Porsche Changes Track - Essay Example

Porsche Changes Track Ferdinand Porsche a young engineer and test driver devised he Lohner-Porsche Electric Car at the Paris Expo in early 1900's. The company has not looked back since then. Today Porsche AG is a publicly traded and yet closely held German-based auto manufacturer. Over the years, the management of Porsche has ruffled quite a few feathers by resorting to some un-orthodox styles of functioning and decisions. What is worthwhile to mention here is, the hype Porsche could create around its strategic decisions without courting trouble. Dr. Wendelin Wiedeking (CEO, Porsche) while outlining the priorities of the company stated, "Yes, of course we have heard of shareholder value.

But that does not change the fact that we put customers first, then workers, then business partners, suppliers and dealers, and then shareholders." This statement signifies the priorities accorded by Porsche to all its stakeholders in the business. That certainly doesn't mean that Porsche is not giving due importance to its shareholders, what it actually signifies is that, Porsche always believes in customer driven policies and keeping the employees happy. Satisfied customers and happy employees provide the company a distinct identity and edge over its competitors.

At times Porsche appeared somewhat stubborn in its attitude owing to postures like non-listing on the NY stock exchange and non-disclosures of quarterly results. There's some confusion in the market place owing to the differences of opinion regarding the stated policy of 'keeping customer's interest on top' and rewarding its own set people with huge dividends, as the company remains a closely held business entity. Key decision CriteriaPorsche has been a closely held company as far as shareholding is concerned.

That effectively means, despite its being listed on the bourses, majority of the stake is being held by limited number of people.Company has shown consistent growth over the last decade with incremental change in sales growth figure ever since 1996. The earnings growth too has been good enough during this decade despite a global slowdown in economies owing to reasons like the 9/11 terrorist activities, Afghanistan and Iraq war with an active support from Germany. Company is considered quite friendly by the Workers unions implies that Porsche is indeed considerate towards their interests.

Company is able to maintain industrial peace even during these times when most of the European companies are on an outsourcing spree, is a feather in its cap.Much of the criticism about the company rewarding a selected few is in fact a statement about the 'good health' of the company. Supposing the company goes in red and suffers losses, then a selected few will only feel the brunt as these few owners are the majority stakeholders in the company. Such criticism doesn't therefore hold much water, as the company is taking good care about all other stakeholders also.

Porsche is also alleged to have derived the earnings from hedging activities. It is worthwhile here to mention that, there's nothing hush-hush or illegal about such an activity. Companies to resort to such activities to gain operating leverage for running the show.Porsche's picking up a stake in VW has also been criticized by some, who consider VW a loss making proposition. It is worth mentioning here that the prestige associated with the brand VW is unparallel all around the globe. Now analysts argue that this costly buyout will result in postponing the dividends indefinitely!

Well, don't forget, it's a closely held company and the 'family' will be at a loss, if at such a situation occurs. Therefore Porsche will make all out efforts to make it a profitable venture. Recommendations:Coming out with quarterly results is now a days considered part of core strategy. This keeps the management always on notice, just in case the reports are not encouraging, the company can initiate damage control exercise within a span of 3-4 months itself instead of waiting for six month or a year.

Listing on NYSE will no doubt result in some expenditure, but it will bring the company intangible profits in the form of prestige associated with such a listing, and will of course strengthen not only its US operations, but operations in many other developing economies.Company will have to make consistent efforts to gain an investment friendly grading from investment bankers, in order to remain in good books of financers and investors.