Analysis of Porsche Using Porter Five Forces Model
A competitive advantage is being on top of the game over other competitors. This is mostly achieved by offering the customers a greater value for the products and services being offered by the company, by either lowering prices or by providing better products and services to justify the higher prices tagged on the products and services. Porsche is a successful car maker that has been in the market for decades. The car, manufacturing industry is very competitive, and Porsche has had to device strategies that will ensure that the business survives in the competitive business environment. Some of the main competitors are the Volks Wagon (VW), Mercedes and the BMW. The changing business dynamics in the industry forced Porsche management to come up with rigorous strategies to try and survive in the competitive environment. In the year 2008, the company fell into a financial crisis when the company failed to secure funds that would be used in acquiring VW. Porsche had to restructure the companys management so that they could come up with possible strategies to save the company.
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 completion 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. There are a number of factors that can help in locking out new entry into the industry. 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 and be able to compete with the leaders in the industry. Capital will also be needed to keep up with new technologies that are constantly being used to improve the quality of cars, as well as in reducing the manufacturing costs.
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. Another barrier to entry is the ability of the new firm to access the distribution channels available in the industry. It can be difficult for a new company to find a means of distributing its products within the limited dealership lot in the industry. 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. In other cases, government regulations and policies can act as barriers for new entrants in the automotive industry. 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. For example, Suzuki tried to introduce its brand in the United States. The brand was not received well in the American market, and now the company announced that it was leaving the U.S. market.
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 DesignThrough 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 ProductionAccording 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 MarketingPorsche 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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