan which will gear the company into success for the next three years. Executive Summary Analysis of Porsche’s past and present Porsche AG was founded in Stuttgart, Germany by Ferdinand Porsche in 1931. (Henderson & Reavis, 2009). Majority of the company’s revenue comes from the sale of luxurious cars. However, the company also develops aviation technology (Porsche Aviation, n.d. para. 1). Based on Porsche’s financial data, it is evident that the company has a sound business model for it has generated high revenues in operation for about a century now. However, in 1990s, Porsche’s market collapsed and the revenues of the company fell. (History of Porsche AG-Funding Universe, n.d). in the mid-1990s, a new elected CEO, named Wendelin Wiedeking, contributed significantly in reviving the company. Wiedeking eliminated overtime, allowing the employees to work for few hours. He also made great efforts in streamlining the manufacturing process. In the late 1990s, the Porsche was one of the top competitors in the automotive industry. Porsche sells luxury cars for the general consumer, tractors and even aircraft engine. The company also designed and developed concept car, as it had done in 1930s for Adolf Hitler. Some of its reputable products are the Boxter, the Spyder and the 911 (Porsche, n.d, products). Porsche (n.d.) purports that its sales escalated when it produced the Porsche 911. The competitors of Porsche are Mercedes Benz, Maserati, Aston Martin and BMWs. Later in this paper, competition between Porsche and the other company will be analyzed, model-wise. Porsche’s vision is “Look towards the future with the knowledge of our past.” Its mission statement is 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 aspect 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. (Porsche, n.d) The mission statement of Porsche takes into consideration different parts which affect the company. It first puts its client forward, ensuring that it pay their customer greatest possible attention and care. It also yearns to ensure that the workplace goes hand-in-hand with the visions and goals and motivation and empowerment to their employees and lastly, maintains to become a corporate which is socially responsible. Business structure Porsche has been able to have business success through the market mix, which is the 4P’s in other words, Price, Product, Promotion and place. Porsche’s products are luxurious sports cars. The cars are of high quality and high performance. The full list of the models produced by Porsche are as follows. According to Porsche (n.d) it has the 718 Cayman Models, the 718 Boxter Models, the 911 Carrera Models, the 911 Targa 4 Models, the 911 Turbo Models, the 911 GT3 RS, the 911 R, the new Panamera Models, the new Panamera E-Hybrid models, the new Panamer Turbo Models, the Macan Models, Macan GTS and Macan Turbo Models, Cayenne Models Their high quality cars have what enabled the company to make sales and play part in the automotive industry. Furthermore, the price of the cars is high because of the high quality nature of the product. The cost of the cars ranges from $48,000 to $136,000 and therefore, owning a Porsche car is very expensive. Porsche cars put one in an elite status when they own the luxurious sport cars. Currently, Porsche is expecting to sell 200,000 vehicles. The company is still producing luxurious sports cars and currently has a four-door SUV Porsche. The steering wheel of the SUV will be like the 918, aimed for the Porsche first buyers. It is targeting to hit 200,000 sales by 2018. The company has a global market share of 80% for the premium cars C. (Chambers, 2015). January sales show that there is a strong demand in China and Germany, having sales of 29.2% and 10% respectively. Financial Analysis Below is a table of the net assets, comparing the financial year ending in December 31, 2014 and the previous period (Yahoo Finance)
|
Item |
In thousand dollars |
|
Total Operating Expenses |
84,000 |
|
Income Tax Expense |
259,000 |
|
Net income |
3,035,000 |
|
Total Cash Flow deom operating activities |
311,000 |
|
Total cash flow from investing activities |
825,000 |
|
Change in cash and cash equivalent |
512,000 |
Porsche AG balance Sheet
|
Current Assets |
|
|
Cash and Cash Equivalent |
983,000 |
|
Short Term Investments |
1,584,000 |
|
Net receivables |
183,000 |
|
Other current assets |
4,000 |
|
Total current assets |
2,750,000 |
|
Long Term Investment |
27,405,000 |
|
Total Assets |
30,157,000 |
|
Current Liabilities |
|
|
Accounts Payable |
3,000 |
|
Short/Current Long Term Debt |
300,000 |
|
Other current Liabilities |
589,000 |
|
Total Current Liabilities |
599,000 |
|
Stockholder’s Equity |
|
|
Treasury Stock |
-1,820,000 |
The profit of Porsche group in 2014 increased by 262 million. That was compared to the previous year which was 1,939 million. The tax rate was 28% whereas for the previous period it was 30 percent. Furthermore, its revenue increased when it realized sales of 17,205 million euro, in the reporting year and 14,326 million.
In 2014, Porsche sold a total of 187,208 vehicles. This number is a 21% increase compare to the previous year. The growth rate of Porsche was influenced by the new Macan model, which sold a total of 48,569 vehicles. The Cayenne model sales decreased by 13,883 vehicles because of the change of the model. The distribution expenses increased from 1,075 million euros to 1,257 million euros because of the high volume sales. When compared to 2013, it is evident that Porsche financial performance had increased.
SWOT analysis for Porsche
Below is the SWOT analysis of Porsche which describes the strength, weaknesses, Opportunities and threats.
Strengths
Porsche’s strength is the skilled workforce that it has. The company has been encompassing career entrants from all the technical and commercial professions and courses of studies of the Baden-Wurttemberg Cooperative State University. It has also had a training workshop so that it can have a focus on the latest technologies. It has also offered the employees training experience outside of the production process (Porsche Automobile Holding SE SWOT Analysis, n.d.)
Porsche has been enjoying the domestic market. Germany, which is its domestic market have enabled Porsche to sell more than 20,000 units of vehicles. Porsche further has best quality vehicles which are relatively low in cost when compared with vehicles of other companies. Its plant, the Stuttgart is currently the best car factory in the world. It also has diversification in its manufacturing, producing a wide range of cars such as SUV (the Cayenne), the 4-door sedan, the Panamera. It has a strong brand image which has been accepted by the customers. Lastly, the company enjoys customer loyalty, especially the ones who value independence and innovations
Weakness
A weakness of the company is the price of the vehicles. They are expensive to be purchased by the ordinary person. This discourages individuals and company from purchasing them because they lack the finances to purchase the vehicle. Furthermore, maintenance of the vehicle is also high, and therefore people to buy cars from other companies. Furthermore, the vehicles can only operate on premium gasoline, encouraging consumers to choose a different brand.
Opportunities
Porsche has also enjoyed opportunities. It has experienced the strong economic support in Germany, which it is its homeland countries. The company is also supported by the infrastructure in Germany. Porsche has also been planning to expand its market into China. Franz Jung, the Porsche China President, and CEO reported that the company is planning to expand into China, expecting an increase in growth of 9 present. This will be equivalent to selling additional of 60,000 units. In 2015, Porsche sold a total of 58,000 cars in the Chinese market and 2016; it anticipated selling 70,000 units (Anastakis, 2005).
Another opportunity is the global strategy where it sells the same models, but to the rest of the world. This will boost the sales since it will be operating in an international market. Porsche also has a wealth of resources when it joined the VW group (Anastakis, 2005).
Threats
The threats which Porsche is experiencing are the alienation of their customer base. This will likely bring down the sales since the clients will not be available. The company has also lost its competitive advantage Taylor, A. (2010).
The Corporate Average Fuel Economy, CAFÉ are standards which are meant to improve the average fuel economy of cars as well as light trucks. Companies which have a little market share find it better to pay the penalty than complying with the regulation. Other companies such as Porsche did not meet the CAFÉ requirement and therefore have to pay a total of 15 million dollars annually. These regulations will cause Porsche to lose its market share by 2020, and the sales will likely reduce (Taylor, 2010).
Furthermore, another threat of the company is competition. Because it has a wide range of products, the companies which are producing the same models are the competitors. The Panamera sedan competes with AMG of Mercedes Benz, Maserati, Aston Martin and BMWs. The competitors are all located in Europe, which has the same culture background. Porsche 911 faces stiff competition from Mercedes SL-Class, the BMW 6-Series, Chevrolet Corvette. However, the 911’s biggest competition is the Nissan GTR. The price of the car is the same price as Carrera S but performs of Turbo. Furthermore, the Cayenne and Cayenne Turbo SUV are facing competition from Toyota Land Cruiser and the Land Rover. Lastly, the new SUV Macan’s looks like the Audi Q5. They share the same chassis because they are both from the VW group.
SWOT areas which need changes
Porsche areas which need change are the strengths, weaknesses and threats. Porsche should combat these areas to ensure that they are doing well in the automotive car industry. Porsche depends on the Panamera as its strength, however, it should make other models which will attract more customers and therefore increase the sales. It should also ensure that it retains its skilled workforce and improve its training workshop to increase its training workshop.
To do better in the future, Porsche should try as much as possible to minimize its weakness. Competitors will always be there, challenging Porsche with their own model which are similar to their. Therefore, improvements should be made to ensure that Porsche’s cars are better off that their competitors. This includes fine-tuning to make them perform better. The cost of their vehicle is another weakness. The vehicles are too expensive, discouraging individuals and companies to purchase. A strategy would be to ensure they charge a reasonable price for the purchasing of the cars. With the Corporate Average Fuel Economy, CAFE, Porsche should ensure that it meets the demands and comply with the regulation
Organization and management plan for the next three years
It is recommended that Porsche lower the price of its expensive cars and parts. The market will likely increase if the parts and cars are affordable to more consumers. Furthermore, Porsche AG should start another line of cars which would be more affordable. These cars would be targeted for the average, and middle-class household, enabling the company to generate more revenue.
The company should ensure that it looks for ways to reduce gas and maintenance and gas costs that consumers incur. The more people are able to maintain the maintenance and gas costs, the cheaper would own a Porsche car.
The company should also focus other aspects in their operational of the business. First of all, the company should focus on its performance. It should ensure that the valued features of customers should be embedded in their vehicles. For example, their cars should support the Bluetooth feature, a feature which is valued in America. Furthermore, the navigation system is essential, to enable the consumer to be guided by the vehicle and the shortest route possible between two locations. Nowadays people admire taking their meals and desserts in their cars. Equipping the car with cup holders and temporary tables will be an advance feature of the cars.
The company should have targets on its operation. First of all, the target is to sell more than 200,000 in sales of the cars. Furthermore, it should target to have a return capital of 21% and return on sale of more than 15%. To be able to achieve these milestones, the company should also concentrate on customer satisfaction. The company should please the customer by attracting. The company can achieve this by increasing customer enthusiasm. When the customers become interested, enjoy and approve the product of the company, it is likely that the sales will increase.
Porsche record breaking year was in 2011 where is sold 166,978 unit sales. That was the first years in the history of the company to have sales of over 100,000 units. Furthermore, the company recorded a revenue of $14.5 billion and a profit of $2.6 billion in profit. with these values, Porsche AG should work extra hard to ensure that by 2018, it has doubled its market share. It should still remain to be a Porsche brand, even if it partners with other companies. Furthermore, the company should value creating growth instead of growing at all cost.
Porsche has been concentrating on other consumer, but not the young consumers. In today’s modern world, majority of the population are the young adults and the company should learn to include them in their plan. The company should target the younger consumer by utilizing tween demographic, getting hold of the recent graduates and young professionals (Schor, 2004).
Porsche should be in the front line in product placement. The market of the cars can increase if films and movies uses the Porsche brand. Films which are of car performance and speed such as The First and Furious, Gone in 60 Seconds, Need for Speed, Bullit, and the likes should use Porsche cars to widen the market. Not only in the movies, but also in Music videos where the other brands have made appearances too (Lehu, 2007).
References
A Porsche Spyder for your little 'rebel'. (2004). Advanced Materials & Processes, (6), 14. Retrieved from http://eds.b.ebscohost.com.proxy-library.ashford.edu/eds/pdfviewer/pdfviewer?vid=2&sid=6374b49b-9111-4e89-916d-a09b0ed213e9%40sessionmgr120&hid=127
Abraham, S. (2012). Strategic management for organizations. San Diego, CA: Bridgepoint Education.
Chambers, C. (2015). "'TOO BIG TO FAIL' VOLKSWAGEN SET TO DO A BANKING TURN." . Engineering & Technology (17509637) 10, no. 10: 17.Retrieved from http://eds.b.ebscohost.com.proxy-library.ashford.edu/eds/pdfviewer/pdfviewer?sid=3cf0650a-0f1e-4c68-bdf4-a99de879cb6b%40sessionmgr112&vid=2&hid=122
Henderson, R., & Reavis, C. (2009, August 25). What’s Driving Porsche?. Retrieved from https://mitsloan.mit.edu/LearningEdge/CaseDocs/08-075-What%27s%20Driving%20Porsche.Henderson.pdf
History of Porsche AG – FundingUniverse. (n.d.). Retrieved from http://www.fundinguniverse.com/company-histories/porsche-ag-history/.
Porsche Aviaition . (n.d.). Porsche Aircraft Engines. Retrieved from http://porscheaviation.com/
Topolosky, P. S. (2000). Linking employee satisfaction to business results. New York: Garland Pub.
Porsche, L. (2014, Aug. 19). Why Do People Love Vintage Porsches So Much? News & Research From Leith Porsche. Retrieved from http://blog.leithporsche.com/porsche-raleigh-vintage-classic/.
Yahoo Finance. (n.d.). Porsche Automobil Holding SE (PAH3.DE). Retrieved from http://finance.yahoo.com/q?s=PAH3.DE
