1. The minicase began with Aesop’s Fable of “The Goose That Laid the Golden Egg”
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Question
1. The minicase began with Aesop’s Fable of “The Goose That Laid the Golden Egg” What is the take away of this fable? Is Porsche killing its golden goose?
2. For many decades, Porsche pursued a focused differentiation strategy. Using a clear strategic profile as a focused differentiator. Porsche was very successful and very profitable. More recently, the Porsche brand is repositioning itself from focused differentiation to broad differentiation by changing its competitive scope. What are the risks inherent in such a strategic positioning? What are the benefits? Do you think Porsche will be successful in carving out a new strategic position as a broad differentiator? Why or why not?
3. Porsche is expanding rapidly through both related and geographic diversification. DO you consider this business strategy to be successful? Why or why not?
4. Volkswagen ranks with GM and Toyota as one of the top-three carmakers in the world today in terms of sales volume (in units). It uses its Volkswagen brand, as well as its entire portfolio of other brands, including the luxury marques of Porsche, Audi, Bentley, Bugatti, and Lamborghini, and at the lower end, the Seat, Skoda, and Scania. What type of diversification is Volkswagen pursuing? What are the advantages and disadvantages in VW’s corporate strategy?
In the recent past, both GM and Toyota ran into problems as they chased the goal of becoming the world’s leader in terms of unit sales. GM achieved this goal but lost billions of dollars in the process and ended up in bankruptcy (in 2009). Toyota then pushed output and briefly held the number-one spot in terms of unit sales, but found that the emphasis on increasing output meant that quality issues arose, which then negatively affected its reputation. If you were asked to advise VW, what pitfalls
MiniCase 11 Is Porsche Killing the Golden Goose? One day a farmer going to the nest of his goose found there an egg all yellow and glittering. He took it and found that the egg was pure gold. The farmer could hardly believe his luck! Every morning the same thing occurred, and the farmer grew richer day by day. Thinking he could get all the gold at once, he killed the goose. After he opened it, he found nothing United States and China, the two largest markets of Porsche overall. In fact, China has become the largest market for Cayenne, and the model will continue to be the strategic sales focus of Porsche in that coun try. Roughly two-thirds of the 40,000 Porsche vehicles sold annually in China are Cayenne models. This is because wealthy Chinese don't drive themselves, but prefer having a chauffeur -Aesop's Fable 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. While the model expansion may upset the purists, Porsche did Porsche has been one of the world's finest perfornot stop there. In 2005, Porsche announced its plan to build the Panamera, a premium-category four-seat WHEN PORSCHE REVEALED its 911 sports car design in 1962. it caused a worldwide sensation. Ever since, mance car manufacturers. The Porsche 911 is a leg market with a small output every year, Porsche was endary sports car icon. Although focusing on a neSorts sedan, to further extend its customer base. This new line was launched on time in 2009 and like Cay- the 911 for the first few years after its extremely profitable. Even today, it stl enjoys the enne, it outse all major auto manufac- launch. Porsche kept the model proliferation momen turers, thanks to the hefty premium it can commandtum, and in 2012, it revealed the Macan, a compact SUV. It was launched in 2014 and quickly became the second-best-selling Porsche model behind the Cayenne In the first year, Porsche sold 45,000 Macans. In total, Porsche sold over 110,000 SUVs in 2014 (Cayenne More than 50 years afters birth, the 911 remainsand Macan) while only 30,000 Porsche 911 models. for its cars. Brand Proliferation Its SUV sales now make up close to 70 percent of all Porsche sales. Given the huge success of the Macan in its first year, Porsche is forecasting to sell 72,000 the heart and soul of Porsche. However, it is no lon ger the company's best-selling model. The number- one spot has been taken by the Cayenne, a five-seati sports utility vehicle (SUV) launched by Porsche in 2002. Porsche views the Cayenne as a way to reduce the company's dependence on the traditional sports models and to provide for future growth in sales and Macans in 2015 The essence of a Porsche -a high-performance sports car-seems now to take a back seat. Although built "experience centers" in China the company has profits. The Cayenne may be the most successfuand the United States to cultivate sports car enthusi asts, Porsche sold only some 30,000 units of the 911 model launch of Porsche since the 911: Porsche sold as the 200,000th Cayenne only six years after its debut at the Paris Motor Show. Global sales for the Cay enne reached a record 84,000 units in 2013, account ing for almost two-thirds of the company's overall sales volume (see Exhibit MC11.1). The popularity of the Cayenne is seen across regions, especially in the Frank T. Rothaermel prepared this MiniCase from public sources. He grate- fully acknowledges the contribution of Carrie Yang on an earlier version and James Hoadley for research assistance. It is developed for the purpose of class discussion. It is not intended to be used for any kind of endorsement, source of data, or depiction of efficient or inefficient management. All opinions expressed. and all errors and omissions, are entirely the author's. Revised and updated August 25, 2015. Frank T. Rothaermel. 454Explanation / Answer
Ans 1: The take away of the Fable is that the source of the business or the creator should not be killed for short-term apparent gains. The facts of the business and the source should be nurtured to give better returns.
The Porsche did kill its goose by trying to take over Volkswagen in 2008-2009 a company much larger in market revenue i.e. 110 billion Euro compared to its revenue of 13 billion Euro, almost eight times bigger. The result was that Porsche crashed under a heavy debt and Volkswagen took over Porsche in 2012. The main reason was a family feud.
Ans 2. The brand differentiation strategy is applied across the industry to appeal to many shoppers and does not focus on a niche target segment as the focused differentiation strategy for example sports car. It will have features to meet the requirement of all sports enthusiasts, whereas Porsche was known to be an upmarket brand targeting a high profile clientele and adding to the status of the consumer by its purchase.
The disadvantage is it takes away the shine of the brand as being an exclusive upmarket product and could command a premium due to its high profile customer appeal. The advantage is they can have a bigger target market and create more demand. This can increase sales and lead to higher revenues.
Porsche can carve out a new market by a broad differentiating successfully because they are already acknowledged as market leaders, the customers associate it as a quality brand, and the customers are aspiring to acquire a Porsche and would be happy to buy it. Negative is that they will have to compete with other brands in the same category which are more versatile and innovative and keep coming up with newer models every year./ Porsche will have to match their agility and innovation.
Ans 3: Their business strategy of differentiation and expansion is working well for them as they have shown a high profitability in spite of investing in future hybrid and electric vehicles and new projects.
In first 9 months of 2017 they have shown positive results and trends as follows:
The ·Operating result increased by five percent to 3.0 billion euro.
Ans 4. The Volkswagen with it range of ultra-luxury line of cars, sedans, compact cars, hatchbacks, SUVs’ etc is targeting a broad range of customers. They are using broad differentiation in each category and segment to match the market competition of other automobile giants like Toyota and GM. Further, their strategy has the advantages as follows:
The disadvantage is that they have spread themselves too thin and are seen as an expensive upmarket brand with expensive after sales service.
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