A Case Analysis

Submitted To: Prof N R Govinda

Sharma
Submitted By: Group- C1
Whats driving Porsche?
CASE FACTS
Porsche acquired majority stake in VW from 31%
to 50%
Competitive advantage of Porsche: Engineering
and design
PEG was a wholly owned customer engineering
development company
By 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




ISSUES
Production process was fat and wasteful
No cross department cooperation
Orders from weak US economy started plummeting
Between 1986 & 1993: Sales had fallen from more
than 50,000 units to 14,000 units
Verge of bankruptcy & feared a possible takeover
Share price fell more than 4% on the day after
Porsche unveiled its first SUV prototype
Perception of corruption of the brand due to its
collaboration with VW
Cayenne: Faced quality issues


TURNAROUND
New CEO Wendelin focused on building new core
competencies in lean manufacturing and
synchronised engineering
He also worked on building cross dept cooperation
and collaborating entire production line
Introduced team concepts and processes followed by
industry giants: Toyota, Nissan & BMW
Decision to extend product line beyond sports car
niche to SUV and luxury Sedan segment
Produced SUV in collaboration with VW at its factory
2005: Porsche announced partnership with VW to
produce luxury sedan
PEG remained focused on outside engineering
services



OUTCOME
Porsche income topped $9.4 billion on revenue of
$10 billion
Sales & revenue doubled in 6years through organic
growth
Diversified portfolio helped Porsche cater various
segments
Became more resistant to economic ups and downs


VW Takeover
Porsche was a small independent player focused on
performance sports car market with selling about 1
lakh cars a year
VW 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
confidentiality
The ability to scale and create synergies across a
number of areas were 2 driving forces that led to the
partnership
On a macro level this helped Porsche protect itself
from ups & downs of auto-sector

Challenges
Many 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 sedan
Concerns about cultural issues were also raised
keeping in mind Daimler-chrysler case
Uncertainty about clients who were serviced by PEG
rethinking their relationship with Porsche
Still,
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