American University of Beirut
Case 3: Is Porsche Killing The Golden Goose?
Question 1 : For Many decades, Porsche pursued a focused differentiation strategy. Using a clear strategic profile as a focused differentiator, Porsche was very successful and very profitable. More recently, the Porsche brand is repositioning itself from focused differentiation to broad differentiation by changing its competitive scope. What are the risks inherent in such strategic positioning? Do you think Porsche will be successful in carving out a strategic position as a broad differentiator? Why or why not?
Answer 1 :
Since the 1962, Porsche targets the premium and luxurious sports car market by its 911 series. Buyers of the Porsche 911 car series are known to be wealthy and are serious car enthusiasts who possess an in-depth knowledge and passion about sports cars. For the success of the 911 series, Porsche used a focused differentiated business strategy by targeting a niche market (as mentioned in the case), emphasizing on design, and consistently developing class-leading technologies.However, with the introduction of Cayenne and Panamera, Porsche has repositioned itself from focused differentiation to broad differentiation. This repositioning weakened its brand in the eyes of consumers, eroding the points of differentiation created by their brand and taking the customer’s attention away from the famous 911. Large companies usually shift to broad differentiation strategy when the competition gets tough. This strategic shift has the following risks and benefits.
Porsche faces the risk known as the barrier to entry. It has many direct competitors (such as Lamborghini, Audi, Aston Martin, Jaguar…) and indirect competitors (like BMW, Nissan, and GM). Those competitors put Porsche in a risky position of competing against rivalries already existing in the sports SUV segment of the industry. Porsche will need lots of innovation and investment to be...