Porsche’s Strategy, Structure, and

Culture Report (Assessment)

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Updated: Apr 28th, 2022

Porsche AG Background

Ferdinand Porsche, who was a renowned professor, is the one who started the
car manufacturing company as early as 1931. The company initially did not
produce any vehicle with its brand but specialized in offering motor vehicle
development work and consultancy services to other automobile manufacturing
companies.

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The company produced its first vehicle in 1934 when the company was
contracted by the Germany government to design a car for Germany people. The
assignment resulted to the production of the Volkswagen Beetle, which became
a very successful model up to date. The designing and production of the
Volkswagen Beetle, resulted to designing and production of another successful
model in 1939 referred as Porsche 64.

The new car had many components that were similar to those of the Beetle.
During World War II, the production of Volkswagen was tailored to reflect the
military version of Volkswagen Beetle that was referred as Kubelwagen and
Schwimmwagen.approximately 52,000 and 14,000 of the two models were
produced respectively.
During the same period, Porsche also produced various designs of heavy
tankers. At the end of World War II, the position of Volkswagen Company
changed hands and it started to be managed by the British. Subsequently, a
British major Army who was referred as Ivan Hirst replaced Ferdinand as the new
chairman of the company board of management.

Ferdinand was arrested in 15th December 1945 for war crimes but was not tried.
He was released from prison after 20-months imprisonment. When his father was
in prison, his son Ferry Porsche designed another model of vehicle to steer up
the company during that challenging moment and also to own a vehicle he
desired since he could not get any vehicle in the market which interested him.

The car he designed was regarded as 356 model and he designed its prototype
from sawmill. The 356 model is often regarded as the first Porsche model
because it was the first model to be marketed by the fledgling company. Porsche
then built an assembly plant across the street from Reutter Karosserie which is
currently referred as Porschestrasse.

After the World War II, the components of 356 models were in short supply and
therefore the automobile used the Volkswagen Beetle components that included
the internal combustion engines, the suspension and transmission. The 356
model underwent various modifications namely A, B and C that resulted to
replacement of parts of Volkswagen that were being used in early models of 356
by Porsche made parts.

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The last models of Porsche 356 were fully powered by Porsche designed
engines. In 1964, the Porsche 550 Spider model performed considerably well in
motor-racing that leads to the launching of another model that was referred as
Porsche 911. This model possessed a rear engine.

In 1972 the Porsche company legal form changed from limited partnership to
public limited company. The change occurred because Ferry Porshe and his
sisters, Louise felt that they did not team up very well as family, which was
greatly negatively affecting the smooth running of the company.

The change of the legal form of the company allowed other people who were not
members of the Porsche family to become members of the Executive Board of
the company. Majority of the Board members consisted of people that were not
members of Porsche family. There was another parallel supervisory board that
consisted mainly of the members of the Porsche family.

There were no family members that were involved in the operational

management of the Porsche Company. The absence of any member of the
Porsche family taking part in the management of the Porsche company lead to
F.A. Porsche founding his own design company that focused on designing
sunglasses, furniture, watches among many more luxuries products.

On the other hand, Ferdinand Piech, who was responsible for designing the
racing cars, also founded his own engineering company. He designed five-
cylinder-inline diesel engine for Mercedes Benz. The first CEO of Porsche was
Dr. Ernst Fuhrman (Phaeton 32).

Current Strategies Employed by Porsche Company

Porsche Company has been successful in establishing a strong brand within

German and globally due to its quality and stylish automobiles. It is well known
for designing and production of great sports cars for over a period of 50 years.
The company has employed a number of strategies so that to enable it succeed
in the automobile industry and establish a strong local and international brand.
Product Strategy

The Porsche Company has realized the importance of product differentiations as

a competitive strategy in the automobile industry. Porsche Company has
therefore been able to design, produce, and launch a new car model every year.
Its new models are always characterized by enhanced performance and more
desirable special features.

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This enables the company to meet the demand for all its customers. This
includes both its purist Customers as well as those customers that are comfort-
oriented. The company has also realized that the young generation commands a
great population in the current generation and especially in Asia, Africa and north
and South America.

The young generation also makes the greatest population of those people that
are actively involved in the economy in majority of these regions. Therefore,
young people are economically empowered and thus are good target in the
automobile industry. The company has therefore designed and produced special
models referred as Boxsters which are positioned below 911 to lure the younger
customers.

This strategy has greatly boosted the performance of the Porsche Company.
Many younger people have opted to purchase Porsche sport cars due to these
special designs that are very attractive to the young generation. The Porsche
Company has intensively engaged in research work.

The researches they conduct help them to identify new models that assist the
company to argument its product line so that to avoid it exclusively depending on
the cyclic sport cars. The Porsche Company has realized that the tastes and
preferences of customers are subject to change due to the ever-changing
economies, technology and other dynamics.

Subsequently, the company has thus instituted appropriate mechanism in place

to cater for the changes in tastes and preferences of its customers. The Porsche
Company has adapted a concept of terminating the unprofitable low-volume
models and introducing new models that have been designed in accordance to
the results of the market research that enables the firm to identify the needs and
likes of its customers.

Production and Cost Reduction Strategies

The Porsche Company management has realized the importance of cutting down
its production costs in order to be able to sell its products at a price that is
affordable to most of its clients. The pricing strategy is important, especially at
the current economy that is characterized by increased inflation and economic
recessions.

The Porsche Company had opted to increase the outsourcing of most of its parts
like motor management development by Bosch as well as an assembly in
Finland. The company has also adapted the concept of production of common
parts that are compatible with most of its models. This is a strategy it uses to cut
down on its costs of productions.

For instance, the Boxster resembles the 911 model. The company has, in
addition, adapted the module assembly from Toyota which has also helped it
greatly to increase efficiency in the production process that had tentatively
reduced the costs of production greatly. The company has also reduced the
costs of production by working with only very few suppliers who are highly
efficient.
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The Porsche Company had been in the past being characterized by a very
bureaucratic management hierarchy that had greatly hindered effective
communication. Consequently, the management had resulted to poor
performance of the company due to poor sharing of ideas within the company.

As a result, the company took appropriate measures to curtail its ineffective

communications. It instituted a system that greatly decreased hierarchy in the
Porsche Company, which has necessitated communication within the company
significantly. Effective communications have resulted to increased performance
of the firm because all departments are able to share their ideas with each other
on the best strategies to enhance performance.

The sales and marketing department have been able to communicate with the
production department effectively and advise the production sector about tastes
and preferences of the market in order for the designing and production
department to tailor its productions in a manner to address the tastes and
preferences of its customers.

The Porsche Company had established close ties with other automobile
companies that they do not compete directly. These relationships have helped
the firm to learn from each other certain skills that they have employed to
establish a competitive edge over their rivals. Some of the companies the
Porsche firm has related closely include the Audi, the SUV and VW.

Design Strategies

The Porsche Company has been successful in establishing effective designs

such as the Boxster. This design has been able to compete effectively with other
similar designs from other brands such as BMW Z4, Mazda RX8 and Mercedes
SLK among others.

The Porsche Company has priced its product to give lowest profit margins to
enhance its sales in order to help the design model compete healthily with other
similar design from other brands. The company has been able to get an overall
profit of 10% in a 40% sale. The 911 model is the other Porsche design that
competes from those sport cars that are in the 70-150k price range category.

They include models such as Corvette, BMW Z8, Ferrari 360 Spider as well as
Mercedes SL. This is the Porsche design model that is priced to offer the highest
profit margin of 51% of profits in the overall sale. Cayenne is the third design
model that was designed, produced and launched to compete with similar
designs from other brands such as Mercedes ML, Lexus and BMW X5.

The design model is positioned in the high-power segment where it faces stiff
competition. The fourth design model of the Porsche Company is the Super
Sport Car that is often referred as Carrera GT. The car model competes with
similar designs from other brands such as Ferrari Enzo, Mercedes SLR, among
others.

The major external dynamic forces that are affecting the company

There are various major external dynamic forces that are affecting the Porsche
performance. There are some challenges that accompany the integration of the
European Union countries. The integration makes Germany products to compete
with other products on both prices and quality. Germany was in the past,
renowned for its high-quality products. Germany used its quality as its
competitive advantage.

The exposure of the Germany’s industries especially the automobile industries to

compete in terms of both price and quality is likely to affect the performance of
the Germany automobile companies greatly if they will not be shielded from such
a competition.

Similarly, the existence of European single market that is based on a single

currency causes an increased competition within various European Union
governments. Stiff competitions can negatively affect the prices of the
automobiles. This is the reason why the union should institute appropriate bodies
to regulate the pricing of products to facilitate healthy competitions (Weihrich 6).

Some of the external factors are tailored in helping the company to strengthen its
brands both locally and internationally. One of the external factors that have
benefited the company greatly is its ability to establish close ties with other
automobile manufacturing firms such as the VW and the Audi.

Close cooperation between the VW and Porsche Company was a strategic move
for the company to that helped it to improve its performance greatly. The VW and
Porsche Company had a long term relationship that had existed for many years.
The Porsche Company is the firm that was designing the automobile for the VW
Company. It is the Porsche Company that designed the initial Volkswagen model
that later became the VW Beetle.

The Porsche Company and the VW had produced many car models that shared
car components and platforms. The two companies also were closely involved in
sharing research work and development, which enabled them to enhance their
performances to a great extent and establish strong global brands. The two firms
had close ties because of the family bonds that existed among the shareholders
of the two firms.

This helped the two firms to develop new technologies jointly without any alarm
for confidentiality. The Porsche Company was interested in acquisition of the VW
Company due to the many synergies that resulted across a number of areas. By
acquiring the VC Company, the Porsche Company was to enjoy in sharing the
huge costs of electronics that accounted for 30-35% of its development costs.

The Porsche management considered it more economical to spread this cost

over more than 2 million cars that the joint venture was deemed to produce over
its 100,000 cars it produced. The Porsche Company also realized the benefit of
efficient fuel technology it would receive from the VW Company, especially when
there were roaming fears for emission regulations that were to be enacted.

The ability of the Porsche Company to leverage brand in an effort to expand its
product line is very important. This enables the company to sustain high sales of
its automobile in the established markets and at the same time, help it to
penetrate new markets (Evtimov and Keseel 345).

On the other hand, the Porsche Company witnesses various challenges as it

extends its operations within and across borders. One of the company’s major
challenges it faces is stiff competitions from companies that offers similar brands.
Porsche Company faces a lot of completion from high-powered brands such as
Ferrari as well as Mercedes and BMW.

The company has recently witnessed a great decline in of its sales among its
core markets. Great declines have been recorded in European regions which
have been triggered by slow population growth, especially for the young
generation. The Porsche Company has also been highly affected by economic
recessions and the prevalent inflations and currency fluctuations.

Porsche structure, culture, and management

The Porsche Company has a strategic corporate culture. The company believes
that people are the real engine in the company. The Porsche Company has
emphasized its good performance as a result of the competent and highly
dedicated workforce it possesses. It highly recognizes its manual work and
greatly motivates its workforce to increase its morale to work hard.
The Porsche Company encourages its employees to be creative and
courageous. They promote these elements by greatly rewarding those
employees who come up with new designs and technologies. It encourages
every employee to make the best use of every opportunity that presents itself for
his/her own growth and the growth of the organization.

The Porsche Company has invested a lot of money in educating and training its
employees in order to enhance productivity. The company is ever devoted in
training its future specialist through its well-established program that guarantees
long-term quality assurance as well as addressing the socio-political
responsibility especially towards the young generation.

The company is known to possess the biggest number of trainees compared to

other Germany motor companies. The philosophy in Porsche Company is that of
give and take. The company emphasizes most on trust in staff, Originality,
independency, highest level of competence as well as teamwork.

The Porsche Company’s structure encourages short communications route in

order to promote sharing of ideas and greater integrations of staffs into the
organization processes. The company’s structure allows un-bureaucratic
cooperation between or among various departments. This ensures that everyone
is able to develop individually and also being satisfied with his/her own
undertaking in the overall realization of the company’s goal (Henderson and
Reavis 78).

How well the current Porsche’s strategy, structure, culture and

leadership is responding to the dynamic external environment

In the process of coping with the external dynamics that were affecting the
Porsche Company, the CEO Wendelin Wiedeking introduced a different core
competence referred as the lean manufacturing. In addition, he synchronized the
engineering work in order to enhance efficiency in the company. Initially, Porsche
Company had adapted celebration of craft works that had promoted the concept
of individual processes rather than collaboration in the overall product line.

The former strategy became a handicap for the company since engineers
ignored the need for cross-departmental cooperation on Porsche’s car designs,
while at the same time making huge profits for Porsche on outside sales of
engineering services. Wendelin introductions of the new strategy that is also
commonly used by giant automobile industries such as BMW and Toyota greatly
helped to boost the performance of the company significantly (Weihrich 5).

Porter’s factor determinant of regional advantages is closely intertwined to a

regional strength to industrial production. The reason why German automobiles
are very competitive is because of the concentration of various successful
automobile manufacturing industries in one area, especially in the cities of
Munich, Regensburg as well as Stuttgart.

Most of the Europeans largest automobile companies such as Mercedes, BMW

and Porsche are situated in these regions. Locating the Porsche Company in
these regions is a very effective strategy that the Porsche Company has ensured
as a competitive strategy to increase the performance of the company in order to
address the firm’s external dynamics.

Another very strategic opportunity for the Porsche Automobile Company is the
establishment of European Commission. The establishment of this integration
has necessitated the growth of German automobile industries, especially the
Porsche automobile. The Commission has enabled the adaption of a common
currency which has greatly addressed the issue of currency depressions,
especially within the Europeans region.

The depression of the currencies in the Europeans nations was initially affecting
the sales of the Porsche automobiles greatly. The establishment of the European
Union has, in addition, enabled the integration in telecommunication among the
union’s members. This integration in telecommunication has boosted the
Porsche automobile by enhancing communications in Porsche Company.
Improved communications translate to improved performance because the flow
of ideas from one department to the other is improved.

The existence of good communication also means that the company is now at a
better position to communicate with its supplies and other organizations they
relate with in their daily operations. Those companies that supply them with the
needed components are able to relate more efficiently, thus cutting down the
costs of productions greatly that translates to increased performances.

On the other hand, the establishment of the European Commission means that
the movements of goods across the nations are also increased. This increases
mobility of automobile across borders exposing the Porsche automobile to more
competitions. The Porsche automobile faces stiff competition from other
automobiles manufacturing companies. The acquisition strategy adapted by the
Porsche Company has enabled the company to establish a competitive edge
over its rival companies.

The acquisition of the VW and Audi companies helped the Porsche Company to
increase its market share in the automobile market. Increased production helped
the company to enjoy the economies of scale, which help it in reducing the costs
of production. In addition, Porsche Company enjoys the synergy that
accompanies such acquisition ventures.

Some of the advantages that the company has been able to receive as a result of
the acquisition are the ability to produce automobiles that are more efficient in
consumption of energies. The Porsche Company has been able to acquire this
technology from the VW employees that are well knowledgeable in production of
vehicles that are efficient in the consumption of energy.
Efficiency in the consumption of energies has enabled the Porsche automobile
compete healthily in the automobile industry since the cars it produces consumes
lesser fuel and thus are more economical to use.

This has enabled the company to argument is sales greatly because more
people are willing to buy Porsche vehicles since they consume lesser fuels. The
VW ability to produce vehicles that are fuel-efficient meant that the cars they
produce do not pollute the environmental adversely. This meant that Porsche is
able to operate within the emission limits set by the environmental bodies
(Benson 234).

Conclusion

The Porsche Company is an example of a successful firm that has succeeded in

establishing a local brand in Germany and globally. The company uses the
strength of its quality as its competitive advantage. The company has used
various strategies such as acquisition to remain competitive. The company
strategic culture and management that recognizes and rewards its workforce has
also greatly boosted the performance of the Porsche Company.

Recommendations
 Porsche Company should establish learning institutions to educate and
train its employees.
 The company should identify strategic companies it can acquire or merge
with in U.S., Asia or Africa to increase its sales in these regions.
 The company should adapt more economical costs of productions in order
to allow the company’s models to compete well with rival brands both in
pricing and quality.

Works Cited

Benson, Charles. Porsche Automobile Holding SE. New York: Prentice Hall.
2007.
Evtimov, Andrey and Keseel, Hans. Should Porsche Build a Sedan as a Forth
Product Line? London: Cambridge University Press.2001.

Henderson, Rebecca and Reavis, Cate. What’s Driving Porsche? New York:
Prentice Hall.2004

Phaeton, James. Volkswagen’s High-Luxury Sedan Sails into the U.S. Premium
America, Inc. London: Cambridge University Press. 2008.

Weihrich, Heinz. Analyzing the Competitive Advantages and Disadvantages of

Germany Industries. New York: Prentice Hall. 1999