Porsche is taking in more money from its options strategies than it is from the sale of cars. Some of the earnings are on foreign exchange options, but a significant chunk of the profits is coming from the company's huge stake in Volkswagen. Company executives argue they have built the stake in Volkswagen to fend off the takeover of its partner by another company, but others are crying foul, indicating that the company's speculation is too risky. They are questioning whether the company is still a car manufacturer or if it has become a hedge fund. Students are asked to recommend the best course of action.
Swot Analysis of "Hedging at Porsche" written by Stefan Nagel includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Porsche Volkswagen facing as an external strategic factors. Some of the topics covered in Hedging at Porsche case study are - Strategic Management Strategies, Global strategy, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Hedging at Porsche casestudy better are - – increasing commodity prices, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, technology disruption,
geopolitical disruptions, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Hedging at Porsche
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hedging at Porsche case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Porsche Volkswagen, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Porsche Volkswagen operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Hedging at Porsche can be done for the following purposes –
1. Strategic planning using facts provided in Hedging at Porsche case study
2. Improving business portfolio management of Porsche Volkswagen
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Porsche Volkswagen
Strengths Hedging at Porsche | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Porsche Volkswagen in Hedging at Porsche Harvard Business Review case study are -
Strong track record of project management
– Porsche Volkswagen is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Finance & Accounting field
– Porsche Volkswagen is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Porsche Volkswagen in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Porsche Volkswagen in the sector have low bargaining power. Hedging at Porsche has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Porsche Volkswagen to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Porsche Volkswagen is one of the leading recruiters in the industry. Managers in the Hedging at Porsche are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Porsche Volkswagen digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Porsche Volkswagen has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Highly skilled collaborators
– Porsche Volkswagen has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Hedging at Porsche HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Porsche Volkswagen has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Porsche Volkswagen has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Porsche Volkswagen is present in almost all the verticals within the industry. This has provided firm in Hedging at Porsche case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Analytics focus
– Porsche Volkswagen is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Stefan Nagel can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High brand equity
– Porsche Volkswagen has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Porsche Volkswagen to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Porsche Volkswagen is one of the most innovative firm in sector. Manager in Hedging at Porsche Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Porsche Volkswagen are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses Hedging at Porsche | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hedging at Porsche are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Hedging at Porsche HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Porsche Volkswagen has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Hedging at Porsche HBR case study mentions - Porsche Volkswagen takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Need for greater diversity
– Porsche Volkswagen has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Increasing silos among functional specialists
– The organizational structure of Porsche Volkswagen is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Porsche Volkswagen needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Porsche Volkswagen to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Porsche Volkswagen products
– To increase the profitability and margins on the products, Porsche Volkswagen needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Stefan Nagel suggests that, Porsche Volkswagen is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hedging at Porsche, it seems that the employees of Porsche Volkswagen don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow decision making process
– As mentioned earlier in the report, Porsche Volkswagen has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Porsche Volkswagen even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– It come across in the case study Hedging at Porsche that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Hedging at Porsche can leverage the sales team experience to cultivate customer relationships as Porsche Volkswagen is planning to shift buying processes online.
Products dominated business model
– Even though Porsche Volkswagen has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Hedging at Porsche should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study Hedging at Porsche has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Porsche Volkswagen 's lucrative customers.
Opportunities Hedging at Porsche | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Hedging at Porsche are -
Developing new processes and practices
– Porsche Volkswagen can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Porsche Volkswagen can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Hedging at Porsche, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Porsche Volkswagen in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Porsche Volkswagen can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Porsche Volkswagen can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Porsche Volkswagen can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Loyalty marketing
– Porsche Volkswagen has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Porsche Volkswagen can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Porsche Volkswagen can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Porsche Volkswagen to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Manufacturing automation
– Porsche Volkswagen can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Creating value in data economy
– The success of analytics program of Porsche Volkswagen has opened avenues for new revenue streams for the organization in the industry. This can help Porsche Volkswagen to build a more holistic ecosystem as suggested in the Hedging at Porsche case study. Porsche Volkswagen can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Porsche Volkswagen in the consumer business. Now Porsche Volkswagen can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Porsche Volkswagen can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Threats Hedging at Porsche External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hedging at Porsche are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Porsche Volkswagen.
Technology acceleration in Forth Industrial Revolution
– Porsche Volkswagen has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Porsche Volkswagen needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Consumer confidence and its impact on Porsche Volkswagen demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Environmental challenges
– Porsche Volkswagen needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Porsche Volkswagen can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Regulatory challenges
– Porsche Volkswagen needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Porsche Volkswagen in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Stagnating economy with rate increase
– Porsche Volkswagen can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Porsche Volkswagen needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Porsche Volkswagen
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Porsche Volkswagen.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Hedging at Porsche, Porsche Volkswagen may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
High dependence on third party suppliers
– Porsche Volkswagen high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Weighted SWOT Analysis of Hedging at Porsche Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Hedging at Porsche needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Hedging at Porsche is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Hedging at Porsche is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Hedging at Porsche is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Porsche Volkswagen needs to make to build a sustainable competitive advantage.