FOM Assignment Strategic Review of Porsche AG Stark 313921

Strategic Review of Porsche AG
MBA SS13 D
Master of Business Administration (MBA)

Module: Strategic Corporate Management
Assignment: No. 1
Lecturer: Prof. Dr. Ruud Heijblom
Author: Lars Stark (313921)

2
nd
Academic Semester 2013

Dsseldorf, 17 July 2013
Hochschule
fr Oekonomie & Management
University of Applied Sciences
Strategic Review of Porsche AG I

Executive Summary

Porsche is a very successful premium car manufacturer and worldwide considered to be
even the most profitable manufacturer. Achieving an operating margin of over 17% in
the last year is a big achievement in comparison to other car manufacturers. Almost 14
million in sales is another number of Porsches financial success. Those financial fig-
ures are thoroughly analysed in this paper and strategic business improvements are of-
fered to strengthen the financial position of Porsche. Though, Porsche faces some
threats with its current growth strategy. Nonethelss, the company has the necessary re-
cources and capabilities to outwit competitors and new threats on a regular basis. The
management team, the culture of Porsche and its employees have to build a strong unit
to achieve the goals in mind.

Additionally, the following strategic analysis reveals potential improvements and cur-
rent weaknesses, which have to be analysed by Porsche. The external analysis shows the
reader the opportunities and threats, which Porsche faces in the next years. Especially,
certain mega trends may harm Porsches business as customer demand can shift as well
and worldwide crises can decrease sales volume and financial resources.

The current focus differentiation strategy followed by Porsche can be improved, be-
cause the plain increase of car sales by future diversification has to be viewed critically.
Porsche can face a dilution of its brand and even innovation can lack the necessary qual-
ity due to the fact that Porsche has outsourced most of its production. Thus, Porsches
strategy 2018 is very ambitious, but it can be achieved with careful execution and a
strict focus on growth by value creation.

Strategic Review of Porsche AG II

Table of Contents

Executive Summary ........................................................................................................... I
Table of Contents ............................................................................................................. II
List of Abbreviations....................................................................................................... III
List of Figures .................................................................................................................. V
List of Tables................................................................................................................... VI
1. Introduction ................................................................................................................... 1
1.1. Problem Definition and Objectives ............................................................................ 1
1.2. Methodology .............................................................................................................. 1
2. Porsche AG Business Model ...................................................................................... 2
2.1. Corporate History ....................................................................................................... 2
2.2. Vision & Philosophy .................................................................................................. 3
2.3. Business & Mission Statement .................................................................................. 3
2.4. Values ......................................................................................................................... 4
3. Situation Analysis ......................................................................................................... 5
3.1. Macro Environment ................................................................................................... 5
3.2. Microenvironment ...................................................................................................... 7
3.3. Internal Environment - Company Analysis & Value Chain .................................... 18
4. SWOT Analysis .......................................................................................................... 24
4.1. Opportunities ............................................................................................................ 25
4.2. Threats ...................................................................................................................... 25
4.3. Strengths ................................................................................................................... 26
4.4. Weaknesses .............................................................................................................. 26
4.5. SWOT Issue & central problem ............................................................................... 26
5. Porters Generic Strategies .......................................................................................... 27
6. Ansoffs Growth Strategies & Blue Ocean Strategy ................................................... 27
7. Strategic Options Evaluation....................................................................................... 29
8. Results and conclusion ................................................................................................ 30
Appendices ...................................................................................................................... 31
Bibliography .................................................................................................................... 36
ITM-Checklist ................................................................................................................. 47
Strategic Review of Porsche AG III

List of Abbreviations

Euro
ACEA Association des Constructeurs Europens d'Automobiles
ADAC Allgemeiner Deutscher Automobil Club
AG Aktiengesellschaft
AWA Allensbacher Markt- und Werbetrgeranalyse
BMW Bayerische Motoren Werke
BRIC Brazil, Russia, India and China
C.S. Competitive Strength
Cf. Confer
CIA Central Intelligence Agency
CO
2
Carbon Dioxide
Dr. Doctor
e.g. Exempli Gratia
EBIT Earnings Before Interest and Tax
EBITDA Earnings Before Interest, Tax, Depreciation and Amortization
EFTA European Free Trade Association
et al. et alii (and others)
EU European Union
GDP Gross Domestic Product
GE General Electric Corporation
I.A. Industry Attractiveness
Ing. Ingenieur
M&A Mergers & Acquisitions
OICA Organisation Internationale des Constructeurs d'Automobiles
p. page
pp. pages
PESTEL Political, Economic, Social, Technological, Environmental and
Legal Factors
PLC Product Life Cycle
ROC Return on Capital
ROS Return on Sales
SE Societas Europaea
Strategic Review of Porsche AG IV

SUV Sport Utility Vehicle
SWOT Strengths, Weaknesses, Opportunities and Threats
VW Volkswagen

Strategic Review of Porsche AG V

List of Figures

Figure 1: Passenger cars Europe sales of selected premium car manufactures ................ 9
Figure 2: Strategic Group Map Premium Price/Brand Strength Level ........................ 12
Figure 3: Strategic Group Map Offer Range/ Quality ................................................. 12
Figure 4: Porsches Direct Competitors .......................................................................... 13
Figure 5: Key Success Factors Premium Car Industry ................................................ 15
Figure 6: Porsches stakeholders, their influence and their impact ................................ 17
Figure 7: GE Matrix Industry Attractiveness & Competitive Strength ....................... 18
Figure 8: Greiner Curve Porsche positioning .............................................................. 20
Figure 9: Porsches Cultural Web ................................................................................... 21
Figure 10: SWOT Porsche .............................................................................................. 25
Figure 11: Strategy Canvas Porsche and BMW ........................................................... 28

Strategic Review of Porsche AG VI

List of Tables

Table 1: Passenger cars World sales ................................................................................. 8
Table 2: Porsche Model Endurance ................................................................................ 19
Table 3: Key Financial Ratios from 2010-2012 .............................................................. 22
Table 4: Porsche Product Data Overview ....................................................................... 23
Table 5: Porsche car deliveries worldwide ..................................................................... 23
Table 6: Evaluation of strategic options.......................................................................... 30

Strategic Review of Porsche AG 1

1. Introduction

1.1. Problem Definition and Objectives

The following analysis is a strategic review of Porsche AG. This strategic analysis is
concerned with the analysis of the core strategy of Porsche, which explains the success-
ful management to achieve a sustainable competitive edge. Porsche has been very suc-
cessful in the last years due to a focus differentiation strategy and due to very competi-
tive brand strength. Thus, it is important to grasp the differences between Porsche and
its competitors. This can be achieved by an analysis of the internal and external enviro-
ment of Porsche which leads to the weak point of Porsche. This weakness of brand dilu-
tion by further growth is described and scrutinized in the strategic analysis.
1

1.2. Methodology

At first, the reader is briefly informed about the history of Porsche. Afterwards, the core
of the Porsche business is reviewed critically concerning the vision, mission and values
of Porsche. The next chapter directly analyses the external opportunities and threats.
Therefore, tools as PESTEL, Porters Five Forces and Strategic Groups are used to gain
an understanding of those industry factors. The next part deals with the internal envi-
ronment of Porsche, including soft and hard information. Especially, the financial data
is scrutinized to examine the weak spots in the financial setup of Porsche. The SWOT
analysis summarizes those points above and provides an insight into the main issue for
Porsche. Furthermore, Porters generic strategies are used to analyse Porsches strategy
and in the next chapter, potential growth strategies are discussed to find potential
growth areas and a new value curve for Porsche. Finally, the execution is shortly ana-
lysed and a conclusion rounds up the strategic review of Porsche AG.

1
Cf. Ireland et al. (2013), pp.340-344.

2. Porsche AG Business Model

2.1. Corporate History

Porsche was founded by Ferdinand Porsche in Stuttgart in 1931 and as an engineering
specialist, he was a renowned talent since he had developed disrupting innovations for
the vehicle industry in 1900. These efforts paved the way for a successful start of Por-
sche. The first contracts with major manufactures from Germany comprised the build-
ing of automobiles. Thus, Ferdinand Porsche designed and produced the famous Beetle
from VW in the beginning. He possessed a remarkable talent to create a world-known
company and brand. This was achieved by an extraordinary sense of future develop-
ments, by flexibility regarding the organization and by allowing other persons making
important decisions. In 1946, his son Ferry took slowly over the management responsi-
bility and was fully in charge of the management due to the death of Ferdinand Porsche
in 1951.
2
This management change involved the transition from an engineering focused
office into a fully car manufacturing company.
3

Later on, Porsche scored many victories in racing events and concerning the consumer
segment, Porsche introduced its world famous 911 sports vehicle in 1963. The company
lived off the revenues of the 911 and its variations in the following years. The diversifi-
cation trend also did not make a stop for Porsche and therefore, the Boxster was pre-
sented as the first middle engine sports vehicle by Porsche in 1996. The Boxster was
very successfully sold from the start of its introduction. Another model, the Cayenne,
hit the scene in 2002 and overfulfilled its profit expectations in comparison to other
Porsche models. In the year 2005, a specific hard-top variation of the Boxster, called the
Cayman, was presented to the public. In 2010, the Panamera was launched as the first
Porsche four-door limousine. All these versions and different vehicles indicate the di-
versification strategy of the Porsche Corporation, which lead to a higher share price and
greater revenues for the shareholders in recent years.
4
On the 1
st
of August in 2012, the
operating Porsche business unit was integrated into the VW Corporation for a transfer

2
Cf. Ireland et al. (2013), p.336.
3
Cf. Rosengarten and Strmer (2011), p.103.
4
Cf. Ireland et al. (2013), pp.336-337.

fee of 4.5 billion and additionally, a transfer of an equity share regarding the VW AG
to the Porsche SE was made.
5

2.2. Vision & Philosophy

Porsches strategic vision follows a growth strategy and is described as Strategy
2018
6
, which refers to the ambition of becoming the most successful manufacturer of
exclusive sports cars in the world
7
. Therefore, Porsche clearly aims to become the
market leader in the sports automotive industry. This vision involves hard work and
continuous innovations from Porsche. The statement as such is clearly expressed as the
targeted market position is mentioned. Furthermore, the Porsche way with enthusias-
tic customers and as an excellent, social and family-friendly employer
8
has to be fol-
lowed to achieve further growth in the future. Porsche also is working hard to achieve
sales of over 200,000 cars which are priced at a premium level. Another aspect of the
Porsche vision comprises the ROC of over 21% and the ROS of over 15% which great
collaborations with business and employer partner could support.
9

In the current ADAC AutoMarxX ranking, Porsche achieves a 6
th
place concerning
brand image, brand strength and other relevant variables.
10
This is an indicator that Por-
sche still has a long way to achieve market leadership as the competition has not less
ambitious aims. Thus, the company vision has to be shared and communicated in the
whole organization.
11

2.3. Business & Mission Statement

Porsches overall mission statement reads as follows: Porsche doesnt simply build
sports cars. Porsche is more. Much more. And Porsche is different.
12
This mission
statement clearly addresses what Porsche does and how the Porsche brand and products
have to be absorbed. Additionally, it manifests the existence claim of the corporation.

5
Cf. Porsche SE (2013), p.32.
6
Porsche AG (2013b).
7
Porsche Consulting (2013), p.6.
8
Porsche AG (2013b).
9
Cf. Ibid.
10
Cf. Ibid.
11
Cf. Porsche Consulting (2013), p.6.
12
Porsche AG (2013c).

Nonetheless, the statement could be much more detailed in respect to cars and services
offered by Porsche. Even the necessary satisfaction of specific buyer needs is supposed
to be communicated in more detail in the mission statement. Though, Porsches mission
statement can definitely create and fulfil an emotional attachment to the self-set aspira-
tions.
13

2.4. Values

The core values of the Porsche AG are formulated in seven principles and those princi-
ples are integrated into the corporate culture of Porsche. This also manifests itself in
relation to the quality of the cars as over 70% of the whole Porsche vehicles are driven
even today.
14

What characterizes those seven principles? The major Porsche principle refers to the
individuality of the brand and the cars. The abbreviation Dr. Ing.
15
in the company
name stands for the motivation behind the successful corporation, which reflects the fact
that it seeks to construct exceptional sports vehicles for the customers. The next princi-
ple comprises the idea of intelligent performance. Here, the environment and its chal-
lenges, opportunities and responsibilities are also taken into consideration. Therefore, it
does not amaze the reader that passion plays an important role as well. Hence, the third
principle deals with the passion of the employees. As a company, Porsche has a specific
charisma and this spreads to business partners and customers too. A collaborative ap-
proach fosters innovation and success for Porsche. Its necessary to show excellent per-
formance to achieve success and Porsches fourth principle sets excellence on top. The
excellence idea comprises everything Porsche does and this leads to sustainable success.
The fifth principle addresses another topic that of excitement. Excitement supports the
individuality principle as the customer can choose between many vehicle options and at
the same time the customer can customize his own car to a real individual one. Fur-
thermore, additional services for a Porsche driver add more value and pleasure to the
usual car experience. The next principle deals with Porsches vision and its implemen-
ation. Quality, sustainable investments and innovations are major pillars to work on for
Porsche in the future. The last principle reminds everyone of the Porsche team of the

13
Cf. Thompson et al. (2012), pp.74-75.
14
Cf. Porsche AG (2013d).
15
Ibid, p.4.

history of which the people can be proud of and ray out confidence for the present and
future business.
16

3. Situation Analysis

3.1. Macro Environment

The macro environment plays an important role for Porsche due to the fact that the suc-
cess of Porsche depends on the capability to adjust the vehicles and services to the
changing macro environment.
17
At first, a brief introduction to the megatrends relevant
to the automotive industry is also necessary.
18
Porsche has to take into consideration
five significant megatrends. The shift of development and production to growth markets
is the first megatrend. The second megatrend involves the modularization of automotive
platforms. The increasing importance of embedded electronic task systems marks the
third megatrend followed by a megatrend of low-cost small cars. The last megatrend
refers to the increasing electrification of powertrains. All those megatrends offer multi
opportunities and threats to Porsche. Therefore, Porsche has to consider, analyse and act
in advance to be successful in the future environment.
19

The following PESTEL analysis reveals the key drivers and strategically important fac-
tors concerning the external environment of the Porsche AG in Germany and world-
wide.
20

The political factors concerning Germany play a minor role due to the stable political
federal republic system.
21
Nonetheless, other regions, e.g. North Africa or Middle East,
and their political instability could have negative effects on the prices of raw materials
or trade routes for Porsche vehicles. Even political protectionism could harm Porsche
revenues and earnings in the future.
22

16
Cf. Porsche AG (2013e), pp.4-40.
17
Cf. Kotler et al. (2011), p. 210.
18
Cf. Kotler et al. (2007), p.234.
19
Cf. A.T. Kearney (2012), p.6.
20
Cf. Value Based Management.net (2013a).
21
Cf. CIA (2013).
22
Cf. Porsche Consulting (2013), p.125-126.

The last aspect sets a connection to economical factors which are very important for
Porsche. Germany is a large economy with highly educated employees, but the financial
crisis also hit Germany and human talents are tougher to convince to join Porsche. Car
manufacturers like Porsche have to innovate steadily to make an impact in the industry.
Germanys GDP growth remains low with an expectation of 0.3% and an expected in-
flation rate of 1.6%.
23
Overall, the European areas GDP expectations are relatively low
for 2013 and the GDP growth expectations improve only marginally for 2014.
24
Addi-
tionally, Germany has a leading position as an exporter in Europe and this helps Porsche
also as it can distribute the sports vehicles easier.
25

The social environment shows an increase in the aging of Germanys population and
this presents further challenges to the Porsche offering. Porsche has to consider and of-
fer concepts for elder people. Therefore, mobility and its realization are sure to offer a
good profit opportunity.
26
The customer group of Porsche amounts to approximately 2.3
million people in Germany who are interested in premium products.
27
Furthermore,
those customers can be categorized in a limbic map. Porsche potential and actual cus-
tomers are usually performers and dominant personalities.
28
They are also characterised
as people who have the necessary high income to be able to purchase a premium vehi-
cle. The attraction of premium cars will increase over the next years due to strong de-
mand for luxury goods in social successful circles.
29

Additionally, the technological factors determine the success and failure of future ex-
pected developments. Hence, e-mobility still lacks the acceptance of the customers due
to low charging times.
30
Porsche proactively supports this e-mobility development and
the management of Porsche is confident to achieve the goals set.
31
Future developments
like automatic driving and additional electronic systems are still to be refined to be
completely used.
32
Even the ambitious target of the federal government for e-cars will

23
Cf. Economywatch.com (2013).
24
Cf. Economist.com (2013a).
25
Cf. CIA (2013).
26
Cf. Pudenz (2013).
27
Cf. AWA (2012), p.18.
28
Cf. Nymphenburg.de (2013).
29
Cf. Economist.com (2013b).
30
Cf. Auto-Medienportal.net (2013).
31
Cf. Porsche AG (2013a), p.64.
32
Cf. Auto-Medienportal.net (2012).

be hardly reached due to the high costs and the low affinity to electronic cars at the pre-
sent situation.
33

The ecological factors also constitute an increasing focal point. Therefore, this e-car
development could be strengthened in case the German government demands stronger
emission limits than the EU plans for the future which are supposed to be 95g CO
2
per
km until 2020. Environmental challenges and responsibilities grow in customer aware-
ness as well.
34
Porsche even integrated these ecological challenges and responsibilities
into the guidelines for corporate governance.
35

The legal factors concerning Germany comprise the stable and comprehensible judicial
system, a large freedom for businesses and the corporation-favourable tax system.
Nonetheless, large corporations cannot count on this beneficial tax system for long, be-
cause those existing loopholes of the tax system have to be solved by the government
due to great monetary losses for Germany.
36

3.2. Microenvironment

3.2.1. Relevant Market

Porsche addresses the industries for sports cars, SUV and sedans, but it is still mainly a
premium car brand.
37
Therefore, the following microenvironment analysis is concerned
with the premium car industry. The geographic region for the analysis spans all over the
world and the scrutiny is not separately limited to Germany. The market data reveals the
positioning of Porsche and the attractiveness of the industry. Thus, a market research of
the overall passenger car industry reveals the following sales figures based on OICA to
be examined in table 1.

33
Cf. Zeit (2012).
34
Cf. Ibid.
35
36
Cf. Datamonitor (2011), pp.27-28.
37
Cf. Fuhrmans (2013).

Table 1: Passenger cars World sales
Source: own table
38

After the Lehmann shock, the automotive sales decreased very strongly and the luxury
car market even stronger.
39
The sales volume numbers show this development excellent-
ly. Germanys passenger car sales decreased by 23.4 and even from 2011 to 2012 the
automotive sales decreased by 2.9% as well. Europes automotive industry showed clear
signs of a depression. Contrary to this development, other regions e.g. BRIC, USA or
Japan offered good sales opportunities. Furthermore, 2012 was a record high for many
luxury car brands.
40
Porsche expects a further global growth of the automotive industry,
though with lower growth rates and the market growth expectations for Europe are still
far from normal.
41

Figure 1 shows the passenger car sales of some selected premium car manufactures to
provide the reader with an understanding of the market size of the premium car sector in
regard to the whole automotive industry. The selected premium car manufactures
achieved almost 1,900,000 sales of premium cars in 2010 in the Europe zone. The sales
grew to almost 2,000,000 in 2011 and the 2,000,000 sales mark was achieved in 2012.
The growth rate slowed down in period from 2010 to 2012 which underlines Porsches
statement. Nonetheless, Porsche was still able to generate above-average sales growth
rates in this premium niche market.

38
Cf. OICA (2013), pp.1-2.
39
Cf. Wester and Rother (2013).
40
Cf. Doran (2013).
41
2010
Change
10/09 in % 2011
Change
11/10 in % 2012
Change
12/12 in %
Europe 16,491,307 -0.7% 17,159,553 4.1% 16,187,240 -5.7%
Europe (EU 27 countries + EFTA) 13,792,051 -4.8% 13,601,051 -1.4% 12,537,514 -7.8%
Westeurope (EU 15 countries + EFTA) 12,984,549 -5.0% 12,815,435 -1.3% 11,773,266 -8.1%
New EU-countries (EU 10 countries) 807,502 -1.3% 785,616 -2.7% 764,248 -2.7%
Germany 2,916,259 -23.4% 3,173,634 8.8% 3,082,504 -2.9%
Russia 1,912,794 30.5% 2,653,688 38.7% 2,755,384 3.8%
USA 5,635,432 4.3% 6,089,403 8.1% 7,241,900 18.9%
Japan 4,203,181 7.6% 3,509,036 -16.5% 4,572,333 30.3%
Brazil 2,644,706 6.9% 2,647,250 0.1% 2,851,540 7.7%
India 2,387,197 31.4% 2,510,313 5.2% 2,773,516 10.5%
China 13,757,794 33.2% 14,472,416 5.2% 15,495,240 7.1%

Figure 1: Passenger cars Europe sales of selected premium car manufactures
Source: own figure
42

3.2.2. Porters Five Forces

The following analysis of the competitive implications concerning the premium car in-
dustry will be done with Porters five forces concept.
43
This concept provides the reader
with an insight into the competitive forces affecting industry profitability
44
.

At first, competitive rivalry in the premium car industry is analysed. Although, it is a
niche market in comparison to the worldwide automotive market, the premium car mar-
ket has lots of competitors and the intensity for achieving a competitive edge is very
high.
45
BMW, Mercedes, Audi, Jaguar and Aston Martin are just some main competi-
tors of Porsche. The decreasing customer demand concerning mass automotive further
intensifies competition. Additionally, as long as the financial crisis is not solved in Eu-

42
Cf. ACEA (2013).
43
Cf. Thompson et al. (2012), p.102.
44
Ibid, p.102.
45
Cf. Wordpress (2009).

rope, customers are reluctant to buy lots of cars.
46
Furthermore, customers can easily
switch with low costs to other premium car manufacturers, in case they are dissatisfied
with a specific premium car, which increases competitive intensity.
47
An indicator for
lower competitive rivalry is customer loyalty and Porsche can build on its strong brand
image to keep customers.
48
As a result of the above arguments, rivalry can be assessed
as quite strong in the premium car market.
49

Another field of Porters five forces concentrates on the threat of entrance of new com-
petitors. In the premium car segment, its very tough for new entrants as the capital re-
quirements to setup necessary production sites are very high. Furthermore, present
economies of scale, strong brand loyalty and high industry uncertainty lower the threat
of new competitors, although local companies can nevertheless enter quickly, assumed
they have enough capital reserves, expertise and a lot of staying power.
50
Additionally, a
new firm has to offer relatively low switching costs to the customers and build a strong
reputation.
51
Nonetheless, the further development of e-cars could allow new companies
to enter the premium car segment on a lower cost level which means that Porsche and
other premium competitors have to develop their products further as well.
52

In a next step, the potential competition from substitutes is assessed. Customer purchase
decisions depend to a large extent on the pricing of goods and premium cars are not
different in this aspect. Though, premium cars address wealthier customers and that is
why there are not many substitutes besides an airplane as a potential threat.
53
Neverthe-
less, this threat by substitutes can be diminished significantly if the premium car has
strong quality characteristics and the brand established a strong foothold in the market.
54

Porsche cars have these characteristics and this means that substitute products have a
very low effect on Porsche car sales.
55

46
Cf. Sackmann (2013).
47
Cf. Smith (2013).
48
Cf. Forbes Insights (2012), p.14; Cf. Ireland et al. (2013), p.340.
49
50
51
Cf. Smith (2013).
52
Cf.Hlsmann and Colmorn (2011), p.8.
53
54
Cf. Smith (2013).
55
Cf. Martay (2013).

Furthermore, the bargaining power of suppliers is relatively moderate in the premium
car segment and in case of Porsche, the corporate parent VW even secures better condi-
tions on supply contracts due to the large market power and their own production exper-
tise.
56
Therefore, the suppliers power is quite moderate as every premium car manufac-
turer has differentiated car parts and this fact ties the suppliers to Porsche and the other
competitors of Porsche.
57

Concerning the power of premium car buyers, it can be assessed as low due to the fact
that those premium cars are highly differentiated and the brand names are an additional
factor which lowers the bargaining power of potential buyers.
58
Furthermore, price sen-
sitivity is much less pronounced in the premium car market and this allows Porsche to
charge a premium price.
59

The above microanalysis underlines the profitability attractiveness of the premium car
market. Overall, the strongest competitive force refers to the competing force of com-
petitors of Porsche and concluding the level of the other competitive forces, the level of
competitive forces for the premium car industry can be assessed as moderate to strong.

3.2.3. Strategic Group Maps

The following strategic group analysis refers to with the positioning of Porsche and its
competitors in the premium car market. At first, the differentiating competitive varia-
bles for the premium car market have to be defined.
60
Here, two strategic group maps
are distinguished. The first strategic group map is concerned with the price/brand
strength level and the second strategic group map exmines the range of offer/quality
level. These strategic group maps are supposed to provide a better understanding of
close and distant competitors of Porsche.

56
57
Cf. Smith (2013).
58
59
Cf. Martay (2013).
60

Figure 2: Strategic Group Map Premium Price/Brand Strength Level
Source: own figure
61

Three strategic groups have to be distinguished in case of the first strategic group map.
Porsche is positioned in group 1 with BMW, Daimler(Mercedes) and Rolls-Royce.
These companies possess a strong brand and offer an almost moderate premium pricing.
Group 2 even overlaps partly with group 1. Porsche could target to move higher up to
strengthen the own market position. This involves that Porsche has to invest even more
into the own brand marketing. Additionally, the pricing strategy has to be scrutinized to
be able to demand higher premium prices.

Figure 3: Strategic Group Map Offer Range/ Quality
Source: own figure
62

The second strategic group map reveals more diversified groups in relation to the range
of cars and the quality of those cars. Porsche forms a strategic group with Jaguar Land

61
Cf. Companies Annual Reports(2012); Cf. Rankingthebrands.com (2013).
62
Cf. Companies Annual Reports(2012).
P
r
e
m
i
u
m

P
r
i
c
e
Brand Strength
L
o
w

H
i
g
h
Weak Strong
Group 2
Audi
Jaguar Land Rover
Aston Martin
Group 1
Porsche
BMW
Daimler
Rolls-Royce
Group 3
Lamborghini
Ferrari
Group 4
Maserati
O
f
f
e
r

R
a
n
g
e
Quality
N
a
r
r
o
w

W
i
d
e
Low High
Group 1
BMW
Daimler
Group 2
Audi
Group 3
Aston Martin
Jaguar Land Rover
Porsche
Group 4
Ferrari
Maserati
Bentley
Rolls-Royce
Group 5
Tesla
Lamborghini

Rover and Aston Martin in regard to a slightly better than moderate quality and a slight-
ly worse than middle range of offered cars. Nevertheless, Porsche can improve the qual-
ity even further, although they show a high level of quality thinking in the engineering
department.
63
Furthermore, Porsche makes an effort to broaden the range of offered cars
which is a very good strategic decision.

3.2.4. Competitive Intelligence

Porsche has to compete with Aston Martin, Jaguar Land Rover, Rolls-Royce, Daim-
ler(Mercedes), Audi and BMW in a more direct way than with other car manufacturers
due to the strategic group map analysis from above. Those main competitors are shown
in figure 4 and those competitors strengths are analysed in the appendix 1. Regarding
the competitors performances, the following analysis will examine the financial
strength, the current company situation in the market and strategic moves of the com-
petitors.
64

Figure 4: Porsches Direct Competitors
Source: own figure
65

Aston Martin had problems to finance the growth strategy at the end of 2012 due to the
ongoing financial crisis, but they have found an investor with the Investindustrial Cor-
poration in 2013. This allows Aston Martin to improve their range of products, because
they have to grow else they could be an acquisition target for a larger corporation. In
2012, they achieved an EBITDA of 81.6 million Euros and 3,800 Aston Martin cars
were sold.
66

63
Cf. Porsche AG (2013f).
64
65
Cf. Company Websites(2013).
66
Cf. Autonews.com (2013); Cf. PRNewswire (2013).

Jaguar Land Rover achieved an EBITDA of 2.8 billion Euros in 2012 and the retail vol-
ume amounted to 375k sold cars.
67
The company was very successful due to ongoing
capital investments in the products offered. Additionally, their strategic plan is aimed at
investing more capital in manufacturing facilities and the product development to be
able to offer more new cars.
68

Mercedes-Benz has lost ground in the automotive competition due to wrong strategic
decisions. The pressure from shareholders let them focus on short-term success, alt-
hough a long-term strategy is necessary for success in the automotive industry.
69
None-
theless, the new 2020 strategy targets a wider range of cars offered to customers and a
better product quality overall.
70
Mercedes-Benz sold over 1.3 million cars in 2012
which meant a growth by 4.7%.
71
Mercedes-Benz did not achieve the EBIT from 2011
and only achieved an EBIT of 4.4 billion Euros in 2012, though they reached higher car
sales, production and revenue figures.
72

Audi had a very successful year 2012 and even acquired with Ducati another premium
manufacturer. Regarding Audis long-term strategy, it is planned to increase the produc-
tion capabilities and new car models are also planned for 2013 and beyond. The finan-
cials look very good for Audi, as they sold over 1.45 million cars in 2012 and the oper-
ating income increased to 5.4 billion Euros.
73

BMW is the mother corporation for Rolls-Royce and the following statements concen-
trate on both businesses. BMW achieved an operating income of over 12.1 billion Euros
in 2012 and sold over 1.8 million cars overall.
74
The BMW segment sold 1.5 millions
cars and Rolls-Royce reached sales of 3,575 cars. Concerning the strategy, BMW wants
to have an equal distribution of sales worldwide and hold its leading position in the
premium segment.
75

67
Cf. Jaguar Land Rover (2013), p.5.
68
Cf. Automotiveworld.com (2013); Cf. Macalister (2013).
69
Cf. Hawranek (2012a).
70
Cf. Hawranek (2012b).
71
Cf. Daimler (2013a).
72
Cf. Daimler (2013b).
73
Cf. Audi MediaServices (2013).
74
Cf. 4-traders.com (2013).
75
Cf. BMW Group (2013).

3.2.5. Key Success Factors

The key success factors for the premium car industry decide on leadership positions,
acquisition targets and plainly, profit or loss is determined by those factors.
76
As the
above findings have revealed, the line for success in the premium car market is thin.
The critical success factors are shown in figure 5.

Figure 5: Key Success Factors Premium Car Industry
Source: own figure
77

The first key success factor is concerned with the brand attractiveness and the innova-
tion capability. The car manufacturers have to offer innovations every year, especially
better quality, better design and new innovative features are demanded from the cus-
tomers. These innovative developments have to be advertised to the public. Porsche and
sports car racing are building a connection which fosters the innovative brand success.
The second critical success factor deals with the internal talent management. For Por-
sche and the competitors it is necessary to keep excellent employees else the competi-
tion may benefit from the knowledge and excellence of those employees. The limitation
of supply gains center stage in the next key success factor. The target for every premium
car manufacturer is to increase sales continually over the full product life cycle. There-
fore, the premium car manufacturer maintains its exclusive position in the mind of the

76
77

customer. In case of Porsche cars, it becomes obvious that Porsche management does
not allow discounts in first place. The fourth success factor is concerned with the sup-
plier cooperations. The suppliers are an important brick to innovate fast and successful.
Porsche and all other competitors have to ensure satisfaction of their suppliers as the
suppliers have an important share on the value added of the cars manufactured. The last
key success factor involves the cost-efficient and flexible production capabilities of
premium car manufacturers. A flexible human resources management and a successful
manufacturing strategy, in case of modular production, are essential.
78

Some competitors failed to implement those key success factors and this lead to a de-
cline of their revenues and profits. Shortcomings in those aspects are a sure way to lose
the status of a premium brand.
79
If premium car manufacturers neglect essential devel-
opment and quality aspects, they are certain to lose market shares. Especially, price dis-
counts can have negative effects on the premium status as it was the case for Jaguar in
2003.
80

3.2.6. Stakeholder Analysis

The stakeholder analysis provides an insight into the relationsships and importance of
specific stakeholders in regard to Porsche. Therefore, the following analysis declares the
stakeholders and their positioning. Afterwards those Porsche stakeholders are grouped
in regard to their power influence and their level of interest. At the end, the strategic
impact of the Porsche stakeholders is discussed.
81

Porsches stakeholders, their influence and their impact are shown in figure 6. It be-
comes obvious that VW is the most influential stakefolder for Porsche. The suppliers
and labor unions have a very strong influence on Porsche too. Porsche has to inform
VW on everything as they are the main stakeholder. The suppliers are so much integrat-
ed into the production process that Porsche has to do more than just to satisfy their
needs. Labor unions have to be dealt with successfully, because Porsche does not want
to risk strikes and other monetary risk in regard to the labor force.

78
Cf. Rosengarten and Strmer (2011), pp.179-193.
79
80
Cf. Rosengarten and Strmer (2011), pp.166-169.
81
Cf. Kert and Asum (2008), pp.154-157.

Figure 6: Porsches stakeholders, their influence and their impact
Source: own figure

3.2.7. GE Matrix

Based on the industry attractiveness evaluation and the analysis of the key success fac-
tors and their characteristics for Porsche, the GE Matrix for Porsche can be examined in
figure 7 and the evaluation numbers in the appendix 2. The three-by-three matrix
82

reveals that Porsche is supposed to build the own market position even further and in-
vest more capital. The market conditions for Europe seem to decrease significantly over
the next years and Porsche may be even more influenced by this industry development
due to their strategic moves to expand the product offers.
83

82
Porter (2004b), p.365.
83
Cf. Hintze (2013).

Figure 7: GE Matrix Industry Attractiveness & Competitive Strength
Source: own figure
84

3.3. Internal Environment - Company Analysis & Value Chain

3.3.1. Soft Information

3.3.1.1. Product Life Cycle Overview

The management of Porsche has spoken out the product development targets until 2018
and it has become clear that Porsche wants to achieve sales of more than 200,000 cars
worldwide and every year one new Porsche has to be introduced to the market.
85
Por-
sches product life cycle strategy is targeted on a long-life expectancy of Porsche vehi-
cles and the usual life cycle of a vehicle is about seven years.
86
Therefore, Porsche plans
to update its current offerings of five models which will lead to seven models and this
supports the life cycle strategy plan.
87
Additionally, life-long vehicles are definitely a
competitive advantage in regard to better quality characteristics and Porsche achieves
this longevity by constantly offering value added services to the customers.
88
As can be
seen in table 2, the car model introduction and updates are based on the strategic long
product life cycle idea of Porsche.
89

84
Cf. Value Based Management.net (2013b).
85
Cf. Hamprecht (2011).
86
Cf. ACEA (2009).
87
Cf. Focus Online (2011).
88
Cf. Porsche AG (2013g).
89
Cf. Porsche AG (2013h).
00
20
40
60
80
100
00 20 40 60 80 100
I
.
A
.

I
n
d
e
x
C.S. Index

Table 2: Porsche Model Endurance
Source: own table
90

One could grade those automotive models to certain product life cycles, but Porsche
thinks and acts strategically on a longer scale. Therefore, the following PLC assessment
has to be seen with critical eyes. The Boxster model is currently in the maturity stage,
the Cayman model can be assessed to be in the growth stage, the 911 model is in the
maturity stage, the Panamera model is still in the early growth stage and the Cayenne
model is in the maturity stage.
91

3.3.1.2. Company Life Cycle

Porsches company lifecycle determination leads to the result that Porsche is situated in
the maturity stage. Figure 8 shows the positioning of Porsche on the Greiner curve. The
Greiner curve describes the growth and crisis stages a company enters over a company
lifecycle. Porsche is assessed to be in phase five which involves that further growth has
to be aligned to present and potential collaborations with VW and other automotive
companies. Thus, it is important that the Porsche management acts proactively to secure

90
Cf. Porsche AG (2013h).
91
Cf. Porter (2004b), p. 158.
Model Type 1st Last PLC Stage
Boxster Roadster 1996 2012 Maturity
Cayman Coupe 2005 2013 Growth
911 Coupe / Cabriolet 1963 2013 Maturity
Panamera Gran Turismo 2009 2011 Growth
Cayenne SUV 2002 2013 Growth
Release

a long-term sustainable growth and this means that Porsche has to seek stronger ties and
collaborations with partners.
92

Figure 8: Greiner Curve Porsche positioning
Source: based on: http://www.mindtools.com/pages/article/newLDR_87.htm

3.3.1.3. Culture, Organization and Management Style

Porsches culture is based on the company values mentioned in chapter 2.4. The culture
is shaped by Porsches employees. The employees are supported with further training
possibilities, they are given responsibility and they are practically forced to be creative.
Thus, staff is challenged and promoted to reach the goals set by Porsche and the indi-
vidual employee. Furthermore, communication and decisions are made on short routes
in a rather flat organization where every employee is a member of a big team.
93
Thus,
the leadership style of the Porsche management team can mainly be evaluated as di-
rective and achievement-oriented.
94
Figure 9 shows the cultural web concerning the
above thoughts and it illustrates the cultural understanding of Porsche.

92
Cf. Mindtools.com (2013).
93
Cf. Porsche AG (2013i).
94
Cf. 12manage.com (2013); Cf. Sddeutsche.de (2013).

Figure 9: Porsches Cultural Web
Source: own figure
95

3.3.2. Hard Information

3.3.2.1. Financial Data

Porsches key financial data reveals the financial strength, resources and capabilities to
achieve better profits every year. The balance sheet, the income statement and the cash
flow statement can be examined in the appendices 3-5. The following analysis concen-
trates on key financial ratios which are shown in table 3. Current ratio and working
capital positions have to be improved to strengthen the liquidity position of Porsche.
Additionally, the leverage ratios indicate a weak equity position in relation to the debt
position on the balance sheet. The profitability ratios show a very profitable situation
regarding the operating business of Porsche.
96
An operating profit margin of more than
17% is a really superb margin for an automotive manufacturer. The activity ratios are

95
Cf. Themanagement.de (2013).
96
Cf. Porsche AG (2013n).

also ok, although those numbers can be improved as well. Regarding the internal cash
flow, Porsche has a strong position here to finance potential new business projects.

Table 3: Key Financial Ratios from 2010-2012
Source: own table
97

3.3.2.2. Product Data, Margins, Revenues & Profits

The product offering of Porsche is expanding now even more and regarding the cars,
their margins, their revenues and profits, the reader can explore the data in table 4. Por-
sche achieved a significant increase of cars sold and if Porsche continues to grow like in
2012 it is possible to reach the goal of 200,000 cars sold until 2018. Especially, the
Cayenne is sold very well and beyond expectations of Porsche. The revenues and profits
achieved an increase of 26.9% and 19.3%. Hence, Porsche can claim a profit of 17,289

97
Cf. Porsche AG (2013a), pp.131-135; Cf. Porsche AG (2013j), pp.107-111.
Porsche AG
Key Financial Ratios
million
Year 2012 2011 *2010
Liquidity Ratios
Current Ratio 0.69 0.73 0.59
Working Capital -2,142 -1,727 -2,474
Leverage Ratios
Debt-to-assets-ratio 0.66 0.68 0.67
Debt-to-equity ratio 1.94 2.09 1.99
Long-term debt-to-equity ratio 1.06 1.18 1.08
Profitability Ratios
Gross profit margin 45.4% 43.3% 45.0%
Operating profit margin 17.6% 18.7% 18.3%
Net profit margin 13.3% 13.4% 13.0%
Return on invested capital 11.6% 9.6% 3.6%
Activity Ratios
Days of inventory 55.67 56.23 134.28
Inventory turnover 6.56 6.49 2.72
Other important measures of financial
performance
Internal cash flow 2,954 2,331 842
*Year 2010: August to December only
considered - Income Statement und Cash Flow

Euro per car in 2012. In comparison to other premium car manufacturers, these are
astonishing profit and margin numbers. Audi achieved a margin of 11.2% per car, mak-
ing it 3,721 Euro per car. BMW reached a margin of 10.9% and could earn a profit of
4,132 Euro per car in 2012. As a premium brand, Porsche can ask for a higher average
price which amounted to over 95,000 Euro in 2012.
98

Table 4: Porsche Product Data Overview
Source: own table
99

The premium car deliveries are differentiated on regions in table 5.

Table 5: Porsche car deliveries worldwide
Source: own figure
100

98
Cf. Handelsblatt.com (2013).
99
Cf. Porsche AG (2013a), p.21; Cf. Porsche AG (2013j), p.15.
100
Cf. Porsche AG (2012); Cf. Porsche AG (2013l).
Cars Sold
Model Variants 2012 2011 % 2012 2011 % 2012 2011 % 2012 2011 %
141,075 118,868 18.7%
13,865 2,439 2,045 26.9% 17,289 17,204 10,928
31.4%
8.2%
24.8%
-7.3%
Cayenne 8 74,763 59,898
911 12 25,457 19,377
Panamera 8 29,030 26,840
12,753
Revenues
(in million)
Profits
(in million)
Profit per car
(in )
19.3% 0.5%
Boxster /
Cayman
4 11,825
Porsche AG
Car Deliveries
Year 2012 2011 2010
World 141,075 118,868 97,273
Europe 49,639 43,748 37,509
Germany 17,487 14,959 13,211
America 41,060 34,350 27,357
USA 35,043 29,023 25,321
Asia-Pacific 50,376 40,770 29,838
China 31,205 24,340 14,785

Europe Porsche car deliveries could only grow by 13.5% in 2012 and all other regions
grew by more than 16.5% in comparison to 2011. Especially, China and USA could
mark significant growth with more than 20% each. Thus, Porsche should strive to de-
velop its business in these regions and seek more innovations in difficult environments
like Europe.
101

3.3.2.3. Value Chain

The value chain for Porsche explains the relevant company activities to create a sustain-
able strategic competitive advantage.
102
Porsches value chain is characterized by a low
vertical range of manufacture and this is underlined by the fact that Porsches suppliers
take over 80% of the manufacturing process. Nonetheless, certain core competencies are
still done by Porsche which include the design of the vehicle concept comprising the
engine production and development and the corresponding marketing. Furthermore, the
supplier network is managed, controlled and developed by Porsche.
103
In appendix 6,
the value chain and fit between VW and Porsche is shown. Both companies have to im-
prove and secure the strategic fit due to their corporate connection and dependence.
104

4. SWOT Analysis

The following SWOT analysis combines the before mentioned industry attractiveness
variables and company aspects regarding Porsche and its competitors. It will provide the
basis for the strategic direction development in the next chapter. Thus, it is of great im-
portance to differentiate between the scope and the influence of certain SWOT variables
on strategic decisions. The internal factors are used for the analysis concerning the
weaknesses and strengths, the external factors concerning the opportunities and
threats.
105
Figure 10 displays the strengths and weaknesses concerning Porsche. It also
shows the opportunities and threats for Porsche.

101
Cf. Porsche AG (2012); Cf. Porsche AG (2013l).
102
Cf. Porter (2004), p.33.
103
Cf. Pfitzer and Pannes (2013).
104
105
Cf. Johnson et al. (2011), pp.157-158.

Figure 10: SWOT Porsche
Source: own figure

4.1. Opportunities

Porsche is confronted with lots of great opportunities for growth in the next years,
though it must act already today to outsmart competitors in the future. The external en-
vironment analysis above reveals that Porsche has to make investments regarding e-
mobility and mobility for elder people. The strong demand from BRIC countries even
offers opportunities for much stronger growth. Furthermore, the strong demand for SUV
can be used by Porsche in case Porsche strengthens its market position in this automo-
tive segment.
106
As life expectations and needs change for many people, sportive cars
can be a much more needed product.

4.2. Threats

Porsche must face the threats from external factors with measures to secure and improve
the own competitive strength. Potential threats for Porsche include the increasing im-
pact of growth markets in regard to development and production issues.
107
Another
threat for Porsche is the increasing demand for low-cost small cars. An intense competi-
tion, low GDP growth rates and political instability can further damage the operating
margins of Porsche in the future. Additionally, rising raw materials and a change in the
tax systems can have tremendeous effects on the profit formula. Suppliers will become

106
Cf. KPMG (2013), p.3.
107
Cf. Ibid, p.4.
- strong premium car brand strength - narrow offer range
- high quality cars - low vertical range of manufacture
- strong market power with parent VW - weak liquidity position
- success and team-oriented culture
- flat organization
- outstanding revenues and profits
- superb innovation and design expertise
- strong value added services
- long-term strategy
- strong collaborations
- cost-efficient and flexible production
- modularization of automotive platforms - shift of development and production to growth markets
- increasing demand for e-mobility - increasing demand for low-cost small cars
- mobility concepts for elder people - political instability and protectionism worldwide
- strong demand from BRIC countries - low GDP growth rates worldwide
- rising buyer demand for SUV - changes to the current tax system
- expansion of sportive cars demand - intense competition
- increase in bargaining power of suppliers
- rising raw material prices
- disruptive e-technology developments
- dilution of Porsche brand image

more powerful in the future and this cuts the profit potential of Porsche even more. The
development of e-mobility will fasten in the next years and pose another threat to Por-
sche. Furthermore, Porsches brand strength is threatened to dilute further if Porsche
targets the mass market even more.

4.3. Strengths

Porsche can count on lots of internal strengths which are the basis for future success.
Especially, the brand power is of enormous importance to financial success. A long-
term strategy and high-quality standards can improve this outstanding brand strength
even more.
108
Porsches cost-efficient and flexible production with its superb innovation
and design knowledge adds to the strength of Porsche. The parent VW even improves
Porsches position, because you can compete on another level as a member of a strong
conglomerate. Strong value-added services and a team-oriented culture are necessary
for such a strong business performance and Porsche has command over this capability.

4.4. Weaknesses

On the weak side, it can be summarized that Porsche still has a narrow product line,
although it strives to broaden the offering. Another weakness is the low vertical range of
manufacture which can backfire in certain cases. On the financial side, Porsche has to
improve its liquidity position to be very healthy on the financial position. VW may def-
initely help here to secure financial stability and add financial strength on the equity
position.

4.5. SWOT Issue & central problem

The above SWOT analysis has revealed the main issues and challenges for Porsche in
the future. It is also necessary to state the most important points of the SWOT and their
impact on strategic actions.
109
An intensive competition forces Porsche to innovate at
an even faster pace than today and a low vertical range of manufacture may be inter-
preted as a weakness in case the suppliers are not on par with Porsche in regard to inno-
vation. Nonetheless, the strong Porsche brand helps to perform excellently in the BRIC

108
109

countries where strong growth for premium cars is a reality. Thus, Porsche has to
strengthen its innovation capabilities and avoid brand dilution by tightening its diversi-
fication efforts.
110

5. Porters Generic Strategies

The following analysis deals with Porters generic strategies in the automotive sector
and their differentiating implementation. The generic strategies determine whether a
company can compete with success and create value for the clients. Additionally, the
competitive edge to be achieved is dependent on a low cost or on a differentiating strat-
egy.
111
Porsche pursues a focus differentiation strategy.
112
This focused differentiation
strategy is based on the core competencies and the value-added actions to improve the
brand strength of Porsche.
113
Porsche concentrates its effort on the premium car seg-
ment and they do it with such a high quality and cost efficiency that they are evaluated
as the most profitable car manufacturing company over the world.
114
Thus, Porsche can
definitely match the premium customer demands and gain an outstanding profit from
the operating business. Porsche acts in a market niche regarding the premium car seg-
ment and the addressed premium buyers are also willing to pay a premium on a Porsche
car due to its brand image and excellent quality. Though, there are risks involved with
Porsches strategy. Competitors could found a brand and create superb cars which
would match and overtake the market position of Porsche. Additionally, customer de-
mands and needs could change over time as well and then other competitors may profit
from this customer shift.
115

6. Ansoffs Growth Strategies & Blue Ocean Strategy

Ansoffs growth matrix can reveal potential opportunities for Porsches further business
growth. Product and market dimension are differentiated and evaluated in the Ansoff
matrix. Porsche is supposed to concentrate on the three cells concerning market penetra-

110
Cf. Kloo (2013).
111
112
Stonehouse et al. (2004), p.180.
113
Cf. Stonehouse et al. (2004), p.180.
114
Cf. Dw.de (2013).
115

tion, product and market development.
116
Regarding the GE matrix from above, Porsche
has to invest and follow a growth strategy, which is also supported by Ansoffs growth
strategies market penetration, product and market development. Thus, Porsche strives to
develop the product base even further and this strategy has to be executed with care due
to the issue of potential brand dilution.
117
Therefore, Porsches strategy 2018 becomes
understandable. Strategy 2018 strives to create value for the customers, the employees
and other stakeholders. Porsches aims to increase the customer loyalty to improve the
brand image and to attract even more premium car buyers.
118
Nonetheless, Porsche has
to innovate constantly and even create a blue-ocean to earn future above-average prof-
its. This could be achieved by a further development of the exclusive flagship store idea
of Porsche. Those exclusive stores allow customers to personalize their cars and in the
future they could provide a full Porsche experience as the customer could enjoy the Por-
sche drive in 3D reality.
119
Furthermore, Porsche has to improve its quality and brand
strength which leads to the creation of a blue ocean, because no competitor has set posi-
tion on such a high level yet.
120
The strategy canvas for Porsche and BMW can be ob-
served in figure 11. It provides an insight of the status of certain competitive key factors
and it offers a potential value curve improvement to create a blue ocean.
121

Figure 11: Strategy Canvas Porsche and BMW
Source: own figure
122

116
Cf. Krakauer et al. (2010), pp.5-6.
117
118
Cf. Porsche AG (2013b).
119
Cf. Porsche AG (2013m).
120
Cf. Krakauer et al. (2010), pp.13-14.
121
Cf. Blueoceanstrategy.com (2012a)
122
Cf. Ibid.

7. Strategic Options Evaluation

Following the above strategic growth strategy, it is essential for Porsche to improve the
own market position even further. This can be achieved by going onto the offensive
towards main competitors. It makes sense for Porsche to constantly innovate its cars and
value-added services to secure a sustainable competitive edge over its rivals.
123

Furthermore, Porsche is supposed to increase vertical backward integration as such,
because else the threat to lose innovation power by a weak supplier is always a variable
to think about. The outsourcing of main capabilities can backfire if Porsche does not
keep the main business activities.
124

A potential solution for the issues involved with the above actions could be strategically
strong partnerships where potential partners can benefit from synergy effects. Therefore,
Porsche should seek strong partners in India or China, both strong growth markets for
the time ahead. Especially, Porsche could need an alliance in India to increase sales
much faster.
125
Additionally, those alliances will help Porsche to gain necessary market
knowledge and have access to essential networks.
126

Table 6 shows the strategic options for Porsche and the specific evaluation on suitabil-
ity, feasibility and acceptability. It is necessary to consider all strategic options for Por-
sche and assess them on the above mentioned criteria. In a next step those preferable
strategies are ranked. The internal development strategy is the best choice for Porsche to
improve internal capabilities and increase the competitive strength of Porsche. In second
position, the product development strategy has to be expanded and the last good strate-
gic choice comprises more market penetration by Porsches cars. This will allow Por-
sche to increase the overall market share and improve the competitive position in a very
competitive environment.
127

123
124
Cf. Ibid, pp.231-236.
125
Cf. Porsche AG (2013k).
126
127

Table 6: Evaluation of strategic options
Source: own table
128

8. Results and conclusion

This strategic review has revealed the strengths, weaknesses, opportunities and threats
concerning Porsches future successful development. VW and Porsche have a strong
future ahead if they follow a compelling route to success. This route to success entails
that Porsche avoids a dilution of its brand strength and that it invests more capital into
innovations. This will strengthen the current focus differentiation strategy and it will
lead to more growth if Porsche also invests in the above two main aspects concerning
branding and innovation. Especially, declining car demand in certain regions has to be
countered with a strong quality car by Porsche. Furthermore, Porsche has to evaluate the
necessity to continue weak models with declining sales as this practice may have a neg-
ative effect on the Porsche brand. The strategy execution demands from Porsche a thor-
ough understanding of the strategic route. Therefore, its necessary that Porsche has
access to highly qualified people, that the organizational configuration is capable to
fulfill the strategic needs and that Porsche has the capabilities to achieve the strategic
and financial targets.
129
If Porsche succeeds in adjusting its current strategy, Porsche has
a very profit-yielding future ahead.

128
129
Evaluation Criteria
Strategic Options
- - - - - - - -
++ ++ ++ ++
+++ +++ +++ +++
+/- +/- + +
+ + +/- +
+/- +/- +/- +/-
+ +/- +/- +
++++ ++++ ++++ ++++
Result
Market development
Diversification
M&A
Alliances
Market penetration III
Internal development I
Suitability Feasibility Acceptability
Consolidation
Product development II

Appendices

Appendix 1: Competitive Strength Assessment
Source: own table
130

Appendix 2: GE Matrix Assessment Ratings
Source: own table
131

130
131
Weight Rating Product
45 0.3 13.5
10 0.9 9.0
5 0.8 4.0
20 0.9 18.0
20 0.6 12.0
100
Indust ry
At t ract iveness
( I.A.) Index
56.5
Weight Rating Product
20 0.9 18.0
20 0.6 12.0
5 0.6 3.0
25 0.8 20.0
30 0.8 24.0
100
Comp St rengt h
( C.S.) Index
77.0
This company is in a relatively good competitive position.
Competitive Strength Matrix (C. S.)
limitation of supply below demand
strong cooperation with best suppliers
cost-efficient and flexible production
This index indicates that this industry is 'middle of the road' in terms of attractiveness.
Key Success Factors
innovative and attractive brand
strong talent management
Industry Attractiveness Matrix (I. A.)
low threat of subtitutes
low bargaining power of buyers
low bargaining power of suppliers
Factors
low competition
high entry barriers

Appendix 3: Balance Sheet Data from 2010-2012
Source: own table
132

132
Porsche AG
Balance Sheet
million
Year 2012 2011 2010
Assets
Intangible assets 2,179 1,757 1,255
Property, plant and equipment 3,310 2,850 2,433
Financial assets 208 130 141
Leased assets 1,386 1,207 1,129
Receivables from financial services 1,088 1,207 1,375
Other receivables and assets 9,675 9,470 9,599
Income tax assets 32 39 46
Securities 0 9 9
Deferred tax assets 158 283 325
Non-current assets 18,036 16,952 16,312
Inventories 1,239 1,051 834
Trade receivables 333 284 242
Receivables from financial services 615 663 607
Other receivables and assets 1,323 1,593 1,108
Income tax assets 37 42 56
Securities 54 99 86
Cash and cash equivalents 1,065 884 670
Current assets 4,666 4,616 3,603
Total assets 22,702 21,568 19,915
Equity and liabilities
Subscribed capital 45 45 45
Capital reserves 5,806 5,806 5,806
Retained earnings 1,881 1,123 803
Equity 7,732 6,974 6,654
Provisions for pensions and similar obligations 1,042 990 922
Other provisions 745 677 605
Deferred tax liabilities 459 340 269
Financial liabilities 5,528 5,679 4,988
Other liabilities 388 562 400
Income tax liabilities 0 3 0
Non-current liabilities 8,162 8,251 7,184
Income tax provisions 45 41 30
Other provisions 1,151 995 732
Financial liabilities 1,484 2,098 3,296
Trade payables 1,278 1,032 761
Other liabilities 2,836 2,148 1,241
Income tax liabilities 14 29 17
Current liabilities 6,808 6,343 6,077
Total liabilities 22,702 21,568 19,915

Appendix 4: Income Statement Data from 2010-2012
Source: own table
133

133
Porsche AG
Income Statement
million
Year 2012 2011 *2010
Revenue 13,865 10,928 3,867
Changes in inventories and own work capitalized 1,016 1,095 258
Total operating performance 14,881 12,023 4,125
Other operating income 537 657 263
Cost of materials -8,124 -6,822 -2,267
Personnel expenses -1,648 -1,349 -511
Amortization of intangible assets and
depreciation of property, plant and equipment and
leased assets -1,114 -871 -338
Other operating expenses -2,093 -1,593 -566
Profit before financial result 2,439 2,045 706
Finance costs -258 -323 -154
Other financial result 467 386 170
Financial result 209 63 16
Profit before tax 2,648 2,108 722
Income tax -808 -648 -218
Profit after tax 1,840 1,460 504
thereof profit attributable to non-controlling
interests 36 29 9
thereof profit attributable to shareholders 1,804 1,431 495
Profit transferred to Porsche Zwischenholding
GmbH -1,312 -871 -330
*Year 2010: August to December only considered

Appendix 5: Cash Flow Statement Data from 2010-2012
Source: own table
134

134
Cf. Porsche AG (2013a), pp.134-135; Cf. Porsche AG (2013j), pp.110-111.
Porsche AG
Cash Flow Statement
million
Year 2012 2011 *2010
Profit after tax 1,840 1,460 504
Amortization and depreciation 1,114 871 338
Change in pension provisions 53 68 34
Cash flow 3,007 2,399 876
Change in other provisions 293 328 1
Income tax expense 658 439 161
Change in deferred taxes 150 209 57
Other non-cash expenses and income -301 -303 -180
Gain/loss from disposal of intangible assets and
property, plant and equipment -106 -104 -28
Change in inventories, trade receivables an other
assets -447 -233 -53
Change in trade payables and other
liabilities(without tax provisions and other
provisions) 285 358 261
Income taxes paid -512 -477 -138
Income taxes received 8 28 11
Change in leased assets -473 -273 -177
Change in receivables from financial services 130 151 146
Cash flow from operating activities 2,692 2,522 937
Cash received from disposal of intangible assets
and property, plant and equipment 264 216 64
Cash paid for the acquisition of subsidiaries less
cash funds received 0 -16 0
Cash paid for investments in intangible assets
and property, plant and equipment -1,873 -1,678 -480
Cash paid for investments in financial assets -13 0 0
Change in investments in securities and loans 53 -13 -13
Cash flow from investing activities -1,569 -1,491 -429
Capital transactions with non-controlling interests -44 -30 -2
Cash paid to shareholders -207 -310 -537
Cash paid for loans -1,554 -1,753 -45
Cash received for loans borrowed 1,798 2,434 308
Cash paid for bonds -814 -1,141 0
Change in other financial liabilities -139 -109 103
Cash flow from financing activities -960 -909 -173
Change in cash funds 163 122 335
Exchange-rate related change in cash funds -3 51 -1
Cash funds as of 1 January 2011 and 1 August
2010 777 604 270
Cash funds as of 31 December 2011 and 31
December 2010 937 777 604
Checks, cash on hand and bank balances 1,065 884 670
Securities 54 108 95
Gross liquidity 1,119 992 765
*Year 2010: August to December only considered

Appendix 6: Value Chain and Fit
Source: based on: Cf. Thompson et al. (2012), pp.303-306.


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ITM-Checklist

Complex of
topics
The sine qua non of
success
Comments/ Suggestions
General Eco-
nomics
Which macroeconom-
ic relevance is associ-
ated with this topic?
From a General Economics perspective, it
is essential to understand how strategic
corporate management works and what is
it good for. When it is necessary to create a
strategic review, it is inevitable to have a
good and deep understanding of market
forms and environments, how demand and
supply has to be analysed and how to eval-
uate and find potential growth markets.
Strategic Ma-
nagement
How is the topics
strategic relevance to
be evaluated, especial-
ly concerning the as-
pects of securing ex-
istence, competitive
advantages, typing up
resources, sustainabil-
ity, and risk?
Developing a strategy, planning a new
product or business leads to issues con-
cerning the planning approach to enter a
market, build up new organisational struc-
tures, negotiating contracts with suppliers
or partners, preparing and maintaining
those alliances and networks and finally
making a valid business change proposal.
Marketing What advantages and
disadvantages arise
out of the suggestions
for marketing
measures, external
impact, and the com-
panys general
productivity?
Which measures
should be taken con-
cerning internal and/or
As kind of a melting pot of different sci-
ences such as psychology, economics, con-
sultancy and general management, market-
ing offers the opportunity for a company to
market its products successful on a market.
Within this assignment, nearly all relevant
aspects related to marketing topics are de-
scribed and evaluated. They sum up the
aspects a general manager must understand
and has to be proficient in.

external marketing?

Financial Ma-
nagement
What criteria have to
be considered when
choosing appropriate
terms of financing?
Which risks are there
and what kind of cov-
erage do you suggest?
How should the influ-
ence of external fac-
tors be evaluated?
Core elements of financial management
need to be understood by each manager as
they are in negotiations on expense budg-
ets for marketing with the financial de-
partment of a company, bank houses or
similar. Therefore, a common understand-
ing of several financial concepts like
fix/variable costs, predicting a realistic cost
/ revenue calculation, return on investment,
break even etc., are necessary to negotiate
on equal terms to underline the demands
by arguments with the help of strong key
ratios.
Business Law Which legal fields are
affected by the sug-
gestions?

Strategic Corporate Management is affect-
ed by commercial law and intellectual
property law which could secure ones
business, but could also build up high fron-
tiers to cross. Especially, on the level of
the European Union, it is important to
know that there is a high coverage of con-
sumer protection by law and that is essen-
tial to conduct adequately.
Research
Methods/
Management
Decision Mak-
ing
What source of infor-
mation should be
practiced in order to
stay up to date in the
field of topics?
Which decision crite-
ria should be practiced
on the choice of alter-
natives?
In preparation for this assignment many
aspects need to be assumed though in a
realistic way. With this in mind the need of
a proper research to find applicable sources
and adapt their outcome to provide the
right input is of importance.

Human Re-
source Ma-
nagement
Which personnel con-
sequence (quantitative
or qualitative) result
from the suggestions?
Most common aspect of human resource
management with regard to Strategic Cor-
porate Management is to allocate best re-
sources wherever possible, to take princi-
pal-agent and/or make-or-buy-decision
into account. For sure a company cannot
allow employing an expert for each single
element, but it is quite necessary to recruit
and employ generalists in marketing as
their views open eyes towards new think-
ing, which is important in vola-
tile/changing markets.
Soft Skills/
Leadership
Which demands does
the realization of the
suggestion require of
the responsible man-
ager?
What leadership be-
havior is expedient?
With formulating a proper and applicable
vision of a product or plan how to develop,
a business leader is able to convince peo-
ple and motivate them to collaborate with
him. To clarify a mission and to design the
way to pursue is both, core and key to a
leader.

Strategic Review of Porsche AG

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as quotations all passages, which are reproduced verbatim or nearby-verbatim from pub-
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its digital version. Further, I declare that this thesis has never been submitted before to
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herewith agree/disagree that this thesis may be published. I herewith consent that this
thesis may be uploaded to the server of external contractors for the purpose of submit-
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purpose of submitting it to plagiarism detection systems is not a form of publication.

Dsseldorf, 17 July 2013

Lars Stark

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