Porsche
Porsche Decision
Abstract
A decade ago, Porsche, the luxury car company, found itself at a crossroads. Renowned for its classy and expensive sports cars, the firm had taken a hit in the wake of the 1987 stock market crash and suffered in great part due to Porsche's dependence on the U.S. market.
In addition to launching a new two-seater, the Boxster, in 1996, it decided to move into sport-utility vehicles, or SUVs, the popular but highly un-cool mode of transport for many American suburban families. So when the firm chose not one but two routes to recovery, Porsche caught industry watchers and Porsche enthusiasts by surprise. Porsche erected a small but substantial plant in Leipzig in eastern Germany. Unlike BMW or Daimler-Benz, Porsche did not move closer to the main U.S. market. Although wages in Germany are a good six to seven times higher than in eastern Europe, where many other automakers have moved production.
The controversial Cayenne has turned out to be Porsche's best-selling automobile ever. While rival carmakers such as Ferrari, Aston Martin, Alfa Romeo, and Lamborghini have been happy to locate where labor costs are cheaper, Porsche wanted to ensure its "Made in Germany" imprimatur. Porsche's risky moves which ultimately led to a successful turnaround form the basis for a terrific debate on the importance of brand and location. In a remarkably globalized industry, Porsche is a rare example of a company staking its brand, in this example the Cayenne, on the image of one particular country. Porsche CEO Wendelin Wiedeking's bet-the-company decisions to branch out into SUVs, combined with opening the Leipzig plant, make for a study with rich complexity and broad implications for today.
German craftsmanship and quality are famous, and according to Fear, German companies generally compete as niche producers, particularly those that manufacture high-quality goods that demand a premium price. In 2004-2005 Germany became the number-one exporter of
Abstract
A decade ago, Porsche, the luxury car company, found itself at a crossroads. Renowned for its classy and expensive sports cars, the firm had taken a hit in the wake of the 1987 stock market crash and suffered in great part due to Porsche's dependence on the U.S. market.
In addition to launching a new two-seater, the Boxster, in 1996, it decided to move into sport-utility vehicles, or SUVs, the popular but highly un-cool mode of transport for many American suburban families. So when the firm chose not one but two routes to recovery, Porsche caught industry watchers and Porsche enthusiasts by surprise. Porsche erected a small but substantial plant in Leipzig in eastern Germany. Unlike BMW or Daimler-Benz, Porsche did not move closer to the main U.S. market. Although wages in Germany are a good six to seven times higher than in eastern Europe, where many other automakers have moved production.
The controversial Cayenne has turned out to be Porsche's best-selling automobile ever. While rival carmakers such as Ferrari, Aston Martin, Alfa Romeo, and Lamborghini have been happy to locate where labor costs are cheaper, Porsche wanted to ensure its "Made in Germany" imprimatur. Porsche's risky moves which ultimately led to a successful turnaround form the basis for a terrific debate on the importance of brand and location. In a remarkably globalized industry, Porsche is a rare example of a company staking its brand, in this example the Cayenne, on the image of one particular country. Porsche CEO Wendelin Wiedeking's bet-the-company decisions to branch out into SUVs, combined with opening the Leipzig plant, make for a study with rich complexity and broad implications for today.
German craftsmanship and quality are famous, and according to Fear, German companies generally compete as niche producers, particularly those that manufacture high-quality goods that demand a premium price. In 2004-2005 Germany became the number-one exporter of