Case Analysis

Chapter 10 Topic

Fudi Liu

MGT491

Chapter 10, Porsche

Chapter 10 Topics:

Porsche is one of the most famous sports car manufacturer in the world. Porsche owned some famous sports car model such as 911 and Boxster. In 2010, Porsche was forced to hand over its key to VW, which is the third largest automobile manufacturer controlling the Audi, Bentley, Bugatti, Lamborghini, Scania, Seat, Skoda, VW and now Porsche. VW appointed former Audi executive Matthias Mueller as Porsche’s new CEO. His mission is to integrate Porsche into the VW family, extend the Porsche product line, and increase production. Extend the product line is also named product diversification, which is an example of an agency problem. The reason CEO is willing to extend the product line is not only increase profit for VW, but also increase the company size. The size of the company is positively related to executive compensation. The relationship between VW and new CEO Matthias Mueller is agency relationship. Also, those series of strategy to manage the Porsche Company is also called corporate governance.

Three Problems:

Pressure from high oil price and economic climate: Oil price is always the important factor for customer to consider purchase a car. If the oil price is higher than people’s exception, fewer people will buy new car. The oil price were recorded highs, topping $100 a barrel. For every ten cents the gasoline price rose, about 1000 trucking companies went bankrupt. Also, the global economy is now facing the deepest recession US and Europe experienced in recent 10 years. This situation will affect customer’s decision about purchasing new car obviously, especially for luxury sports car.

Pressure from CAFE: Even though high oil price is an important problem for Porsche, the decision from U.S. government put even more pressure on Porsche. Under the direction of Obama, the National Highway Traffic Safety Administration and the EPA increased the mpg requirement for all cars in...