Analysis of Porsches Using Porters Five Forces Model

2021-05-13 12:26:03
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Porsche can gain a competitive advantage against its major competitors by offering products and services that are of greater and better value. A company can achieve this by advertising the products with higher quality and lower prices, which will always interest the end consumers. Brand loyalty is in this case very important which helps the customers use a particular product or service from a particular company. When understanding the competitive advantage, value proposition ought to be analysed and discussed as it is very important. The value proposition can either produce a competitive advantage in the product or service and can also increase the customers choices and expectations. For a new company to enter the automotive industry, it is likely to face barriers to entry.

The Michael Porter, five forces model, is used to analyse a companys competitive advantage. By the use of this model, an analysis of the possible barriers to entry for new businesses can be conducted. Since the automotive industry yields high revenue returns, it is likely to attract new entrants. The entry of new firms in the industry increases the competition for the market share, which results in a decrease in revenues of all the companies in the industry. It, therefore, becomes important for those in the industry to block the incoming firms. This is will ensure that the abnormal profit rates trend towards a perfect competition. To start with, one of the greatest barriers to entering the automotive industry is the high amount of capital required for the purchase of raw materials, manufacturing plants and employee training. The industry not only requires a high amount of capital for the process of manufacturing but also to ensure that the company keeps up with the current innovations. Secondly, given the competitive nature of the automotive industry, manufacturers of cars need to achieve the economies of scale. To survive in the industry, the newcomer needs to produce in masses so that the cars made are affordable to the customers. This is always a barrier that is considered a major deterrent. With all these barriers, it is important to note that existing giants in the industry can go global by establishing their companies without a lot of hitches. Most of these companies have the managerial skills, the capital and the required technology that is needed to be a strong competitor in the industry. The already established competitors act as barriers to entry for new companies, since competing with such organisations is very difficult.

Besides, use of certain innovations can be restricted to the new entrants through the patent protection laws. This makes it very difficult for new companies as investing in research and technology requires high capital injections. Going global for a company is very important if its objectives are to increase revenue. This can be expensive in some countries whereby there are restrictions regarding emissions standards, fuel efficiency, and safety design. Lastly, marketing a new product in the market can be very expensive and difficult. Introducing new brands can be a gamble especially if the customers do not receive the product well in the market. With the different brands of cars in the market, consumers have a wide range of products to choose from.

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Value Chain Analysis on Porsche

There are a number of capabilities and activities that have helped Porsche create value for their customers. When all the activities and capabilities are combined, the company can meet its overall objectives. To analyse the value chain of Porsche, the following value chain will be considered; product development, and research and design Supply chain management, production, and sales and marketing. To start with, according to the case study there are several capabilities that Porsche has used to add value to its customers.

Product Development, and Research and Design

Through its racing programs, Porsche has been able to generate innovative technologies. In the history of motor sports cars, Porsche is considered one of the most powerful and successful automotive company in the world. Over the years, the company has been able to accumulate some of the best technological expertise by recruiting individuals who have the best engineering minds. Examples of some of the innovation Porsche has come up include Porsche DoppelKupplung (PDK) seven gear system that allows drivers to shift gears without any interruptions. The company has also invested so much capital in market and product research. According to the case study, the founder of Porsche opened an office on April 25, 1931, that was to oversee the engineering, and consultation on engine and vehicle design. This has helped the company in providing customers with a variety of products both in design and price.

Supply Chain Management (SCM) and Production

According to the case study, Porsche has been able to implement an ample innovation that has created a lean production process. The company has also been able to maintain tight controls on their production and supply chain that has served as a benchmark for other manufacturers in the automotive industry. To ensure that the company production and supply chain delivers, the company has formed some strategic alliances with partners in the industry. The company has formed alliances with other automakers to ensure that they get the best hybrid technology. The company also has a highly paid and selective internship programs that have ensured that the company gets the best engineering brains in the market. This has resulted in the company providing flexibility as well as ensuring that high-quality standards are maintained. Apart from their superb design production capabilities, Porsche has focused on its capability of engine production.

Sales and Marketing

Porsche has for years maintained a wide knowledge of its buyers. This is because the information within the company flows freely between the buyers, dealers and the head quarter. According to the case study, the company has been diversifying into other international markets. For example, the company has tapped into the Chinese market. To encourage the new market, Porsche has started building race trucks for the drivers. The company has also been expanding to the international markets mainly through exporting which is considered a less expensive option compared to other ventures. This outsourcing has enabled the company to ease its financial risk. In addition, the company also possesses high brand equity. The company over the years has invested a lot of capital to ensure that its brand identity is intact. To strengthen its brand, Porsche extended its product line by including SUVs. The introduction of Cayenne has fuelled the companys growth for several years. Lastly, the company has relied on a global and central integrated marketing.

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Analysis of Porsches Capabilities Using Ansoff Product/Market Mix

Ansoffs matrix is an analysis tool that is used by most businesses to ascertain their capabilities and for identifying growth opportunities. This matrix looks at how a company can grow its the business through new or existing products, in new or existing markets. Both options always consider the internal and external analysis, influences and investigations. The matrix consists of four segments; market penetration, product development, market development and diversification.

Market Penetration

Porsche has managed to sell their existing products to their existing customers. Some of the companys existing products are the Cayman, Boxster, Turbo and Carrera. The company has sold all these products within several countries though they had to downsize in other territories because of financial crisis, increase in fuel prices, increased taxation in vehicles and unstable economic conditions. Some of the countries where the company had to downsize are Germany and in North America. The company has also managed to maintain their market shares in the Middle East, New Zealand and Australia.

Product development

To strengthen its brand, Porsche was involved in extending its product line so as to meet the customers needs. The company introduced the product line of SUVs which saw the manufacturing of Cayenne. This was able to fuel the growth of the company for years. Porsches factory is what the company relies on in order to keep its independence in terms of product development. The companys Weissach research and development centre is a place where the company owns auto innovation and technology. In this centre, some of the best motor car designs have been created. Through its racing programs, the company is able to come up with the best technologies that are required for product development. Some of these technologies are very difficult to imitate by the competitors. This is also because Porsche employs some of the best engineering brains in the world. With these competitive advantages, the company is able to maintain its existing products, as well as in manufacturing new product lines that help in fuelling the companys growth.

Market development

In this stage, the company has been able to market its existing products in new markets. Porsche has formed mergers and strategic alliances with other companies, when needed particularly when the company has technologies that are out of their own reach. For example the company merged with VW, and this helped the company in tapping other new markets. Some of these markets included China, Russia, Brazil, India, the Middle East and the Asia Pacific.

Diversification

In reference to the case study, the company has invested in diversifying its products into other international markets. Porsche has managed to enter the Chinese market. To push forward the diversification strategy, the company built race trucks for their drivers in China. Besides this, Porsche has diversified its products in the international markets through the export markets which the company considers cheap compared to its other diversification strategies like the Greenfield ventures. The outsourcing done through the exports markets has also managed to reduce the financial risk that the company is exposed to in regard to marketing. In its diversification ventures, Porsche launched brands such as the Sedans and SUVs. The introduction of the Cayenne type of SUV helped in fuelling Porsches growth.

Recommendations

After a review of the competitive strategies of Porsche, it important to come up with recommendations on the future growth options of the company. To start with, the company should not comply with the VWs 2018 strategy. This is because the focus on this strategy would lead the company from a focused approach to a broader brand of car segments. The company would also be forced to consider new customer segments instead on focus on the traditional way of targeting its customers. This means that the brand image of the company will be diluted; the company will alienate its customers as well as risk destroying its competitive advantage. Secondly, after analysing the internal and external capabilities of Porsche, it is important to note that the prevailing consumer segment where the company wants to position for example, its 911 series of cars ought to be maintained while the company is trying to find Newmarket segments to take over and invest in as their new target markets.

It is also important to note that while the company is trying to keep its brand image and the core competencies, it requires having future growth strategies that have their basis on penetration and expansion into new market segments using the same product lines. This is in comparison to their current strategy of diversification where the compared introduced the Sedan and SUV markets. Moreover, due to the nature of the com...

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