Generic Strategies and PerformanceEvidence from Manufacturing Firms - Case Study Example

Name Instructor’s Name Institution Date Porsche Strategy Context Since its foundation in 1931, Porsche, founded by Dr. Ferdinand Porsche has shown consistent growth and perseverance towards prosperity. The Company is known for outstanding strategy that has seen it transform from a one Section Company situated in Germany to a multi-company corporation with manufacturing various vehicle brands marketed across the planet currently branding the company as a multinational corporation (MNC). Dr Porsche in late 1920’s spotted a niche in the vehicle and automobile manufacturing industry where he determined the market need of a more luxurious vehicle or car brand which even Volkswagen (VWG) Corporation did not provide (Heil et al 128). To meet the emanating demand, Porsche settled on initiating a new vehicle company with his major project being the iconic 911 brand. The brand really attracted a significant section of the worldwide market especially Germany and countries within Europe which ideally assisted the company earn prestige catalyzing the organization’s transformation within the shortest time possible. By keeping close to Volkswagen, Dr. Ferdinand Porsche demonstrated willingness to learn from competitors which is a key aspect of strategic sourcing and marketing (Schulz, Wolfgang and Müller 239-274). Dr. Ferdinand himself designed the Beetle which became one of the best selling brands from VWG Corporation ever since. They also made together Porsche Cayenne Volkswagen Touareg which became exceptional selling brands for the two companies as well. However, the take of Dr. Ferdinand to work that much close with its rival was questionable. The end of 2013 marked a successful year for Porsche Corporation having introduced two brands that is, Porsche 918 which is a Sports Utility Vehicle (SUV) priced at $ 750,000 and Porsche Macan priced at $48,000. The idea of Porsche to develop 918 was highly informed by the increasing need of high class cars to be used in sporting hence the need to strategize for it. By the end of 2014, Porsche had six vehicle brands in the global market consisting of Cayman, 911, Cayenne, 918, Macan, and Panamera. Porsche, in 2012 devised the 2018 strategic plan which is expected to epitomize the general organizational goal. It anticipates hitting annual sales of 200,000 cars by 2018. By 2012 the company was already selling an average of 150,000 cars annually with Macan accounting for significant part of the sales for 50,000 (Heil et al 132). The company has set a strategy to hire at least 1000 plant workers, and 200 engineers which is a perfect human resource strategy towards meeting the World’s sport car needs and to improve the 918 model. Problem With respect to Porter’s Five Forces of Competition, it can be said that Porsche failed to recognize the objectives of competitors. The company worked distinctively towards increasing the organization’s profitability failing to recognize the impact of a competitor to the organization. The decision of Dr. Ferdinand to work closely with VWG Corporation did bring much detriment than benefit to Porsche incorporation. Mr. Ferdinand ended up giving out his idea on Beetle to Volkswagen leading to increased threats of substitutes. Beetle which was primarily his idea turned out to the bestselling brand for VWG up to date. If only Dr. Ferdinand could have used the idea to improve a brand in his company or devise a new brand altogether, the returns could have directly been channeled to the organization. He failed to recognize competitor’s strategy and when the relationship came to an abrupt halt, Porsche became unable to reach its objectives and in the long-run became heavily indebted as a result of hostile takeover by VWG Corporation. This denied the incorporation a chance to enhance product development, penetration strategy, and diversification strategy. Additionally, the idea of take-over by VWG was not well informed. By 2012, VWG had bought 100% shares of Porsche making Porsche explicitly dependent on VWG. A company would be in a position to perform at its best when it makes its own decisions influenced by mostly the internal factors and rarely be the components of the external environment. Being dependent on VWG shall limit the Porsche’s capability to augment innovation, product differentiation and make strategic decisions. Further, it remains dubious launching new and differentiated brands almost at the same time. When Porsche introduced 918 in September 2013 and Macan in November 2013, they expected sales would increase and customers be contented but in ideal scenario, introducing two brands almost at the same time results in cannibalization. This is where sales volumes reduce considerably as a result of conflict of market share of brands introduced (Schulz, Wolfgang and Müller 240). Options Despite the family ties between Piech and Porsche families, Dr. Ferdinand could have kept his ideas to Porsche Company. Implementing the idea in a differentiated manner, not necessarily the Beetle, could have assisted the company boost up its strategy and earn elevated reputation providing it with a better chance to rule over its competitors. If only Dr. Ferdinand could have implemented the strategy in Porsche, the company could have earned much outstanding competitive advantage diminishing the need for business take-over (John, 15). It could have also saved the internal environment of the Porsche. When the takeover was implemented, a significant number of employees had to lose their jobs, corporate objective has to be restructured, and supply system had to be channeled through VWG. Takeover has the problem of complete dependency and insolvency of the second company (Nandakumar et al. 225). The company could have either gone for acquisition or a merger. With acquisition, the company could have just sold part of the total shares but not whole making VWG a shareholder not the primary owner. With merger, the two companies could have teamed up and initiated operations as a single unit owning the business proportionately (Brones et al 17). To prevent cannibalization in future, the company should produce one brand at time, say one brand semi-annually. This would allow a brand to penetrate the market and even expand the company’s product market. Porsche Corporation has however presented a consistent and a robust company life cycle driven by demand growth for various vehicle brands especially sports utility vehicle (SUV). From its introduction in 1931, the company’s sales have been consistently augmented and currently its size is twice the way it was in 1990’s.the increasing productivity is attributed to the increasing rate of product innovation as well as process innovation (Dobbs, 38). Within the last 10 years, the company, which is now a part of VWG Incorporation, has presented at least six brands to the market with Macan and 911 making the major part of the sale volumes. The company has extensively applied technology in its manufacturing processes which has assisted it move from manned production to a mechanized production marked with outstanding efficiency, quality, and minimal errors. The level of technology applied by the company has consistently augmented from the time that the 911 was innovated up to date where the technology is well diffused. The company’s move to enhance its investment in SUV is an exceptional move towards keeping relevant in the competitive environment. The effectiveness of Porsche Company is however under quandary due to the increasing competition from the members of the industry mainly the Chinese companies, Bentley and Lamborghini which are constituent companies of VWG. Other potential competitors include Toyota, Maserati and Jaguar. The company puts to use Porter’s Generic Strategies of differentiating its products, Suggestions Essentially, the company needs to boost its competitive advantage not only amongst the subsequent companies within VWG but also external firms (Chakravarty et al n.d). The company should take a move to segment to its market into sections, say according to customer needs, geographical areas, and demographics. By customer needs, the company should recognize the various sections of the society and their needs such as consumers with sport needs, consumers with official needs, and consumers with luxurious needs. The move of the company to increase production in sports utility vehicle is indeed a necessary move but the company should not ignore channeling concentration on other consumer needs. Additionally, the company should consider penetrating new markets especially the developing countries where the level of competition is minimal as a way of increasing market penetration and expanding the general product market. Further, the company should major ensure that their products are highly differentiated from their competitors setting unique the company’s brands as compared with rivals’ by putting to use Porter’s generic strategies of boosting product differentiation, cost leadership and focus. This begins by the company determining the internal sources of change. This assists in realizing the change drivers and how to address them. The company should as well consider the external sources of change such as the changing customer demands, changing product pricing as well as technological change. Up to date, it can be ascertained that Porsche has worked exceptionally towards meeting the needs of luxurious customers though its brands which majorly are linked to the luxurious segment of the market. The company has made a move to manufacture SUVs which is a great move towards meeting the demands of sport industry though the company is yet to adjust towards meeting the needs of the ordinary customers. The production of Macan, the cheapest brand of the company, was indeed an outstanding cost effective strategy that helps meet the needs of the ordinary customers but satisfaction comes with time necessitating need for new brands. Implementing these strategies shall indeed assist the company be a world class value innovator and be of perfect value to VWG, the mother-company. Work Cited Brones, Fabien Albert, Marly Monteiro de Carvalho, and Eduardo de Senzi Zancul. "Reviews, action and learning on change management for ecodesign transition." Journal of Cleaner Production 142 (2017): 8-22. Chakravarty, Dwarka, et al. "Multinational enterprise regional management centres: Characteristics and performance." Journal of World Business (2017). E. Dobbs, Michael. "Guidelines for applying Porter's five forces framework: a set of industry analysis templates." Competitiveness Review 24.1 (2014): 32-45. Heil, Oliver P., and Daniel André Langer. "Identifying the Luxury Sustainability Paradox: Three Steps Toward a Solution." Sustainable Management of Luxury. Springer Singapore, 2017. 125-144. Nandakumar, M. K., Abby Ghobadian, and Nicholas O'Regan. "Generic strategies and performance–evidence from manufacturing firms." International Journal of productivity and performance management 60.3 (2011): 222-251. Schulz, Wolfgang H., and Matthias Müller. "Procurement Strategy—Levers for Increasing Efficiency in Product Development in the Automobile Industry." Supply Management Research. Springer Fachmedien Wiesbaden, 2017. 239-274. Stark, John. "Product lifecycle management." Product Lifecycle Management. Springer International Publishing, 2015. 1-29. Read More