Porsche is a major player in the automobile industry that specializes in the production of sports cars. The company offers its clients unique designs of cars of the models such as 911 models, Boxter, Cayman, Cayennes, and Panamera. These cars came into inception with the development of hybrid technology in car manufacturing, which resulted in the production of luxurious and speed cars. The company is owned by the Volkswagen Company that traces its origin to post-World War II times (Mulligan, 2013). The company owes its success to the effective techniques of the marketing department. Thus, they translate to a total annual sale of about 98,652 cars both domestically and internationally. Currently, the company enjoys the highest profit per unit sold of any car company in the world. Porsche’s success is equally attributed to efficient financial services that accommodate individual needs and driving habits (Parment, 2014). This paper is purposed to show that the financial and marketing resources alone cannot foster the success of Porsche, but it also needs supportive measures from other factors in the industry.
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Parse’s Top-Ranked Segments in the Automotive Industry
Porsche’s top-ranked segments are the financial services department and the marketing department. The two have been attributed to enhance remarkable customer adequate levels and industrial practices effectively.
Financial Services Department
The financial department of Porsche is dedicated to offering value-based prices to the customers. Financial techniques employed by the financial department include leasing and retail financing. These strategies have proved useful since they allow the company as well as the potential customers to enjoy key benefits such as compelling rates, minimum initial cash outlay, attractive insurance, and direct payment programs. The leasing strategy is designed in such a way that clients enjoy monthly payments with flexible terms. Such an initiative serves as an alternative purchasing method that attracts customers who do not have the cash to purchase the vehicles (Ayd, 2010). Additionally, the minimum initial capital requirement that creates a lease-end residual value makes purchasing a Porsche car a sound financial option for many. Alternatively, Porsche’s retail financing services provide a competitive interest rates program favorable to their clients. Additionally, the financing terms allow consumers to purchase a range of cars that suit their financial position, for example; the availability of both used and new cars from Porsche creates a wider variety for customers to choose from in accordance with their economic status.
The leasing and retail financing services techniques have positively contributed to high-profit margins due to good sales of the company’s cars and compelling rates that create equality with every payment made. The value propositions of the brands provided perfectly match the sum of cash paid for each time. Additionally, the minimum cash outlay for individuals who opt to purchase Porsche cars via leasing financial plan is quite impressive (Ayd, 2010). There is often no down payment required to purchase Porsche cars. The initial cost is included in the financial contract between the buyer and the company. Further, the Porsche retail plan allows clients a $1,500 deductible standard insurance charge (Rosengarten & Stürmer, 2006). This program saves customers a great deal of paying their insurance plan, which makes it efficient and economical as compared to other vehicle manufacturing companies. Finally, the direct payment program, which is deducted from monthly checking account, automatically ensures that clients do not forget to clear their bills with the company; hence, there are no additional charges due to default in payment.
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Porsche uses club coordination method to win its corporate market. Competitively, the company coordinates the roles of each key player in the market setting. For example, the sales partners, importers, subsidiary sellers, and retailers are significantly singled out and linked to the organization via a public contact to deal with sales such as placing orders on demand. This aspect creates a mutual understanding and timely delivery of the brand in question, thus improving effective customer relations. Both the national and club coordination teams equally offer support to Porsche planning and organizing of projects. The interface connects Porsche dealers, importers, subsidiary companies, and Porsche clubs (Parment, 2014).The clubs allow strategic management of its activities by tracing any records of poor quality in service delivery. Such an initiative helps clients to build trust in the brand; thus, efficiency and accountability are highly advocated. The clubs also create recognition of Porsche industry in a broader context and environment and maintain structural development and Porsche’s principles. Further, communication and information to customers are spread across all departments and market dynamics. Requests, advice, support, and consultations from the clients are addressed amicably and timely (Parment, 2014). Finally, club members enjoy a tour to Porsche factories to familiarize themselves with new designs on the market as well as knowledge concerning automotive industry. Such visits give them a broader selection and financial decisions as per their current needs and financial position.
Forces of Competition
Porsche operates in a wider environment with various effects of competition. These forces include supplier bargaining power, buyer bargaining power, threats of a substitute, new entries, and the nature of the rivalry. Supplier bargaining power in Porsche is little since the company has a wider number of vendors who compete on a worldwide basis, thus lowering raw materials costs. Equally, the company manufacturers its vehicle component; therefore, the switching costs between suppliers is low as well. Porsche operates in a market segment where other businesses cannot thrive quickly, which gives it a competitive advantage over its rivals. The large economies of scale, brand loyalty, and high switching costs position Porsche at the top of the ladder regarding new entries. The company’s stressing factors are threats of substitutes and the buyer power (Mulligan, 2013).
Threat of Substitutes
Porsche faces competition from other brand developers limiting its market share within the global market. For example, BMW M6, Jaguar XKR, and Audi R6 among others are possible competitors of Porsche. These competitors make the middle-level market of Porsche a challenge based on the social trends and perceptions. To manage this problem, the company’s marketing department has diversified the crucial markets such as Europe, Japan, and the USA (Mulligan, 2013). Such a move has enhanced Porsche’s consistence.
Consumers play a significant role in the industry’s revenue. The transactional power of Porsche plays is quite important for shaping the purchase of its brands. Buyers have a little transactional power on Porsche’s high-performing vehicles. This issue limits customers’ repetitive activities, hence low-profit margins on such vehicles due to high switching costs and price sensitivity. In such a context, the middle-class and low-class buyers are blocked out from accessing these vehicles, which makes Porsche favorable to the wealthier persons. The company manages this challenge through its financial department, where it allows its customers to lease vehicles as an alternative purchasing method, (Ayd, 2010), and minimizes the initial capital requirements.
Strategies to Counter Competition Forces
To manage the forces of buyers’ power and threats of substitutes, Porsche should maintain and improve its product quality through innovation. Additionally, it should diversify its products. Technological innovations may be a solution to Porsche to solve the forces of competition ensuring their customers obtain the best product quality. The management should incorporate the marketing department with the manufacturing to ensure that quality and designs meet consumers’ needs. For example, speed, luxury, temperature, and spare parts would attract more customers to using Porsche’s cars (Mulligan, 2013). Additionally, product diversification would work for the best of the company. Creating a vast pool of customers is highly dependent on the availability of various designs and products. The management with the help of the marketing section should do research on prospective customers to gain data on their tests and preferences through surveys and in-depth interviews (Bullard, 2008). This factor should ensure customers that their needs are well catered for, which will allow the company to tap into the new markets. The financial department should equally play a role in evaluating the legibility of the proposed projects as far as research is concerned.
The customers are alienated against the brand by reducing their bargaining power in the market hemisphere. Alienating customers would lead to losing brand loyalty; hence, a shift in the market position will give the competitors an advantage to triumph over the market dynamics. Moreover, Porsche faces a threat of trademark dilution. The CAFÉ regulations on automotive industries to be effective in 2020 are a major challenge to Porsche since the company runs a risk of losing its market in the USA. Such a move threatens the company regarding profit margins and market share.
German citizens take pride in using their manufactured cars. Therefore, most locals prefer Porsche’s products to other brands, which means a good economic support from homeland for Porsche. For instance, Porsche consumed car brand from the locals is 30% of the total cars produced. Therefore, such patriotism spirit boosts Porches’ domestic market leading to high-profit margins (Ayd, 2010).
The company equally enjoys benefits of high customer loyalty. Customers who subscribe to innovation and technological advancement greatly use Porsche’s cars due to their luxury nature. Such customers are so loyal to the company and they would like to be identified with the enterprise’s products irrespective of the price, provided their social class be maintained to keep their prestige.
Further, the company has a strong brand image. Porsche’s established market is linked to high quality, speedy, and luxurious cars. Such a history is adequately sufficient to convince potential customers to buy products and services from the company. The durability of the brand equally gives Porsche a good corporate image one would wish to associate with in the business. Additionally, sports cars are used in sports activities, thus marketing the brand to prospective buyers and creating a positive brand image (Parment, 2014). Further, the company’s core values, such as teamwork trust and responsibility, work for the company, attracting a huge customer base.
Finally, the availability of skilled workforce from the human resources competitively helps the company make its engines; therefore, low costs of production are experienced by the organization. The price advantage saves the company the burden of outsourcing labor or engine importation. Practically, the vehicles made by Porsche are quality and price relative, so they attract more customers.
Porsche enjoys from multiple technologies by incorporating world-leading companies to its innovative edge. Such an initiative has enhanced various developments in the manufacturing department of the company via large research units to link the final products with the needs and tastes of the organization (Parment, 2014). For instance, the hybrid locomotive engines that move at a supersonic speed preferably for sports events came into inception as the result of technological advancement.
Porsche has also diversified its market niche via globalization to spread its branches into foreign markets for example in China and Asia. Such a move has positively influenced the company by increasing its market share against its competitors. Newer undeveloped markets of Africa and South America have been tapped by offering quality vehicles at a favorable price, thus attracting a huge customer pool (Rosengarten & Stürmer, 2006).
Management conflicts between Porsche and Volkswagen as the leaders in the industry are a repetitive threat to the organization based on ownership and patent rights due to their collaborative nature. Each party opts to protect its interest against the other, amounting to a conflict of interest and leading to delayed production schedules. The company is equally obsessed with its expansion in a bid to win international and local markets. In most instances, the management devises approaches of licensing. This issue may lead to neglecting essential elements within the market range, such as population and preferences, leading to low product viability and quality as well.
Methods of Dealing with the Greatest Threat and Opportunity
The main threat facing Porsche is brand dilution. Majorly, this threat can be mitigated via brand diversification to develop more vehicles that will be acceptable globally. This factor can be enhanced via collaboration with other patent businesses (Baur, 2015). The initiative will give the company an existence if the CAFÉ law is applied in the USA, hence maintaining its profit levels.
Contrary to the threat is an opportunity that lies in the availability of skilled workforce. Job enrichment would be used in this context to enhance maximum skills utilization and professionalism in the workplace. Training would ensure that workers are well equipped with appropriate expertise and knowledge with regard to the current technology. Taking into account the demands of employees within the organization, that would yield a positive output of quality products due to high levels of satisfaction.
Strategy to Maximize Its Strengths
Deducting investment plans, which are innovative in nature, will competitively help the company to keep its agenda of technological apprehension. The take towards its resources, such as capital, should be adequately monitored to ensure they are not depleted nor awfully consumed. Therefore, this means that the management is tasked with a responsibility to devise clear and concise communication strategies to avoid operational mistakes that may cost the company its financial position. Further, resources should be monitored adequately to establish proper use within the workplace and other areas of interest (Parment, 2014).
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Strategy to Fix Weaknesses
It is evidenced that the company is bound to experience conflicts of interest. To solve such issues, realist theory of international relations would apply to ensure that each party plays its part by taking into consideration the anarchy and interests of each party amicably.
Porsche’s Resources, Capabilities, and Core Competencies
Porsche actively invests in infrastructure to attract its clients into buying its cars. Such a move serves as a great marketing strategy for the company, giving the company a good corporate image. This issue boosts the morale and applicability of brand wagon into various parts that help in winning the market dynamics. Secondly, Porsche enjoys from a wider pool of resources due to a broader economy of scale. This competitive advantage gives the company a position to develop its cars at a lower price against its competitors (Baur, 2015). The lower price acts as a hook to clients; therefore, a broad market is created as well as huge profit margins. The broader economies of scale work to the advantage of the company by giving it a wider market penetration to sell its products and services globally.
Porsche’s Value Chain
Porsche value of chain is mainly vertical in nature since it incorporates various sales persons and agents who link the final consumer to the company. At every stage, different demands should be taken into account. Such may include information, inquiry, and communication (Parment, 2014). Therefore, the management meets such needs to increase credibility, efficiency, and to maintain customer trust. For example, the company’s website serves the purpose of informing the interested parties about the company’s progress and product range.
Porsche‘s success is attributed to effective financial and marketing strategies. The financial department influences the clients through user-friendly value-based prices. To enhance this, the company leases its products and uses retail financing. These strategies have proved useful since they allow the company as well as the potential customers to enjoy key benefits such as compelling rates, minimum initial cash outlay, attractive insurance, and direct pay programs. On the other hand, the company uses clubs to enhance marketing by giving information to customers across all departments and market dynamics. Requests, advice, support, and consultations from the clients are addressed amicably and timely. However, Porsche is affected by forces of completion such as threats of substitutes and buyer power. To counter this, the company diversifies its markets and improves its product quality. Competitively, Porsche can convince its clients through its vast source of capital, economies of scales, collaborative strategy, multinational business operations, and a strong brand image. This issue gives it a placement in the appropriate market sector.
It is evident that Porsche has a greater defined future within the automotive industry. Thus, it is the management’s role to ensure that it plays safe regarding resources mobilization, building brand image, maintaining quality through product development and innovative technological approaches among other key methods for its existence on the global market. Hence, mechanisms should be created to deal with weaknesses and threats that the company faces to avoid failure in achieving its goals.