Corporate Strategy Case Study

Porsche's Investment in Volkswagen: Moving Away from 911?

OR

Abstract:
In October 2005, German luxury sports-car maker Porsche, increased its stake in mass-market car maker Volkswagen to 18.53%, with an option to acquire an additional 3.4%. Porsche's chief executive officer Wendelin Wiedeking maintained that the move was to protect its business model and to give the company long-term stability. Analysts were sceptical about the profitability of this venture and more about the risk that Porsche's image could suffer from close association with Volkswagen. That voiced diversification meant that Porsche faced the same threats of brand dilution, rising costs and lower margins as bigger car makers.

Pedagogical Objectives:

• To discuss the future of the Porsche-Volkswagen alliance and the challenges faced by Porsche as it moves away from its '911' (luxury sports car) image.

Keywords : Porsche; Volkswagen; Automobile; Luxury sports car maker; Mass-market car maker; Diversification; Diversification risk; Corporate Strategies Case Study; Brand management; Positioning; Alliance