Case Study: Dr. Ing. h.c. F. Porsche AG (A): True to Brand? Questions: Relying on one or two sports car models and nearly going bankrupt and losing its independence in 1993. Porsche had to diversify product lines, and examines the branding implications of the internationalization of production. 1. The company CEO wants to integrate a new member into the Porsche product line-a sport utility vehicle (SUV), a model segment the company has never focused on. The brand extension will hinder the Porsche brand imagery as a result of brand dilution. (When entering the SUVs-market it lowered its brand value).
Should Porsche move into the sport-utility market? 2. Porsche’s “Made in Germany” mantra is danger of losing its strength and effective as a brand association. German manufacturing plant is running at full capacity and cannot host the implementation of a new product. The tax in German is high in automobile sector, and high labor cost. How will the company enable the manufacturing of the brand extension? SWOT：
Strength: Porsche is already a luxury brand. Strong Brand/Image; High quality products; Value chain(?); Weakness: Opportunity: They decided to enter the sport-utility market. This was not an impulsive decision though; the SUV’s popularity with US drivers was because Americans are attracted to large cars and truck that could serve both as a car for work and personal use. Opportunity: Porsche did market research among its customers and found out that many of them were waiting for a Porsche SUV. Weakness:
The Porsche SUV targeted the high-end market with its top interior, which was uncommon for an SUV. Option 1: Outsource manufacturing of brand extension to a third party assembler. - Pros: Continue to build brand awareness through the use of “Made in Germany.” The brand image of the Porsche will be no effective. More sources to develop new product.
- Cons: Brand performance is put in danger because the workforce of a third party is concerned with quantity rather than quality. Outsourcing any production leaves the third party in control of external factors increasing the risk of customer dissatisfaction. These feelings of dissatisfaction will in turn decrease the brand quality associated with Porsche automobiles. Porsche cannot afford negative viral marketing because it is a luxury brand. Luxury brands are highly susceptible to the fluctuations in consumers’ thoughts regarding brand credibility
Option 2: Build a manufacturing plant in East Germany. - Pros: Preserve the “made in Germany” cachet for high quality engineering, avoid high labor cost. Stimulate marketing with the creation of new jobs in the local economy, to improve the reputation of Porsche brand. - Cons: Poor Efficiency in East, because east workers were widely seen as less skilled and less experienced. Germany’s social market economy makes it undesirable to invest in a domestic Porsche manufacturing plant. While the company will keep its “Made in Germany” imprint, it will risk its financial stability.
Option 3: Partner with Volkswagen to build a new manufacturing plant. - Pros: Gain visibility in mainstream markets. As a luxury brand, Porsche is a desired brand by many but owned by few. At the same time, because the exclusivity element can only be afforded by few, the demand for the brand has correlated to the sales of their vehicles. The brand has not yet transcended the product but exposing it to a wider audience will generate brand recognition. - Cons:
Since the Porsche SUV is a new product the brand has to avoid association with its manufacturing counterpart. Because Volkswagen is a mass production maker, Porsche’s business to business relationship is enough to cheapen the image of the new SUV. Porsche has one brand. Volkswagen has its own brand.
Linking the two brands, in the manufacturing process will confuse their differentiation in the minds of consumers. This effect will distort the brand recognition and brand recall of both Porsche and Volkswagen. Moreover, the leadership team of each company has a vision of the company brand. When combining leadership, to combine company visions will waste each company’s focus, and thus, each company will lose sight of their brand advantage.
Option 4: Build a manufacturing plant in North America. -Pros: A brand extension strategy is possible. “Made in Germany,” mantra the brand will use “Made in America with a foreign Touch.” The facility will be managed and supervised by experienced German assemblers and product engineers. - Cons: No matter what good marketing strategies are implemented, an American-made German car loses the exclusivity appeal it heavily relies on as a novelty brand. Germany has a global reputation for highly engineered, high-performance, high quality automobiles. It is a German brand that relies on German manufacturing. If the SUV is manufactured in the United States, for that matter, it will be losing one of its most favorable brand associations.