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 - – competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings,
technology disruption, central banks are concerned over increasing inflation, 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 -
Sustainable margins compare to other players in Finance & Accounting industry
– Hedging at Porsche firm has clearly differentiated products in the market place. This has enabled Porsche Volkswagen to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Porsche Volkswagen to invest into research and development (R&D) and innovation.
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.
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.
High switching costs
– The high switching costs that Porsche Volkswagen has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
Effective Research and Development (R&D)
– Porsche Volkswagen has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Hedging at Porsche - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
Superior customer experience
– The customer experience strategy of Porsche Volkswagen in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Hedging at Porsche Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Organizational Resilience of Porsche Volkswagen
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Porsche Volkswagen does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Porsche Volkswagen is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Porsche Volkswagen is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Hedging at Porsche Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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 -
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.
Skills based hiring
– The stress on hiring functional specialists at Porsche Volkswagen has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Hedging at Porsche, in the dynamic environment Porsche Volkswagen has struggled to respond to the nimble upstart competition. Porsche Volkswagen has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Porsche Volkswagen needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Porsche Volkswagen is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Hedging at Porsche can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Porsche Volkswagen has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
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 -
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.
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.
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.
Buying journey improvements
– Porsche Volkswagen can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Hedging at Porsche suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Porsche Volkswagen can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Porsche Volkswagen to increase its market reach. Porsche Volkswagen will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
Learning at scale
– Online learning technologies has now opened space for Porsche Volkswagen to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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 -
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Porsche Volkswagen can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Porsche Volkswagen can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Hedging at Porsche .
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Porsche Volkswagen in the Finance & Accounting sector and impact the bottomline of the organization.
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.
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Porsche Volkswagen will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Porsche Volkswagen business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.