Assignment 2: External and Internal Environments Choose an industry you have not yet written about in this course, and one publicly traded corporation within that industry. Research the company on its...

External and Internal Environments
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Table of Contents
Introduction ................................................................................................................................. 2
Environmental factors influencing Porsche ................................................................................ 3
Five forces of competition........................................................................................................... 5
Actions that the company might do to improve its ability to address these forces in the near
future ........................................................................................................................................... 7
Threats and opportunities affecting the corporation ................................................................... 7
Strengths and weaknesses of the organization .......................................................................... 10
The company’s resources, capabilities, and core competencies ............................................... 12
Analysis of the company’s value chain ..................................................................................... 13
Conclusion ................................................................................................................................. 15
References ................................................................................................................................. 15
Introduction
With globalization the business environment is constantly changing. The companies
decide on their business goals and objectives by developing a strategic management plan. For
developing the strategic management plan it is important for a company to have an
understanding of the environment and the internal and external factors that influence the
competitive environment of the industry in which the company is operating. This helps in
understanding the ongoing changes in these factors and their impact on the way of the
organization to achieve the strategic goals. Luxury sports car industry is no exception. The
companies in this industry also experience the environmental and competitive pressures. So it
is important for the companies to have an understanding of the internal and external
environment. For the purpose of this assignment the automobile industry, more specifically
luxury sports car industry. The company chosen it Porsche Automobil Holding SE, hereafter
referred to as Porsche. Porsche is a well recognized luxury and sports car manufacturer which
was established by Ferdinand Porsche over hundred years back. It is a German company and
it primarily focuses on racing cars and cars for all topography. It also manufactures and sells
engines and component parts of cars.
The objective of this assignment is to have an understanding of the external and internal
environment which Porsche operates. The assignment also conducts an analysis using Porter’s
five forces model to understand the competitive environment in the automobile industry,
especially in luxury sports car segment. The assignment identifies the company’s core
competencies, capabilities and organization resources.It also reflects on the company's value
chain.
Environmental factors influencing Porsche
The external environmental factors that impact the competitiveness of the company are
evaluated using Pestel analysis. Pestel analysis conducts an analysis of political, economic, legal,
social, technological and environmental factors that influence the business environment of the
company. The section below analyses the two most important segments of environment that
influences the industry in which Porsche operates.
Economic factors
One of the most significant environmental factors that has a major impact on whether a
company succeeds or fails depends on the economic environment of the country in which it
operates (Worrell, 1998). Economic growth, exchange rates, interest rates and the inflation rate
are the major economic factors affecting the business of Porsche. The interest rates increase the
cost of capital, thus influencing the profit levels of the business. The operations of Porsche
involve a lot of foreign trade and import of raw materials and export of cars. The change in the
exchange rates affects the foreign trade because of currency parity and fluctuations. Moreover
with rise or fall of inflation rates, the cost of materials and in turn the final profits of the
company would increase or decrease. Economic crisis, as witnessed in 2008-09, invariably affect
the sales of the company because luxury sport cars are not a necessity and the customers can opt
for buying other low cost cars. Presently the economy is recovering from the recession (World
Bank, 2010). So Porsche can capitalize of this recovering economy to improve its sales.
Technological factors
According to Porter (2004), a company can gain competitive advantage by considering
technological factors as an important strategic concern and investing in technology.
Advancement of technology has significantly transformed the markets (Middleton, 2003). The
emerging and new technologies are opening newer prospective options for the companies to
develop new marketplaces. This makes the existing technology obsolete and necessitates it to be
replaced with the latest ones to gain benefits. For Porsche, technology influences the aspects of,
product development and designing, innovation, customer interaction and customer experience.
E-commerce has revolutionized the distribution channels of the company. Higher levels of plant
efficiency and fuel efficiency of vehicles can be achieved through adopting new technologies. A
different technological improvement such as fuel efficient engines meets the changing
preferences of customers and changing legal requirements. Application of technology improves
the company’s communication and interaction with its existing and potential customers by
introducing newer channels and methods of communication (Buckstein, 2010).
Five forces of competition
Porter’s five forces model analyses the competitive position and competitive advantages
of a company based on threat of new entrant, bargaining power of buyer, bargaining power of
supplier, substitutes and competitive rivalry (Kotler, 2000). The section below analyses the two
most important forces of competition within the industry in which Porsche competes.
Threat of new entrants
When entering or exiting from a new industry is easy, the treat of new entrants for a
company in the industry is high. If the barriers to enter a new industry are low, investment
needed is low, product differentiation is easy and the external environmental factors are
favorable, new companies can enter easily (Kotler, 2000). In case of Porsche, the automobile
industry is capital intensive and requires high end engineering expertise. The luxury sports car...