Whats driving Porsche?

A Case AnalysisSubmitted To: Prof N R Govinda SharmaSubmitted By: Group- C1Whats driving Porsche?

1CASE FACTSPorsche acquired majority stake in VW from 31% to 50%Competitive advantage of Porsche: Engineering and designPEG was a wholly owned customer engineering development companyBy 2007 Porsche was worlds most profitable automaker on per unit basis & operating margin was nearly 20%Spent 12% of revenue on R & D compared to an industry average of 4-6% 19% of its employees worked in R & D facility compared to 6% in VW

2ISSUESProduction process was fat and wastefulNo cross department cooperationOrders from weak US economy started plummetingBetween 1986 & 1993: Sales had fallen from more than 50,000 units to 14,000 unitsVerge of bankruptcy & feared a possible takeoverShare price fell more than 4% on the day after Porsche unveiled its first SUV prototypePerception of corruption of the brand due to its collaboration with VWCayenne: Faced quality issues

3TURNAROUNDNew CEO Wendelin focused on building new core competencies in lean manufacturing and synchronised engineeringHe also worked on building cross dept cooperation and collaborating entire production lineIntroduced team concepts and processes followed by industry giants: Toyota, Nissan & BMWDecision to extend product line beyond sports car niche to SUV and luxury Sedan segmentProduced SUV in collaboration with VW at its factory2005: Porsche announced partnership with VW to produce luxury sedan PEG remained focused on outside engineering services

4OUTCOMEPorsche income topped $9.4 billion on revenue of $10 billionSales & revenue doubled in 6years through organic growthDiversified portfolio helped Porsche cater various segmentsBecame more resistant to economic ups and downs

5VW TakeoverPorsche was a small independent player focused on performance sports car market with selling about 1 lakh cars a yearVW group soled more than 6 million cars with revenue toping $160 billion Their alliance based on old family relationship allowed them to develop technology without concern for confidentialityThe ability to scale and create synergies across a number of areas were 2 driving forces that led to the partnershipOn a macro level this helped Porsche protect itself from ups & downs of auto-sector

6ChallengesMany expressed their concern that VW would prove to be a distraction to Porsche particularly at a time when it is about to enter a new car market with a luxury sedanConcerns about cultural issues were also raised keeping in mind Daimler-chrysler caseUncertainty about clients who were serviced by PEG rethinking their relationship with PorscheStill, What was certain was that Porsche was no longer a small, nimble car maker focused on the luxury sports car market With VW under its wing Porsche would be seen everywhere

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