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By:
Audria Adelia Prameswari (29115361)
Presdya Nandi Wardhana (29115338)
Sekar Wisma Wiridiana (29115360)
More than 50 years after its birth, the 911 remaining the heart and soul of
Porsche. However, it is no longer the companys best selling model. The
number one spot has been taken by the Cayenne, a five seat sports utility
vehicle (SUV) launched by Porsche in 2002. The Cayenne has made Porsche
more appealing to people who are not sports car drivers but are happy to own
the sportiest SUV on the market and make no idea about Porsches true
identity as a high-performance sports and race car manufacturer.
In the years leading up to the global financial crisis in 2008-2009, Porsche was
attempting a hostile takeover of the much larger Volkswagen. Next as the
global financial crisis took hold, Porsche collapsed under a heavy debt burden
caused by the hostile takeover attempt. Volkswagen turned the tables and took
over Porsche and now Porsche now a division of Volkswagen, is clearly
gunning for economics of scale as it ramps up unit sales, and VW overall is
aiming to be the global leader in sales units.
Volkswagen corporate strategy is not without its critics. They are very much
concerned about brand dilution, in particular at Porsche but also other VW
premium brands, including Audi. However, although VWs total net income
may have increased, the groups profit margin are too low, which necessitated
implementation of company wide cost cutting program.
In fall 2015, VWs CEO was forced to resign in light of an emissions cheating
scandal and was replaced by Matthias Muller. Not only must VW now face
repercussions of recalling and retrofitting 11 millions vehicle the world s
largest vehicular recall it must also suffer billion of dollars in law suits and
fines throughout the world, from which it may take years to recover.
CHAPTER 2
PROBLEM IDENTIFICATION
(Ozbas & Scharsfstein, 2010; Maksmovic & Phillip, 2007). Still others have
shown that diversification and
performance linkage depends on business cycle. Santalo and Becerra (2004)
explain conceptually and provide empirical evidence that no relationship
exists (positive, negative or even quadratic) between diversification and
firm performance. Santalo and Becerra (2008), concurring with Stowe and
Xing (2006), broadly conclude, (a) the empirical
evidence is inconclusive (b) models perspectives and results differ based on
the disciplinary perspective chosen by the researcher and (c) the relationship
between diversification and performance is complex and is affected by
intervening and contingent variables such as related versus unrelated
diversification, and mode of diversification.
In the words of Daud, Salamudin and Ahmad (2009), studies in the areas have
tended to provide inconclusive results due to inconsistent data, different time
frames, different performance measures and moderate variables. Mackey
(2006) argues that the contradictory results are related to; different timeframes,
various measures of profitability and different measures of diversification.
Andreou and Louca (2010) assert that the confusion is partly methodological
and partly theoretical. However, the diversification- performance puzzle was
summarized in the theoretical models outlined below as the theoretical
framework is reviewed.
CHAPTER 4
CASE ANALYSIS & SOLUTIONS
From the case, we know that Porsche is trying to enhance its core competence by
doing corporate diversification. The type of diversification that Porsche does is
product-market differentiation. But, to become a board differentiator is not as easy as
it expected.
1. with the same resources, focusing on differentiating one aspect should produce
more attracting result than trying to differentiating all aspect does.
2. by being a board differentiator, Porsche might lose its brand recognition because
of the unclear positioning. Porsche used to focus on its niche market Sports car
market. However, when Porsche is a car company that produce not just sports car,
but also SUVs, sedans, and tracks, how should customers relates this company to
Porsche? Car industry as such a high competitive industry, there are a lot strong
competitors who are good at producing each kind of cars, like GMCs tracks.
So if Porsche is trying to produce tracks and differentiate them from the others, how
much should Porsche spend to compete with GMC? It will be a lot. Finally, Porsche
used to produce few cars but with high quality. Now, by expanding production lines,
the rapidly increase of quantity somehow will reduce its cars quality. Like in the case,
VW is experiencing the worlds largest vehicular recall because of quality problems
with diesel emissions cheat software in more than 11 million vehicles worldwide
(Rothaermel, 2015). Having quality problems might destroy a car company. In
conclusion, I think Porsche would not be successful in carving out a new strategic
position as a broad differentiator.
VW is now pursuing the horizontal diversification, which is able to offer products for
different markets and different customers. The strength of this strategy is that by
attracting customers from the rich who will buy luxury cars like Porsche, to the
middle class who can only afford Skoda and Seat, VW will gain more market share,
sale volume (in units) and net income. Also, VW can achieve reduction of competition
by diversifying its products to different market, so that its own brands will not need to
compete themselves. The disadvantages are increased risks, reduction in flexibility,
and losing focus of each division of its portfolio. Since VWs portfolio covers many
different market, it will suffer risks from every markets. Also, by having such a board
product portfolio, it is quite hard to change, like getting rid of the unprofitable
companies because of the large cost of exit. Losing focus of each division of its
portfolio is like what the case said, since VW has such a board portfolio with so many
different strategies, it sometimes unable to figure out the right direction for each of
them, because each one of them should have a different strategy. For example,
pursuing sale volume is not a suitable goal for the luxury brands like Porsche, since
they are supposed to focusing on quality development, but not the sales quantity.
CHAPTER 5
CONCLUSION & RECOMMENDATION
CONCLUSION
In that fable, the famer actually take-away the golden gooses ability to produce the
golden eggs. For Porsche, it risk killing the golden goose, since Porsche is losing
focus on what it does best, but shift to a goal that not really fit its brand, which is the
units of sales. Porsche is known by its sports and racing car, but now it keeps its focus
on the SUVs and sedans because of the larger sales units. Customers might be
confused with Porsches positioning: is Porsche still the worlds finest performance
car manufacturers? (Rothaermel, 2015) Sports car should be the one brings the
golden eggs to Porsche, but now as Porsche keep developing in SUV and sedan,
and focus more on units of sales than the quality, it might eventually lose its golden
goose
RECOMMENDATION
CHAPTER 6
LESSON LEARNED
From this case we learned that to be a market leader in the industry, do not
ever losing the quality while chasing the unit output. And also do not sacrifice
profit to earn unit of sales. A company need to be profitable in order to keep
running its business. So reduced price is not a good long term strategy for its
goal. Finally, try to keep what the company does best. Do not kill the golden
goose.
REFERENCES