Porsche: Strategy 2018

Porsche has long been the sports car industry leader in profit margin levels, exceeding those of their direct competition by a healthy ten percent.  Matthias Mueller, the new CEO of Porsche, has implemented “Strategy 2018” to keep profit margins high amid the unstable market.  Porsche’s goal is continued growth by value added investment opportunities and expansion.

Mueller states, “We want to remain the world’s most profitable car manufacturer and build on this position. We are going to raise the bar even higher in terms of customer satisfaction, employee satisfaction and product quality.”  The CEO has created Strategy 2018 to uphold and execute this objective.

In 2010, Porsche sold about 97 thousand units globally, and hopes to sell 200,000 units by 2018.  In order to achieve this Porsche will be introducing a new product every year.  This will sustain healthy growth, maintain Porsche’s standing in the market, and favorable reputation with consumers and potential buyers.

Strategy 2018 has four main objectives:

1)    Increase customer enthusiasm by providing a unique purchase and ownership experience

2)    Be an excellent employer and business partner

3)    Generate greater than twenty-one percent return on capital and greater than fifteen percent return on sales

4)    Record sales of more than 200,000 cars at a typical Porsche price premium

Porsche strategy 2018
Volume carmakers generally strive for a two to three percent profit margin.  Competitors of Porsche, luxury carmakers, earn nine to thirteen percent profit margins.  Historically, Porsche has earned a twenty percent operating profit margin.  This outstanding level is uncommon in the automotive industry and Porsche has a set of strong core competencies to thank.

Porsche has established a well-known identity on the basis of these core competencies.  The brand is established, and the eminent emblem is a sign of status and ranking within the sports car industry.  This branding gives Porsche pricing power and allows for the price premium that the auto maker charges.  Next is Porsche’s customer satisfaction and loyalty.  The comradarie among Porsche owners and potential buyers has created a tight-knit community, making one-time buyers lifetime customers.  Next is Porsche’s performance.  Each product line is tested to be highly agile and powerful, keeping it among the sportiest of its competitors.  Finally, Porsche has differentiated itself.  The sports car maker is a trend setter in the market, further justifying and enabling the high price premium.

So is the car worth this price premium?  Mercedes, BMW, and Lexus have long been Porsche’s close competitors, but Porsche’s innovative growth plans seem to keep it at the top of the game while the others lose their edge.

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