PORSCHE CANADA Harvard Case Solution & Analysis

PORSCHE CANADA Case Study Solution

Introduction

The Porsche Company is very successful in manufacturing cars and it has been greatly known for its racing cars. In Canada, during winter the customers of Porsche are reluctant to drive car for a certain number of reasons. The people say that they like the car very much and they don’t want their Porsche to deteriorate or get damaged in winters. The customer said that they don’t drive the car due to the risk of accidents, salt and ice on the roads which could damage the car if used in winter. Jasmin Rawlinson considered this issue quite serious for Porsche Company and she conducted a research behind this and she found out certain reasons and she is now making efforts to ensure that the customers use their Porsche in winters too as it is not a big deal to ride Porsche in winter. If the perception of the customers doesn’t change then this will result in Porsche sales being deteriorated.(CHITTLEY, 2016)

Financial Analysis of the Jasmin Rowlin’s options

The financial analysis of the budget of $500000 shows that the amount of $312400 will be left over if all costs are to be considered. It is assumed that Jasmin Rowlinson       goes for newspaper advertisement for the whole year. It is good to have this marketing expense in order to change the mindset of the customers as the customers now think that they cannot ride their Porsche in winter, but this marketing cost does not guarantee the fact that the customer’s perception will be changed after the launch of advertisement. Furthermore, using the same advertisement for the whole world is not appropriate as different customers have different mindsets and different countries have different rules and regulations regarding advertisement.There are many customers in the target market and if the major customers are captured then the company will lose the minority customers who don’t purchase many cars but are equally valuable to the company in financial terms and in building its relationship with customers. See Exhibit No.1(Parikh, 2012)

Minimum level of sales needed for breakeven if only cars are sold:1

The minimum level of sales required to breakeven is only 5 units of Panamera cars to recover the marketing cost of $500,000.The car cost $110,000 per unit andif considered in isolation then the 5 units of Panamera will cover the marketing cost incurred by the company. In reality the company would be selling more cars at the same time of different models.

PORSCHE CANADA Harvard Case Solution & Analysis

If Cayenne car is considered, then the company would have to sell 7 units of Cayenne car in order to breakeven. The Cayenne car costs $70000per unit. Although 7 units of Cayenne car are required to breakeven whereas different cars of different models will be sold at the same time and this will help the company cover its marketing costs easily.

If both Boxter and Cayenne aresold, then the average car price per unit will be $55000 which will require the company to sell 9 units in order to breakeven the marketing costs of the Porsche company. Both cars have different prices so an average priceis needed in order to calculate breakeven of the marketing cost.

Breakeven if winter equipment is to be sold:

The company has launched the winter equipment with different accessories at different prices. Ifall accessories are sold in a single set, then it will cost a person $3850.The winter equipment cost is quite low compared to the cars being sold and the marketing cost.So it will require many units of the winter equipment to be sold if the company wants to breakeven the marketing cost. This will require 130 units to be sold in order to breakeven as the cost of marketing is huge. This might lead to the company making a loss or even losing some share of profit if the marketing cost being spent doesn’t lead to sufficient sales. This might further create cash flow problems in the company and the company might turn to creditors for the loans required for working capital..............

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