Porsche: where performance meets low cost labor
Few name in the automobile industry embody engineering, luxury and handing the way Porsche does. But unfortunately for Porsche the accelerating effects of competition and globalization are marketing costs, as well as design, a growing concern.
German worker are relatively effects of competitive and productive, but they’re not cheap. Porsche’s unmatched excellence still give it a comparative advantage, but with the quality of products from developing countries increasing.so too are the teats. The strategic concern for Porsche is that if they move production to low wage environment their quality will suffer and so too their reputation. The answer to Porsche’s problem might, quite literally, be right in their own back yard. The country that we now recognize as Germany is only a recent phenomenon. After World War 2 it was divided into 2 parts, with the eastern section being under communist control. Years of centralized planning had left that part of the country relatively poor, but with somewhat decent level of infrastructure and education. After formal reunification in 1990 an estimated 1.3 trillion euros was transferred from the west to the east in an effort to re build that part of the country. But even with all that investment, wages in the east still lag those found in the west by as much as 40%, says the IW economic institute.
This would prove to be a born for Porsche. In 2000 they built a factory on an old Soviet military base in Leipzig. Recently, they have decided to invest an additional 500 million euros to expand the facility, which produces their Panamera four-door coupe and the Cayenne sport-utility vehicle. Porsche believes that it can get German levels of engineering, productively and quality at rate eastern European prices. Unfortunately for Porsche they are not alone. BMW and Mercedes Benz also have facilities in the region and are planning to expand theirs as well. The race Porsche to maintain a competitive advantage goes on.