Corporate Strategy: Vertical Integration and Diversification

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1. For many decades, Porsche pursued a focused differentiation strategy (see Exhibit 6.2 in Chapter 6). Using a clear strategic profile as a focused differentiator, Porsche was very successful and very profitable. More recently, the Porsche brand is repositioning itself from focused differentiation to broad differentiation by changing its competitive scope. What are the risks inherent in such strategic positioning? What are the benefits? Do you think Porsche will be successful in carving out a new strategic position as a broad differentiator? Why or why not?

2. Volkswagen ranks with GM and Toyota as one of the top-three carmakers in the world today in terms of sales volume (in units). It uses its Volkswagen brand, as well as its entire portfolio of other brands, including the luxury marques of Porsche, Audi, Bentley, Bugatti, and Lamborghini, and at the lower end, the Seat, Skoda, and Scania. What type of diversification is Volkswagen pursuing? What are the advantages and disadvantages in VW’s corporate strategy?

3. In the recent past, both GM and Toyota ran into problems as they chased the goal of becoming the world’s leader in terms of unit sales. GM achieved this goal but lost billions in the process and ended up in bankruptcy (in 2008). Toyota then pushed output and briefly held the number-one spot in terms of unit sales, but found that the emphasis on increasing output meant that quality issues arose—which then negatively affected its reputation. If you were asked to advice VW, what pitfalls would you point to that may need to be considered when attempting to be the world leader in unit output? How might VW avoid those pitfalls?

4. Porsche is expanding rapidly through both related and geographic diversification. Do you consider this business strategy to be successful? Why, or why not? If you consider Porsche’s diversification to be successful, what is the source of Porsche’s success?

5. The Mini Case began with Aesop’s fable of “The Goose That Laid the Golden Eggs.” What is the take-away of this fable? Is Porsche killing its golden goose?

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