Discuss the Decision of Porsche to Enter the Chinese Market

Discuss the decision of Porsche to enter the Chinese Market.

By Tom Evans

Established in Germany in 1931, Porsche is now one of the world’s leading car manufacturers of highly quality sports cars and SUVs. They currently offer consumers 18 different models ranging from four seater coupes to 2 seater roadsters. In 2010, Porsche’s sold a total of 25,320 cars up 28.6% from the previous year, this in turn lead to an operating profit of just under 6.4 billion Euros. (Porsche Press Release, 2011) Porsche’s next move is to look to move into the Chinese’s market, in this essay I am going to look at the Chinese market currently and how Porsche would best succeed in moving into this new market and the pitfalls of making such a bold move.

In August 2011, China overtook the US to become the world’s largest automobile market with global sales crossing the $1 billion mark. (Jonathan Watts, 2011) Back in 2000, Ford realised the potential of the Chinese market and looked to take of advantage of the opportunity. However they quickly came to realise that the luxury sedan market was already heavily saturated with Japanese producers such as Hyundai and Honda, an area of the car market Ford specialised in. (Gong Zhengzheng, 2000) Another factor which led to Ford being unable to be competitive in China was the cost they had to selling their cars at, in order to maintain current profit levels. With Ford producing the majority of their cars in the US they could not compete in terms of running costs with China. (Peter Coy, 2004) The main catalyst for this was the difference in wage rates; the average factory worker in the US earned around 25 times more then their counter part in China. (John Daniels, Lee Radebaugh & Daniel Sullivan) Also with a population of over 1.3 billion China had and still has a highly varied workforce and there will always be demand for jobs, regardless of the overall pay rate they will receive. As a result, they could not receive a substantial level of...