Porsche Car Company Strategy

What do we consider winning? How about being a company with a large and consistently increasing revenue stream, while having the highest profit margins in the industry? If that qualifies as superior performance, then Porsche AG can lay claim to ‘winning’ by having superior performance. Their current successful operation however, was not how most people in the industry thought Porsche’s story would go. I’d like to illustrate how Porsche turned their story around and showed that a small, independent car maker in the modern era can become a profit and revenue powerhouse. First, I’d like to try showing the huge value locked into the brand.

As an introduction, Porsche is a luxury car marque most famous for gracing the driveways of wealthy lawyers and dentists (at least in the U.S). But behind that stereotype lies a brand with a history of technological innovation, exceptional precision and quality. All three of those characteristics were honed on the racetrack. Porsche has the highest number of wins in the grueling and highly prestigious 24 hours of Le Mans race where cars from several other companies race each other for 24 hours nonstop, covering 3300 miles in 24 hours at speeds over 200 mph. So they have the most prestigious record in the greatest single race there is for automobile manufacturers to prove their technology against one another (Figure 3). A large part of the lure for customers is the brand’s sheen of success from repeatedly proving technological superiority in the most objective way possible. As the saying goes, the stopwatch doesn’t lie. The other part of Porsche’s lure is the road going sports cars that they created for the market, leveraging their racing technology. There are several fan favorites but the most iconic is the Porsche 911 (Figures 1 and 2). This model has been synonymous with Porsche for the last 7 decades and commands instant brand recognition with its legendary silhouette.

So in summary, Porsche’s vehicles had an enviable performance heritage cultivated over 7 decades through constantly proving themselves out against competition both on the track and on the road.

Their business and operational track record however, were not as stellar. In the mid-1990s, Porsche was a small, independent car maker that was bleeding cash and seemingly unable to climb out of debt. The only models being made the 911 and its variants. Their operations were bloated and expensive and not enough 911s were being sold. Most people at the time thought a larger, more ‘mainstream’ car maker would scoop the company up and add it to their larger portfolio as a niche. This is similar to how Lamborghini (another small independent sports car maker) was passed around from one company to another, even ending up in the hands of a hedge fund at one point. But Porsche management prevented this nightmare scenario by decreasing costs and increasing consumer value by leveraging their tremendous brand more effectively than ever before in the company’s history.