Porsche Case Study
1. Repositioning from focused differentiation to broad differentiation involves the risk of losing Porsche’s brand name and identity. Currently, focused differentiation ensures Porsche’s identity as a sports and race car manufacturer through satisfaction of the needs of a certain niche. Increasing focus on other consumer segments and strife to reduce dependence on sports models changes the company’s image (Dirisu, Iyiola, and Ibidunni 260). Already now Chinese Cayenne owners are unaware of the company’s identity as a sports car manufacturer. Nevertheless, broad differentiation strategy involves the benefits of increased consumer base, sales, and profits. During 2004-2005 and since 2008 Cayenne has been the major source of the company’s sales growth. In 2012, Cayenne and Panamera together accounted for 73% of the total Porsche’s sales volume. In this regard, Porsche can be successful in carving out a new strategic position as a broad differentiator. As its advertising campaign “Engineered for Magic. Everyday” shows, its cars can be broadly used by different people for different purposes including daily activities. However, the strategy may be not very good for the company’s long-run perspectives as Porsche risks to become a more conventional manufacturer while its peculiar features may be lost.
2. Volkswagen pursues related (also referred to as concentric and horizontal) diversification as it uses its Volkswagen, Audi, Bugatti, Porsche, Bentley, Lamborghini, Skoda, Seat, and Scania brands and integrates within the same industry. This corporate strategy involves such benefits as greater operational efficiency and lower rivalry. Volkswagen can benefit from cross-business value chain and resource match-up. Resources can be transferred between businesses. Thus, costs can be reduced (for instance, unit cost can fall) while profits and flexibility will increase. In addition, product differentiation increases which attracts more consumers and enhances sales. Market rivalry falls as several manufacturers work under one brand. Volkswagen’s bargaining power over suppliers and buyers also increases (Zhou 4-5). The disadvantage of the strategy concerns reduction in the firm’s value due to frittering among different products and models. In addition, the strategy requires much cooperation and cannot rely only on financial controls and market-based disciplines to achieve synergy (Zhou 5). Related diversification assumes the same production stage and may impede development. In this regard, the company’s competitiveness may fall in the long run (Hiriyappa 97).
3. While attempting to be the world’s leader in unit output, Volkswagen should consider such pitfalls as reduction in product quality and negative effect on the company’s image. Volkswagen’s strife for increasing unit output and sales may cause focus on those car models that have the highest demand and thus, can boost unit sales. Herewith, these models may involve lower quality, speed, and price. In this case, the company’s image as a superior car producer may be severely hit as its offers will gradually become worse. Volkswagen could avoid these issues through the use of quality control and quality enhancement techniques, such as total quality management and continuous improvement. For example, the Group and its local companies already have quality policy involving customer orientation, …