The Dupont Analysis – Porsche V.S. Toyota

From the chart above, we can see that Porsche has a high gross margin (37.6%) and operating expense to sale ratio (15%). It also has relative low asset turnover ratio (0.51). Hence, it is obvious that Porsche focuses on the strategy of increasing the net profit margin and maintaining its brand. 1. High profit margin

In its financial statements, the company mentions that they intend to maintain their position as one of the most profitable carmakers in the world for the long term, with a return on sales of at least 15% and a ROA of at least 21%. Thus, its price is relatively much higher than Toyota, which results in a greater gross margin. To reduce its COGS, Porsche plans to build efficient warehouse system and work with other companies like Volkswagen, whose business model is more about volume. For example, Porsche recently consolidated nine warehouses in Germany and achieved a 10 to 20 percent cost reduction. Also, at the end of 2013, Porsche’s fifth model series – Macan Model – will be launched and is believed to attract new customers to the brand. Then, the new sales will eventually contribute to a higher gross margin and ROA. 2. Brand effect

Porsche establishes itself as an exclusive brand. In order to maintain its brand value, Porsche has to spend more on its asset. As we can see from the chart above, Porsche’s fixed asset including plant, property and equipment and intangible asset consists 78.6% of its total asset. In addition, Porsche values customer satisfaction and service. Porsche’s professional employees are required to have motivation and enthusiasm. According to Porsche, their customers typically have a higher brand loyalty because of the professional service they receive from dealers and the high quality of product. However, providing high quality service also drives up its operating expenses. In the financial statement,

Porsche is now running a plan called “Strategy 2018” and intend to increase their unit sales to around 200,000 vehicles by 2018. This involves improving innovative strength and promoting their development efforts. For example, the expansion of the plant in Leipzig, which is regarded as one of the most advanced car factories in the world, and the extension of the development center in Weissach. The new Macan Model that is about to open in 2013 can be another example. With large amount of investment in asset, Porsche reduces its asset turnover ratio.