Discuss the decision of Porsche to enter the Chinese Market.
By Tom Evans
Established in Germany in 1931, Porsche is now one of the world’s leading car manufacturers of highly quality sports cars and SUVs. They currently offer consumers 18 different models ranging from four seater coupes to 2 seater roadsters. In 2010, Porsche’s sold a total of 25,320 cars up 28.6% from the previous year, this in turn lead to an operating profit of just under 6.4 billion Euros. (Porsche Press Release, 2011) Porsche’s next move is to look to move into the Chinese’s market, in this essay I am going to look at the Chinese market currently and how Porsche would best succeed in moving into this new market and ...view middle of the document...
As a result, they could not receive a substantial level of profit when they attempted to compete on price with the firms that were already established in the Chinese market.
I do feel however, that what I talked about above could be one of the main reasons why Porsche is looking to move into the Chinese market. If Porsche were able to create reliable transport links into China, they would be able to move a portion of their production line to China and take advantage of the fair cheaper labour costs. There would of course be downsides to making this decision; the first of which would be the inevitable language barrier, due to the majority of Porsche’s production currently takes place in Stuttgart, Germany. Porsche executive would also have to take into consider the initial cost over moving production half way across the world then finding new warehouses to relocate the company.
Even if Porsche was able to overcome these issues it would not simply result in easy sales. BMW is also looking to move into the Chinese in terms of both sales and also production, (Xu J, 2007) BMW is one of Porsche’s direct competitors as they offer cars of a similar quality, spec and price range. You can understand why both firms have looked to exploit the Chinese market, because as we spoke about earlier although the mid-range family car industry is highly competitive, the luxury car industry has room to grow. By 2015, China will have the world’s fourth largest concentration of wealthy people. (Yuval Atsmon & Vinay Dixit, 2009) This in turns means that there is soon to be an increase in the demand for high quality cars, areas in which Porsche specialises in. In order to take advantage of this huge opportunity Porsche must make sure they know who to target and how to target, in terms of what products they are to offer and how to market them.
Before Porsche did decide to move production into China they released a car into the Chinese market back in 2009. The car they released however was actually a luxury sedan, not heeding the warning signs brought up by Ford. (Keith Bradsher, 2009) Porsche did on the other hand clearly did analyse the Chinese market before unveiling the first car. Although the car is a luxury sedan, it also has a V8 engine offering a substantial increase in horsepower compared to the standard sedan in China. I feel this was a great move by Porsche as it will not only entice non-child households into making it their next car due to the impressive level of performance the car has, but could still be popular with families especially due to safety features (author not...