This paper examines the emergence, growth and development of the Porsche motor company. The paper establishes that Porsche arose from humble beginnings way back in 1931. The company has developed and attained international status with specialty in the production of sports cars. However, the transition has not been smooth all along. The company has remained competent as exemplified by its classy productions. Through market segmentation, the company has cut a niche for itself. This study further examines the reasons for the company’s internationalization, success and failure.
The paper concludes that the company has relatively registered remarkable growth during its short time in business. Introduction Ferry Porsche, Max Hoffman and Johnny got together in 1950 to engineer the production of the first Porsche 356 in New York. By 1951, thirty-two cars had been imported to the United States. In 1954, thirty percent of Porsche production was under Hoffman. This catered for the eastern part of the American market as the California section was ably addressed by von Neumann. The three entrepreneurs knew that to market a car, it was necessary to get outside Europe and locate a vibrant one elsewhere.
The United States of America offered this proposition. Consequently, the venture has proved a worthwhile exercise as the company grew from strength to strength. Emerging after world war two, the United States market was the most affluent place because the effects of the war had adversely hit Europe. In 1998, PCNA chose to move its home away from Reno, Nev. to Atlanta in Sandy Springs. This shift was attributed to the business attitude of the Atlanta area. This is underscored by the realization that Atlanta is internationally recognized, enjoys flair and its proximity to access points like airports remains unquestionable.
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Since the making of the headquarter move, the company has enjoyed more success in the country than ever witnessed before. In 2007, Porsche announced a marked improvement on its sales in the United States. Selling a total of thirty four thousand six hundred cars represented a near double increase in its sales over a decade. Besides its headquarters operations, Porsche runs a Logistic Services enter next to the regional airport, which serves the entire area. The car dealer mostly imports its products from Germany via the Brunswick Port in Georgia.
The Porsche Company has been characterized by strong growth leading to solid benefits to the society. While other car dealers have been forced to downsize, Porsche has been creating jobs. History of the company Porsche was founded in 1931 as an engineering office. The founder, Ferdinand Porsche, had gathered enough experience while serving in the military during the First World War. Further, Ferdinand worked for a number of firms as a constructing engineer. At the turn of the 1930 year, Porsche opened an engineering office, which later transformed into ‘Dr. Ing. H. c. F. Porsche GmbH’ in 1931.
At this consultancy, Porsche was able to produce racing cars used by Auto Union. Porsche later made a notable contribution towards the construction of the Volkswagen. The year 1937 witnessed the change of the legal status of the organization, as it became a private group by the name German: KG. In the period between 1944 and 1950, the company relocated to Austria. It is at Austria where Ferry Porsche made the first Porsche car called ‘the 356 Nr. 1 Roadster’. In 1947, Ferry Porsche, the son of Ferdinand Porsche took over the chair from the father. This took place in the absence of Ferdinand who was in prison in France.
Ferry took up half of the company shares and went ahead to put up the sports car dealer under the current trade name. Ferdinand’s daughter, Louise Piech, inherited the other half of the shares. The husband to Louise Piech, Anton Piech, became the director and factory manager of the Volkswagen GmbH stationed at Wolfsburg. As time went, the personalized nature of family interactions led to controversies. As a result, in 1972, ferry Porsche and Louise Piech made a decision that family members could not take art in the management of the company. The ‘Dr. Ing. h. c. F.
Porsche’ group was changed to a corporation by the name German: Aktiengesellschaft AG. One grandson, Ferdinand Piech had to quit management to find a personal outfit to pave way for the growth of the company. The proposed take over of its closest partner, the Volkswagen in 2007 saw the company reform its structure. The Dr Ing. h. c. F. Porsche AG changed to a holding company, Porsche Automobil Holding SE. on the other and, Dr Ing. h. c. F. Porsche AG was formed as an operating company. By September 2008, Porsche held 35. 14 stake in the Volkswagen AG. porsche later increased its stake in the company to 50.
76 percent and still harbors plans to increase it to seventy five percent. The attempt to take over the Volkswagen has led to compiling of debts for the group. The debts were aggravated by increasing taxes based on the huge profits made by the Volkswagen Company. As at July 2009, the Porsche Company was facing debts in excess of ten billion Euros. This pushed the company’s board into making concessions with the Qatar Investment Authority concerning funds. This deal paved way for the injection of funds and the subsequent merger between Porsche and Volkswagen in July 2009.
Michael Plant was to replace Wendellin Wiedeking as the CEO. Reasons for internationalization The drive for growth for growth presents the main reason behind the internationalization of the Porsche group. As in the case of any business entity, growth and development forms the basis upon which success is attained. Germany alone could not offer the company the much-fancied development. Even the larger European market could only serve as a launch pad towards growth. Coupled with this, the collapse of the World War 2 meant that Europe after exhaustions did not present fertile grounds for marketing.
The continent had been spoiled and destroyed by war. As a result, it was incumbent upon the Porsche group to look for better hunting grounds. Following this, the Porsche Company was forced to move and seek market in the more affluent places in the name of the United States of America. Family interactions with management proved an obstacle towards attaining company growth. To address the issue, the Porsche family chose to disengage family from management. This paved way for entry into the company by other individuals with different ideas leading to the growth of the company further.
For instance, the Wiedeking strategy of risk management encouraging sub-contracting meant that the company operated at an international level. The acquisition of the Volkswagen Company by Porsche led to an emergence of debt problems. This was due to an increase in taxation debts. The debts soared because the Volkswagen group was a high profit-making firm. The subsequent plunging of Porsche into debt occasioned the need to go international. The Qatar Investment Authority extended a rescue package to the company and in the process underscored the movement of the company into the international stage.
The growth strategy of the company based on this paper is the premised on acquisition. The Porsche Company worked hard to attain a controlling share in the Volkswagen group. This implies that the company was expanding on its ownership since the Volkswagen Company was internationally based though Germany owners had control of the company. Simply put, acquisition presents one way of going international. The Porsche group by acquiring the Volkswagen in a bid to grow thus paves way for further internationalization. Markets have become saturated.
The traditional markets, which were the mainstay of businesses, can no longer be relied upon. This does not however indicate an absence of growth opportunities. The markets have contracted and call for specialized skills in production and marketingDev and Don, 2005). The Porsche group aware of this scenario was bound to rethink its position. It is therefore not surprising that the company had to go international. Reasons for success Market segmentation The Porsche group was successful based on its ability to segment the market. The company focused on the production of classy utility car sports cars.
The Volkswagen for instance stands for daily reliability, practicability, quality and the general focus on the middle class image. Porsche focuses on the premium segment whereas the Volkswagen zeroes in on the middle level market. The Volkswagen has tried to diversify into the posh segment as exemplified by the production of the Phaeton car. This was however unsuccessful. The business model of the Porsche Company is premised on a concisely defined, long-lasting product and brand strategy. The strategy, the focalization on the affluent segment zeroes in on performance, emotion and sportiness.
All Porsche products are geared towards serving the sports segment. The model consists of four main products marketed under the brand Boxster, Cayman. Today Porsche’s product portfolio consists of 4 main models, all designed for the sports car luxury segment and marketed under the same brand: 911, Boxster, Cayenne and Cayman. Cayenne and 911. This indicates that the company has followed a niche strategy in the industry. Despite engaging in diversification, the company has remained in its niche. By using a single basic car model, economies of scale and scope were generated.
The strategy by the company was programmed to generate increments in company growth. The perfect balance struck between product variations and economic expansion underlies the main element of the group’s growth strategy. The Porsche product 911 exemplifies this approach. The car model is a representation of twelve independent models and two types of engines and carriages and four performance based variations. Management of capacity is critical towards attainting success in any business. In the automobile industry, capacity utilization is necessary in achieving business goals.
In the initial stages, Porsche workers turned up for work in shifts. The company also had an over-size intermediate storage and at the same time practiced over-engineering. Through the strategy of Wiedeking, there is coordination with external suppliers. As such, subcontractors or suppliers develop stores and products at own cost while Porsche incurs limited costs of fabrication. This strategy thus reduces the crises associated with capacity usage since it maximizes using other entities’ premises while carrying out its productive duties. The strategy also provides for the different models alternation.
A dip in one-model sales is substituted or rescued by another. For instance, the Valmet can bail out a decrease in the demand for Cayman. In 2003 and2004, other models compensated for a decline in the demand for Boxster. The adoption of positive communication systems has enabled the car dealer to gain in the market. Through positive communication and the Wiedeking strategy lowers any risks which may emerge as a result of negative attributes on the brand. The top manager uses his public appearances showing rough edges and trying to imitate an image of manhood in the automobile industry.
While this may be untrue, the picture sends a clear message that the company is strong enough. The reasons for Porsche success are numerous as this paper highlights. It has a strong brand name, it focuses on high quality production, focalization on a profitable segment, has high financial base, it effectively manages its risks, it encourages operations based on flexibility and has personalized its brand and Wiedeking. Reasons for failure The crisis in the gulf region, increasing oil prices and the decrease of world oil reserves presents factors inhibiting the growth of the company. Laws on fumes are being tightened across the world.
This is aimed to lower the impact of carbon gas emissions. The legislative agenda has led to signing of treaties, which manufacturers need to abide by. Protocols like the one on environmental issues in Kyoto amplify this position. This affects the development of cars across various fronts. In Germany, the ecological taxation system supports the gasoline prices. This forces consumers to demand for renewable energy sources. This calls for the need to increase investments into coming up with new sources of energy. Research and development is an expensive aspect, which highly taxes a company or an entity’s resources.
The focus on the luxury segment of production may be limiting however successful it may have been in the past. The segment narrows down growth opportunities and thus constrains company or business development. The company has not shown the kind of innovation attributable to other industry players. Its capacity to innovate is seemingly constrained. The company overly relies on external players to produce most of its parts. This lowers the risks to incur losses but also undermines the potential of the company making it big in business. The dependence on Wiedeking is too much and unacceptable.
While a manager is a dependable person, it is wrongly to fully entrust an individual it the running of a business however bright such a person is. Despite the great appearance of the Porsche cars, there are problems related to sensitivity. For instance, the Porsche cars remain too sensitive to heat as its parts warp during extreme conditions. Overexposure further leads to brakes failure, which underlies the car’s major problem. The brake rotors are also thinner than other regular ones in the US demanding that they can only be replaced but not repaired. Porsche is an expensive model and as a result, replacing parts is costly to owners.
There is no doubt; individuals with class are the ones who buy these brands of cars. However, the costs incurred in maintenance may prove an obstacle towards increasing sales. Simply put, individuals do not want extra costs to keep their cars going. The technical problems, which have hit car dealers in the recent past especially the Toyota group has also affected the Porsche Company. The recall of faulty vehicles has characterized the two groups. For instance, one hundred and fifty two Panamera copies sold to Australia were earmarked for repairs on the safety belts.
The repairs would address the clamping problem for the front seats. The clamping problem could easily lead to separation from jam while coupling or decoupling. At the same time, the seat belt mount could become detached from the system while fastening. The Porsche blamed defective parts from a local dealer for the problem. Although the recall was the first in the history of the company, such occurrences do not augur well for business. Recalling defective product is sound management practices, however, the damage caused is undesirable.
For instance, customers would no longer hold the cars in the same esteem before the fiasco. This adversely affects the market of the Porsche not only in the Australia but also in the whole world. Conclusion The Porsche Company presents the typical family business evolution into an internationally renowned business entity. As the paper finds, the growth and development of the company has been fast moving since its formation in 1931. Though the company has attained relatively commendable success, it has a long way to go if it harbors any ambitions to dominate the global car business.
However, the Porsche market segmentation approach may deny it the chance to attain lead status in the industry since other brands offer stiff competition. The acquisition of Volkswagen presents a big opportunity for Porsche to gain a foothold in the market since the new acquisition serves the middle-income segment of the population. Even though the Volkswagen added problems to the Porsche Company in reference to taxation, the benefits attainable in the long-run remains abundant. In conclusion, the Porsche group has needs to strengthen its market grip and diversify further in order to rein on the car industry.
BIBLIOGRAPHY Audi, ? AG. 2008? Annual? Report, Ingolstadt, Germany, 2009.? Grant, R. M. Contemporary Strategic Analysis. Blackwell Publishing, London, 2004. Mantle, Jonathan. Car wars: fifty years of greed, treachery, and skulduggery in the global marketplace. Arcade Publishing, 1996, p. 216. Pettendy, ? M. VW? to? transform? Porsche.? GoAutoNews? (497), ? (2009, ? 08? 26), ? p.? 9.? Whitwell, ? G. , ? Lukas, ? B. A. and? Doyle,? P.? Marketing? Management: A? strategic? valued? based? approach.? Milton, ? QLD:? John? Wiley? &? Sons, 2003.
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