Required information
[The following information applies to the questions
displayed below.]
Susan Lopez, a consultant with Deloitte & Young, has just begun
an engagement at Four Corners Airlines, which is based in Santa Fe,
New Mexico. The company has fallen on hard times of late despite
record profits for the rest of the airline industry. Management is
somewhat set in its ways and could probably use some “new blood,”
as the most recent hire to the firm’s executive team was 12 years
ago.
In Lopez’s first meeting with the team, the airline’s chief
executive officer commented that “all that mattered in this
industry were load factors—the percentage of seats sold on
scheduled flights. If load factors were adequate, everything else
would take care of itself.” Lopez noted that while this measure was
important, other, broader facets of operation were significant as
well. She asked if any of the management team had heard of the
balanced scorecard, and received dead silence as a response.
Based on her experiences with other engagements, including two that
involved airlines, Lopez was convinced that the balanced scorecard
could provide benefits in helping to solve the airline’s woes.
After a presentation about the philosophy of the balanced
scorecard, Four Corners Airlines’ management team accepted her
idea, feeling that a shift in operating philosophy was needed for
survival.
3. Identify the type of measure used to evaluate the key elements below. (Hint: There are 6 financial measurements, 6 customer-satisfaction measures, 8 internal business process measures, and 5 Learning and growth measures.)
table
Aircraft turnaround time between flights
Average age of aircraft in fleet
Average trip length (in miles)
Average wait time when calling reservations center
Cost per meal served
Earnings per share
Employee satisfaction scores
Employee training programs
Employee turnover
Enhancements to product line (new class of service)
Load factors
Market shareNet income
New unique features of frequent-flier club
Number of aircraft in fleet
Number of bags lostNumber of cities/new cities served
Number of passenger complaints
Operating expenses per seat mile
Passenger revenue per seat mile
Percentage of on-time arrivals
Percentage of on-time departures
Percentage of tickets sold through travel agents, reservation agents, and the Internet
Response time for resolving customer problems
Revenue growth
In: Accounting
Personal Skill Builder 5-3: Dealing with People Who Make Your Life Difficult: Roary—the Exploder!
I have a boss, Ralph Poore, who is the consummate Dr. Jekyll and Mr. Hyde. On some days, Poore can be the nicest and kindest person, but on others—that’s another story. Behind his back, we call him Roary because when he’s angry, he speaks at such a loud volume that anyone within miles can hear him. He shows his impatience and displeasure by exploding at the drop of a hat. He has meetings where, if someone disagrees with him or delivers bad news about what is happening at the company, he will pound his hands on the table and yell at the top of his lungs. More than once, Poore has ended the meeting with one of these tirades, either by kicking everyone else out or by leaving.
Once, Roary went into one of the salespeople’s offices to ask if he had called on a contractor as asked. When the salesperson answered that the person was not there when he called but that he had sent a fax and a copy of some new fixtures the company had just gotten in, Poore stormed out of the office, shouting obscenities.
When Poore hears bad news, it doesn’t matter whose fault it is—he blows up at whoever is there. Another time, Poore was speaking to another of my co-workers about a delivery she needed to arrange. She told Poore that Crane’s manufacturing facility was about three months behind in its production runs. We couldn’t deliver the product because Crane hadn’t produced it. Poore picked up a flower vase and threw it across the room.
Poore is always right—in his mind. If anyone disagrees with him or tells him something he doesn’t want to hear, he throws a tantrum. This man is a time bomb waiting for something to set him off. I haven’t felt his wrath, but it’s only a matter of time.
Analyze Roary’s leadership style. When might this style be appropriate? What might be some disadvantages of this style?
Based on your findings, what suggestions would you make to Karim on how to cope with Roary?
In: Operations Management
Is Copper completely obsolete?
Here is a direct quote from “Why such slow Wi-Fi?” in a recent Los
Angeles Times article:
“In an analysis of fixed broadband and mobile speeds in July,
Speedtest ranked the United State No. 9 for broadband and No. 46
for mobile (Nos.1, respectively, Singapore and Norway. Last:
Venezuela and Iraq). Part of the issue for Americans: Many of us
still have home service based on copper wire, not fiber.
Craig Ganssle, chief executive of Camp3, which works on wireless
infrastructures, explains this difference: Copper service is based
on the speed of sound (generally about 1,125 feet per second if
it’s 68 degrees and the air is dry), and fiber is based on the
speed of light (about 984 million feet per second).”
With a few exceptions, most of us get our home Internet access
through a cable modem and the wires that connect our modems to our
ISPs are made of copper. Let’s assume you are streaming a Netflix
movie. The nearest Open Connect appliance, which Netflix uses to
host and deliver movies to customers (see Chapter 11, pg. 360), is
3 miles from your home. Let’s also assume you have already found
the movie to watch and is ready to start. You click on the Play
button, a one-bit signal is sent over the 3-mile copper wire to
reach the Open Connect appliance, which then starts sending the
digitized movie frames back to your home, also over the 3-mile
copper wire.
Questions:
a. Given the quoted speeds above (i.e., 1,125 feet per second vs.
984 million feet per second), from the moment you click the Play
button, to the moment the first frame of the movie appears on your
screen, how long will it take (round-trip time) over a copper wire?
Over a fiber optic cable?
Note: 1 mile = 5,280 feet
Round-trip time = (Distance / Speed) × 2
b. How does your calculated result over a copper wire compare to
your own experience of streaming movies on the Internet, excluding
any buffering time? Do you see any problem with what the expert in
the article above was saying? Hint: this expert did not get some
basic facts of physics right.
In: Computer Science
GRAMMAR: Subject-Verb Agreement in the Simple Present
INSTRUCTIONS: Complete each sentence with the correct verb.
11. Everyone who ________________ (attend / attends) the concert will receive a t-shirt and poster.
12. The U.S. Olympic ice hockey team ________________ (practice / practices) in Colorado.
13. All the drinking water in New York City ________________ (come / comes) from the mountains more than a hundred miles away.
14. One of the most obvious causes of car accidents ________________ (is / are) drivers who use their phones while driving.
15. Living in a big city ________________ (cost / costs) more money than living in a small town.
GRAMMAR: Word Forms
INSTRUCTIONS: Complete each sentence with the correct word form.
16. Scientists were quick to understand the ________________ (important / importance) of the new discovery.
17. Choosing a major in college can be a difficult ________________ (decide / decision) to make.
18. Effective teachers plan ________________ (creative / creatively) lessons for their students.
19. Stress can have a negative effect on a person’s ________________ (mental / mentally) health.
20. The ________________ (recommend / recommendation) of some experts is to avoid checking email throughout the day.
INSTRUCTIONS: Choose the correct word to complete each sentence.
____ 21. A(n) ________________ advantage of this program is that it can be used on mobile devices.
a. doubtful b. additional c. abandoned
____ 22. Although a university degree cannot ________________ a great job, graduates do tend to receive higher salaries than those without a degree.
a. be related to b. shrink c. guarantee
____ 23. Races that are 10,000 kilometers or longer test the ________________ of the athletes.
a. impact b. strategy c. endurance
____ 24. Sitting still for long periods of time can be a ________________ challenging task for young learners.
a. dilemma b. mentally c. particularly
INSTRUCTIONS: Choose the correct word form to complete each sentence.
25. Families often build an ________________ (addition / add / additional / additionally) to their house as they have more children and need more space.
26. Modern medicine has made it unnecessary for people to ________________ (endure / endurance / enduring) the terrible pain that often accompanies diseases such as cancer.
27. When learning a new language, it is best to ________________ (interaction / interact / interactive / interactively) with native speakers as often as possible.
28. Strong ________________ (motivation / motivate / motivational) can be a powerful tool in reaching one’s goals.
29. The sales department’s ________________ (strategy / strategize / strategic / strategically) for increasing sales has been extremely successful.
In: Operations Management
Cutting Speed (meters per minute) Useful Life Brand A (Hours) Useful Life Brand B (Hours)
30 5.2 6.3
30 4.4 6.4
30 5.2 5.2
40 4.5 6.0
40 3.7 4.6
40 2.5 5.0
50 4.4 4.5
50 2.8 4.0
50 1.0 3.7
60 4.0 3.8
60 2.0 3.0
60 1.1 2.4
70 1.1 1.5
70 0.5 2.0
70 3.0 1.0
.
Use a 95% confidence interval to estimate the mean useful life of a brand A cutting tool when the cutting speed is 45 meters per minute. Repeat for brand B. Compare the widths of the two intervals and comment on the reasons for any difference.
The mean useful life of a brand A cutting tool when the cutting speed is ___ to ____ hours. (Round to one decimal place as needed.)
The mean useful life of a brand B cutting tool when the cutting speed is ___ to ____ hours. (Round to one decimal place as needed.)
Compare the widths of the two intervals and comment on the reasons for any difference. Choose the correct answer below.
A. Brand A is wider than brand B. The estimated standard error of y^ is different for the two intervals.
B. Brand B is wider than brand A. The value of t α/2 is different for the two intervals.
C. Brand A is wider than brand B. The calue of y^ is different for the two intervals.
D. There is no difference in the widths of the two intervals.
b. Use a 95% prediction interval to predict the useful life of a brand A cutting tool when the cutting speed is 45 meters per minute. Repeat for brand B. Compare the widths of the two intervals to each other and to the two intervals you calculated in part a. Comment on the reasons for any difference.
The predicted useful life of a brand A cutting tool when the speed is 45 meters per minute is ___ to ____ hours. (Round to one decimal place as needed.)
The predicted useful life of a brand B cutting tool when the speed is 45 meters per minute ___ to ____ hours. (Round to one decimal place as needed.)
Compare the widths of the two intervals to each other. Choose the correct answer below.
A.The prediction interval for brand A is larger than the prediction interval for brand B because the estimated standard error of y^ is different for the two intervals.
B.The prediction interval for brand B is larger than the prediction interval for brand A because the value of y^ is different for the two intervals.
C.The prediction intervals are the same size.
Compare the widths of the two prediction intervals to the two confidence intervals you calculated in part a.
Choose the correct answer below.
A.The prediction intervals are both larger than the corresponding confidence intervals.
B.The prediction intervals are both smaller than the corresponding confidence intervals.
C.The two prediction intervals are the same size as the corresponding confidence intervals.
D.There is no difference in the widths of the four intervals.
Comment on the reasons for any difference. Choose the correct answer below.
A. The value of t α/2 for the estimated mean value of y is smaller than the value of t α/2 for the predicted value of y.
B. The standard error for the estimated mean value of y is smaller than the standard error for the predicted value of y.
C. The standard error for the estimated mean value of y is larger than the standard error for the predicted value of y.
D. The value of t α/2 for the estimated mean value of y is larger than the value of t α/2 for the predicted value of y.
c. Suppose you were asked to predict the useful life of a brand A cutting tool for a cutting speed of x=100 meters per minute. Because the given value of x is outside the range of the sample x-values, the prediction is an example of extrapolation. Predict the useful life of a brand A cutting tool that is operated at 100 meters per minute and construct a 95% prediction interval for the actual useful life of the tool. What additional assumption do you have to make in order to ensure the validity of an extrapolation?
The predicted useful life of a brand A cutting tool that is operated at 100 meters per minute is _____ hours. (Round to two decimal places as needed.)
The actual predicted useful life of a brand A cutting tool when the speed is 100 meters per minute is ______ to ____ hours. (Round to one decimal place as needed.)
What additional assumption do you have to make in order to ensure the validity of an extrapolation?
A.The linear regression is an accurate model when x=100.
B.The value of t α/2 can be found for x=100.
C.There is no additional assumption required.
In: Statistics and Probability
A star is being observed with an 8 bit CCD has a central pixel value of 82 counts when the exposure time is 10 seconds. What would the central pixel value be if the exposure time were 25 seconds? Explain your reasoning.
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The central pixel value would be about 82 counts since the detector is linear. |
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The central pixel value would be about 205 counts since the detector is linear. |
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The central pixel value would be about 305 counts since the detector is linear. |
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The central pixel value would be about 159 counts since the detector is linear. |
A 12-bit CCD collects light from a star over a 10 second exposure and obtains a central pixel value of 1068. What is the longest exposure that could be taken of this star and still avoid saturation? Explain your reasoning.
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A. The longest exposure is about 39 seconds since the detector is linear and will saturate at 4095 counts. |
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B. The longest exposure is about 38 seconds since the detector is linear and will saturate at 4095 counts. |
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C. The longest exposure is about 40 seconds since the detector is linear and will saturate at 4095 counts. |
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D. The longest exposure is about 37 seconds since the detector is linear and will saturate at 4095 counts. |
Choose the table which most closely agrees with your answer for the followig question:
Enter the offsets you obtained for starfield 2 and starfield 3 in the table below.
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Choose the table below which most closely agrees with your answer for Question 7 of the lab.
The starfields of the blink comparator contain 5 variable stars. Create different blinking sequences in the simulator to identify the variables and record the x and y locations of the variables on this starfield. One variable star has already been located for you. Note that the coordinates do not need to be exact, you just need to be able to find the stars again in the next simulator
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Decide if the following answer is true or false for the question:
Hypothetically, suppose that you add a long series of observations all taken one day apart to the blinking queue. Would you be able to detect large amplitude variable stars with periods of a) 1.0 days, b) 0.5 days, or c) 0.75 days?
Answer:
If the observations are taken 1 day apart then you will not see large amplitude variable stars with periods of 1.0 day or 0.5 days because after one day both types of stars will be in the same phase on each day of observation.
If the star has a period of 0.75 days then the phase will not be the same after one day. A period of 0.75 days is 18 hours. Suppose on the first day the phase of the star is 0. After 18 hours the phase will again be 0 so after 6 more hours the phase will now be 0.33 or 6/18 = 1/3 of a cycle. On day 2 we have: after another 18 hours the phase will again be 0.33 so after another 6 hours the phase will advance another 1/3 cycle so the phase is 0.67. On day 3 the phase will be back to 0.
Another way of looking at this is to consider when the phase will be 0; it will be zero after 18 hours, 36 hours, 54 hours and 72 hours, So if we observer each 24 hours then the phase will not be zero again during our observation until after three days.
True
False
What is the range of pixel values inside the inner circle for this star? (Find the maximum and minimum values.
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In: Physics
The Vita Plastics Assembly Company (VPAC), which has its headquarters in St Louis, Missouri, is considering opening a manufacturing plant in an overseas country and transferring much of its current US-based production to the new plant. After extensive data collection and visits by managers to a number of possible countries Almeria has been identified as the most promising country for a new plant. A site near the capital, Lasia, appears to be highly suitable and a new state-of-the art manufacturing facility could be constructed there very quickly.
The decision on whether to go ahead with the move to Almeria will be based on the level of monetary savings in production costs that it is hoped would be generated over the next 10 years by opening a plant there. However, there are a number of risks associated with these savings and, for simplicity, the level of savings has categorized as either high, medium or low. If a move to Almeria does go ahead, VPAC will review the success of its investment after the first five years and will have the option of withdrawing from that country and returning operations to the USA if this appears to be appropriate.
Almeria has a relatively new democracy which was created following the overthrow of a military dictatorship that had ruled the country for nearly thirty years. However, there is considerable poverty and unemployment rates have recently been as high as 38%. The current government is therefore keen to attract foreign investors, but it only has a narrow majority in the country’s parliament. Despite the efforts of the government widespread corruption has persisted and Almeria is ranked 5th in the World league table of corruption. Corruption is partly responsible for the neglect of the country’s road and rail systems which are now amongst the worst in the region.
If a decision is made to relocate to Almeria there is a risk that a new government will come into power and nationalize all foreign investments. There is thought to be only a 0.05 probability of this happening during the first five years, but if it did occur, the loss of assets would cause VPAC to be worse off by $75 million (in present value
terms) compared to the returns that would have been generated by continuing manufacturing in the US. Nationalization would also cause VPAC’s association with the country to end immediately. There is also an estimated 0.3 probability that within the next five years, restrictions will be imposed by the government on the convertibility of local currency into foreign currency. This would reduce savings by an estimated $43 million (nationalization and currency restrictions can be assumed to be mutually exclusive events).
Insurance can be purchased to cover both of these political risks for the first five years of operations by paying a total premium which has a present value of $16 million. (Note that the insurance can only be purchased at the start of the five years).If the company does purchase political risk insurance and nationalization occurs in the first five years then the insurance will only cover the loss of assets. It is expected that any savings generated before nationalization would be canceled out by the costs of relocation and so would have present value of $0. If nationalization does not take place it is thought that there is a 0.6 probability that in the first five years the investment would generate high savings having an estimated present value of $85 million. There is also an estimated 0.25 probability that medium savings, with a present value $48 million, would be earned in the first five years and a 0.15 probability these savings will be low and only amount to $5 million. If no political insurance has been purchased currency restrictions would reduce these savings by the estimated amount given above
At the end of the first five years the company would have to decide whether to continue to operate the plant in Almeria for another five years or whether to transfer operations back to the US. However, this decision will only be considered if the savings in the first five years have been low. If a decision to withdraw is made then the plant will be sold for a return with an estimated present value of £10 million. If VPAC decide to continue operations in Almeria for a further five years the risk of nationalization during this period is difficult to estimate but is thought to be between
0.1 and 0.2. However, the risk of restrictions on the convertibility of local currency is estimated to be the same as that in the first five years. The total insurance premium
to cover these risks for the second five years would have a present value of $12.8 million. If insurance is purchased and nationalization occurs in the second five years then it is the assumed that gross savings made before nationalization will again be cancelled out by the costs arising from the disruption. For simplicity, the present values of other costs and savings occurring under each set of conditions in the second five years are assumed to be the same as those in the first 5 years, with a 20% reduction to take into account the time value of money. However, it is thought that the probabilities of high, medium and low returns in the second five year period will be dependent on the level of returns achieved in the first five years as shown in the table below.
Second five years
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High |
Medium |
Low |
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High |
0.60 |
0.30 |
0.10 |
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First five years |
Medium |
0.10 |
0.80 |
0.10 |
|
Low |
0.03 |
0.07 |
0.90 |
For example, the table shows, that if savings in the first five years have been high then there is a 0.60 probability that high savings will be maintained in the next five years, a 0.3 probability that only medium savings will be generated and a 0.10 probability that savings will be low. The other two rows can be interpreted in a similar manner. It can be assumed that, if the company stays in Almeria, for ten years it will sell the plant at the end of this period and hence generate extra returns with a present value of £6 million
Question 1
Analyse the decision problem faced by VPAC and recommend the policy that the company should pursue.
Question 2
Discuss the strengths and limitations of your model in terms of the usefulness of the guidance that it would provide to VPAC’s managers.
In: Operations Management
COMPANY Case: Porsche: Guarding the Old While Bringing in the New
Porsche (pronounced Porsh-uh) is a unique company. It has always been a niche brand that makes cars for a small and distinctive segment of automobile buyers. In 2009, Porsche sold only 27,717 cars in the five models it sells in the United States. Honda sold about 10 times that many Accords alone. But Porsche owners are as rare as their vehicles. For that reason, top managers at Porsche spend a great deal of time thinking about customers. They want to know who their customers are, what they think, and how they feel. They want to know why they buy a Porsche rather then a Jaguar, a Ferrari, or a big Mercedes coupe. These are challenging questions to answer; even Porsche owners themselves don’t know exactly what motivates their buying. But given Porsche’s low volume and the increasingly fragmented auto market, it is imperative that management understands its customers and what gets their motors running.
Since its early days, Porsche has appealed to a very narrow segment of financially successful people. These are achievers who see themselves as entrepreneurial, even if they work for a corporation. They set very high goals for themselves and then work doggedly to meet them. And they expect no less from the clothes they wear, the restaurants they go to, or the cars they drive. These individuals see themselves not as a part of the regular world but as exceptions to it. They buy Porsches because the car mirrors their self-image; it stands for the things owners like to see in themselves and their lives.
Most of us buy what Porsche executives call utility vehicles. That is, we buy cars primarily to go to work, transport children, and run errands. Because we use our cars to accomplish these daily tasks, we base buying decisions on features such as price, size, fuel economy, and other practical considerations. But Porsche is more than a utility car. Its owners see it as a car to be enjoyed, not just used. Most Porsche buyers are not moved by information but by feelings. A Porsche is like a piece of clothing—something the owner “wears” and is seen in. They develop a personal relationship with their cars, one that has more to do with the way the car sounds, vibrates, and feels, rather than the how many cup holders it has or how much cargo it can hold in the trunk. They admire their Porsche because it is a competent performance machine without being flashy or phony.
People buy Porsches because they enjoy driving. If all they needed was something to get them from point A to point B, they could find something much less expensive. And while many Porsche owners are car enthusiasts, some of them are not. One successful businesswoman and owner of a high-end Porsche said, “When I drive this car to the high school to pick up my daughter, I end up with five youngsters in the car. If I drive any other car, I can’t even find her; she doesn’t want to come home.”
For its first few decades, Porsche AG lived by the philosophy of Ferry Porsche, Ferdinand’s son. Ferry created the Porsche 356 because no one else made a car like he wanted. But as the years rolled on, Porsche management became concerned with a significant issue: Were there enough Porsche buyers to keep the company afloat? Granted, the company never had illusions of churning out the numbers of a Chevrolet or a Toyota. But to fund innovation, even a niche manufacturer has to grow a little. And Porsche began to worry that the quirky nature of the people who buy Porsches might just run out on them.
This led Porsche to extend its brand outside the box. In the early 1970s, Porsche introduced the 914, a square-ish, mid-engine, two-seater that was much cheaper than the 911. This meant that a different class of people could afford a Porsche. It was no surprise that the 914 became Porsche’s top selling model. By the late 1970s, Porsche replaced the 914 with a hatchback coupe that had something no other regular Porsche model had ever had: an engine in the front. At less than $20,000, more than $10,000 less than the 911, the 924 and later 944 models were once again Porsche’s pitch to affordability. At one point, Porsche increased its sales goal by nearly 50 percent to 60,000 cars a year.
Although these cars were in many respects sales successes, the Porsche faithful cried foul. They considered these entry-level models to be cheap and underperforming. Most loyalists never really accepted these models as “real” Porsches. In fact, they were not at all happy that they had to share their brand with a customer who didn’t fit the Porsche owner profile. They were turned off by what they saw as a corporate strategy that had focused on mass over class marketing. This tarnished image was compounded by the fact that Nissan, Toyota, BMW, and other car manufacturers had ramped up high-end sports car offerings, creating some fierce competition. In fact, both the Datsun 280-ZX and the Toyota Supra were not only cheaper than Porsche’s 944 but also faster. A struggling economy threw more sand in Porsche’s tank. By 1990, Porsche sales had plummeted, and the company flirted with bankruptcy.
But Porsche wasn’t going down without a fight. It quickly recognized the error of its ways and halted production of the entry-level models. It rebuilt its damaged image by revamping its higher-end model lines with more race-bred technology. In an effort to regain rapport with customers, Porsche once again targeted the high end of the market in both price and performance. It set modest sales goals and decided that moderate growth with higher margins would be more profitable in the long term. Thus, the company set out to make one less Porsche than the public demanded. According to one executive, “We’re not looking for volume; we’re searching for exclusivity.”
Porsche’s efforts had the desired effect. By the late 1990s, the brand was once again favored by the same type of achiever who had so deeply loved the car for decades. The cars were once again exclusive. And the company was once again profitable. But by the early 2000s, Porsche management was again asking itself a familiar question: To have a sustainable future, could Porsche rely on only the Porsche faithful? According to then CEO Wendelin Wiedeking, “For Porsche to remain independent, it can’t be dependent on the most fickle segment in the market. We don’t want to become just a marketing department of some giant. We have to make sure we’re profitable enough to pay for future development ourselves.”
So in 2002, Porsche did the unthinkable. It became one of the last car companies to jump into the insatiable sport utility vehicle (SUV) market. At roughly 5,000 pounds, the new Porsche Cayenne was heavier than anything that Porsche had ever made, with the exception of some prototype tanks it made during WWII. Once again, the new model featured an engine up front. And it was the first Porsche to ever be equipped with seatbelts for five. As news spread about the car’s development, howls could be heard from Porsche’s customer base.
But this time, Porsche did not seem too concerned that the loyalists would be put off. Could it be that the company had already forgotten what happened the last time it deviated from the mold? After driving one of the first Cayenne’s off the assembly line, one journalist stated, “A day at the wheel of the 444 horsepower Cayenne Turbo leaves two overwhelming impressions. First, the Cayenne doesn’t behave or feel like an SUV, and second, it drives like a Porsche.” This was no entry-level car. Porsche had created a two-and-a-half ton beast that could accelerate to 60 miles per hour in just over five seconds, corner like it was on rails, and hit 165 miles per hour, all while coddling five adults in sumptuous leather seats with almost no wind noise from the outside world. On top of that, it could keep up with a Land Rover when the pavement ended. Indeed, Porsche had created the Porsche of SUVs.
Last year, Porsche upped the ante one more time. It unveiled another large vehicle. But this time, it was a low-slung, five-door luxury sedan. The Porsche faithful and the automotive press again gasped in disbelief. But by the time the Panamera hit the pavement, Porsche had proven once again that Porsche customers could have their cake and eat it to. The Panamera is almost as big as the Cayenne but can move four adults down the road at speeds of up to 188 miles per hour and accelerate from a standstill to 60 miles per hour in four seconds flat.
Although some Porsche traditionalists would never be caught dead driving a front engine Porsche that has more than two doors, Porsche insists that two trends will sustain these new models. First, a category of Porsche buyers has moved into life stages that have them facing inescapable needs; they need to haul more people and stuff. This not only applies to certain regular Porsche buyers, but Porsche is again seeing buyers enter its dealerships that otherwise wouldn’t have. Only this time, the price points of the new vehicles are drawing only the well heeled, allowing Porsche to maintain its exclusivity. These buyers also seem to fit the achiever profile of regular Porsche buyers.
The second trend is the growth of emerging economies. Whereas the United States has long been the world’s biggest consumer of Porsches, the company expects China to become its biggest customer before too long. Twenty years ago, the United States accounted for about 50 percent of Porsche’s worldwide sales. Now, it accounts for only about 26 percent. In China, many people who can afford to buy a car as expensive as a Porsche also hire a chauffeur. The Cayenne and the Panamera are perfect for those who want to be driven around in style but who may also want to make a quick getaway if necessary.
The most recent economic downturn has brought down the sales of just about every maker of premium automobiles. When times are tough, buying a car like a Porsche is the ultimate deferrable purchase. But as this downturn turns back up, Porsche is better poised than it has ever been to meet the needs of its customer base. It is also in better shape than ever to maintain its brand image with the Porsche faithful and with others as well. Sure, understanding Porsche buyers is still a difficult task. But a former CEO of Porsche summed it up this way: “If you really want to understand our customers, you have to understand the phrase, ‘If I were going to be a car, I’d be a Porsche.’
.
Required Questions
Question 01: You are asked to develop a Mission statement and four Marketing objectives for Porsche for the next ten years (2021- 2025) . Draft an ideal mission statement and outline your four marketing objectives (5 marks
.
Question 02: Identify , explain and justify the main consumer behaviour characteristics that influences the Porche buyers.
In: Operations Management
COMPANY Case: Porsche: Guarding the Old While Bringing in the New
Porsche (pronounced Porsh-uh) is a unique company. It has always been a niche brand that makes cars for a small and distinctive segment of automobile buyers. In 2009, Porsche sold only 27,717 cars in the five models it sells in the United States. Honda sold about 10 times that many Accords alone. But Porsche owners are as rare as their vehicles. For that reason, top managers at Porsche spend a great deal of time thinking about customers. They want to know who their customers are, what they think, and how they feel. They want to know why they buy a Porsche rather then a Jaguar, a Ferrari, or a big Mercedes coupe. These are challenging questions to answer; even Porsche owners themselves don’t know exactly what motivates their buying. But given Porsche’s low volume and the increasingly fragmented auto market, it is imperative that management understands its customers and what gets their motors running.
Since its early days, Porsche has appealed to a very narrow segment of financially successful people. These are achievers who see themselves as entrepreneurial, even if they work for a corporation. They set very high goals for themselves and then work doggedly to meet them. And they expect no less from the clothes they wear, the restaurants they go to, or the cars they drive. These individuals see themselves not as a part of the regular world but as exceptions to it. They buy Porsches because the car mirrors their self-image; it stands for the things owners like to see in themselves and their lives.
Most of us buy what Porsche executives call utility vehicles. That is, we buy cars primarily to go to work, transport children, and run errands. Because we use our cars to accomplish these daily tasks, we base buying decisions on features such as price, size, fuel economy, and other practical considerations. But Porsche is more than a utility car. Its owners see it as a car to be enjoyed, not just used. Most Porsche buyers are not moved by information but by feelings. A Porsche is like a piece of clothing—something the owner “wears” and is seen in. They develop a personal relationship with their cars, one that has more to do with the way the car sounds, vibrates, and feels, rather than the how many cup holders it has or how much cargo it can hold in the trunk. They admire their Porsche because it is a competent performance machine without being flashy or phony.
People buy Porsches because they enjoy driving. If all they needed was something to get them from point A to point B, they could find something much less expensive. And while many Porsche owners are car enthusiasts, some of them are not. One successful businesswoman and owner of a high-end Porsche said, “When I drive this car to the high school to pick up my daughter, I end up with five youngsters in the car. If I drive any other car, I can’t even find her; she doesn’t want to come home.”
For its first few decades, Porsche AG lived by the philosophy of Ferry Porsche, Ferdinand’s son. Ferry created the Porsche 356 because no one else made a car like he wanted. But as the years rolled on, Porsche management became concerned with a significant issue: Were there enough Porsche buyers to keep the company afloat? Granted, the company never had illusions of churning out the numbers of a Chevrolet or a Toyota. But to fund innovation, even a niche manufacturer has to grow a little. And Porsche began to worry that the quirky nature of the people who buy Porsches might just run out on them.
This led Porsche to extend its brand outside the box. In the early 1970s, Porsche introduced the 914, a square-ish, mid-engine, two-seater that was much cheaper than the 911. This meant that a different class of people could afford a Porsche. It was no surprise that the 914 became Porsche’s top selling model. By the late 1970s, Porsche replaced the 914 with a hatchback coupe that had something no other regular Porsche model had ever had: an engine in the front. At less than $20,000, more than $10,000 less than the 911, the 924 and later 944 models were once again Porsche’s pitch to affordability. At one point, Porsche increased its sales goal by nearly 50 percent to 60,000 cars a year.
Although these cars were in many respects sales successes, the Porsche faithful cried foul. They considered these entry-level models to be cheap and underperforming. Most loyalists never really accepted these models as “real” Porsches. In fact, they were not at all happy that they had to share their brand with a customer who didn’t fit the Porsche owner profile. They were turned off by what they saw as a corporate strategy that had focused on mass over class marketing. This tarnished image was compounded by the fact that Nissan, Toyota, BMW, and other car manufacturers had ramped up high-end sports car offerings, creating some fierce competition. In fact, both the Datsun 280-ZX and the Toyota Supra were not only cheaper than Porsche’s 944 but also faster. A struggling economy threw more sand in Porsche’s tank. By 1990, Porsche sales had plummeted, and the company flirted with bankruptcy.
But Porsche wasn’t going down without a fight. It quickly recognized the error of its ways and halted production of the entry-level models. It rebuilt its damaged image by revamping its higher-end model lines with more race-bred technology. In an effort to regain rapport with customers, Porsche once again targeted the high end of the market in both price and performance. It set modest sales goals and decided that moderate growth with higher margins would be more profitable in the long term. Thus, the company set out to make one less Porsche than the public demanded. According to one executive, “We’re not looking for volume; we’re searching for exclusivity.”
Porsche’s efforts had the desired effect. By the late 1990s, the brand was once again favored by the same type of achiever who had so deeply loved the car for decades. The cars were once again exclusive. And the company was once again profitable. But by the early 2000s, Porsche management was again asking itself a familiar question: To have a sustainable future, could Porsche rely on only the Porsche faithful? According to then CEO Wendelin Wiedeking, “For Porsche to remain independent, it can’t be dependent on the most fickle segment in the market. We don’t want to become just a marketing department of some giant. We have to make sure we’re profitable enough to pay for future development ourselves.”
So in 2002, Porsche did the unthinkable. It became one of the last car companies to jump into the insatiable sport utility vehicle (SUV) market. At roughly 5,000 pounds, the new Porsche Cayenne was heavier than anything that Porsche had ever made, with the exception of some prototype tanks it made during WWII. Once again, the new model featured an engine up front. And it was the first Porsche to ever be equipped with seatbelts for five. As news spread about the car’s development, howls could be heard from Porsche’s customer base.
But this time, Porsche did not seem too concerned that the loyalists would be put off. Could it be that the company had already forgotten what happened the last time it deviated from the mold? After driving one of the first Cayenne’s off the assembly line, one journalist stated, “A day at the wheel of the 444 horsepower Cayenne Turbo leaves two overwhelming impressions. First, the Cayenne doesn’t behave or feel like an SUV, and second, it drives like a Porsche.” This was no entry-level car. Porsche had created a two-and-a-half ton beast that could accelerate to 60 miles per hour in just over five seconds, corner like it was on rails, and hit 165 miles per hour, all while coddling five adults in sumptuous leather seats with almost no wind noise from the outside world. On top of that, it could keep up with a Land Rover when the pavement ended. Indeed, Porsche had created the Porsche of SUVs.
Last year, Porsche upped the ante one more time. It unveiled another large vehicle. But this time, it was a low-slung, five-door luxury sedan. The Porsche faithful and the automotive press again gasped in disbelief. But by the time the Panamera hit the pavement, Porsche had proven once again that Porsche customers could have their cake and eat it to. The Panamera is almost as big as the Cayenne but can move four adults down the road at speeds of up to 188 miles per hour and accelerate from a standstill to 60 miles per hour in four seconds flat.
Although some Porsche traditionalists would never be caught dead driving a front engine Porsche that has more than two doors, Porsche insists that two trends will sustain these new models. First, a category of Porsche buyers has moved into life stages that have them facing inescapable needs; they need to haul more people and stuff. This not only applies to certain regular Porsche buyers, but Porsche is again seeing buyers enter its dealerships that otherwise wouldn’t have. Only this time, the price points of the new vehicles are drawing only the well heeled, allowing Porsche to maintain its exclusivity. These buyers also seem to fit the achiever profile of regular Porsche buyers.
The second trend is the growth of emerging economies. Whereas the United States has long been the world’s biggest consumer of Porsches, the company expects China to become its biggest customer before too long. Twenty years ago, the United States accounted for about 50 percent of Porsche’s worldwide sales. Now, it accounts for only about 26 percent. In China, many people who can afford to buy a car as expensive as a Porsche also hire a chauffeur. The Cayenne and the Panamera are perfect for those who want to be driven around in style but who may also want to make a quick getaway if necessary.
The most recent economic downturn has brought down the sales of just about every maker of premium automobiles. When times are tough, buying a car like a Porsche is the ultimate deferrable purchase. But as this downturn turns back up, Porsche is better poised than it has ever been to meet the needs of its customer base. It is also in better shape than ever to maintain its brand image with the Porsche faithful and with others as well. Sure, understanding Porsche buyers is still a difficult task. But a former CEO of Porsche summed it up this way: “If you really want to understand our customers, you have to understand the phrase, ‘If I were going to be a car, I’d be a Porsche.’
4 Questions – Answer all Total Marks: 25
In: Operations Management
COMPANY Case: Porsche: Guarding the Old While Bringing in the New
Porsche (pronounced Porsh-uh) is a unique company. It has always been a niche brand that makes cars for a small and distinctive segment of automobile buyers. In 2009, Porsche sold only 27,717 cars in the five models it sells in the United States. Honda sold about 10 times that many Accords alone. But Porsche owners are as rare as their vehicles. For that reason, top managers at Porsche spend a great deal of time thinking about customers. They want to know who their customers are, what they think, and how they feel. They want to know why they buy a Porsche rather then a Jaguar, a Ferrari, or a big Mercedes coupe. These are challenging questions to answer; even Porsche owners themselves don’t know exactly what motivates their buying. But given Porsche’s low volume and the increasingly fragmented auto market, it is imperative that management understands its customers and what gets their motors running.
Since its early days, Porsche has appealed to a very narrow segment of financially successful people. These are achievers who see themselves as entrepreneurial, even if they work for a corporation. They set very high goals for themselves and then work doggedly to meet them. And they expect no less from the clothes they wear, the restaurants they go to, or the cars they drive. These individuals see themselves not as a part of the regular world but as exceptions to it. They buy Porsches because the car mirrors their self-image; it stands for the things owners like to see in themselves and their lives.
Most of us buy what Porsche executives call utility vehicles. That is, we buy cars primarily to go to work, transport children, and run errands. Because we use our cars to accomplish these daily tasks, we base buying decisions on features such as price, size, fuel economy, and other practical considerations. But Porsche is more than a utility car. Its owners see it as a car to be enjoyed, not just used. Most Porsche buyers are not moved by information but by feelings. A Porsche is like a piece of clothing—something the owner “wears” and is seen in. They develop a personal relationship with their cars, one that has more to do with the way the car sounds, vibrates, and feels, rather than the how many cup holders it has or how much cargo it can hold in the trunk. They admire their Porsche because it is a competent performance machine without being flashy or phony.
People buy Porsches because they enjoy driving. If all they needed was something to get them from point A to point B, they could find something much less expensive. And while many Porsche owners are car enthusiasts, some of them are not. One successful businesswoman and owner of a high-end Porsche said, “When I drive this car to the high school to pick up my daughter, I end up with five youngsters in the car. If I drive any other car, I can’t even find her; she doesn’t want to come home.”
For its first few decades, Porsche AG lived by the philosophy of Ferry Porsche, Ferdinand’s son. Ferry created the Porsche 356 because no one else made a car like he wanted. But as the years rolled on, Porsche management became concerned with a significant issue: Were there enough Porsche buyers to keep the company afloat? Granted, the company never had illusions of churning out the numbers of a Chevrolet or a Toyota. But to fund innovation, even a niche manufacturer has to grow a little. And Porsche began to worry that the quirky nature of the people who buy Porsches might just run out on them.
This led Porsche to extend its brand outside the box. In the early 1970s, Porsche introduced the 914, a square-ish, mid-engine, two-seater that was much cheaper than the 911. This meant that a different class of people could afford a Porsche. It was no surprise that the 914 became Porsche’s top selling model. By the late 1970s, Porsche replaced the 914 with a hatchback coupe that had something no other regular Porsche model had ever had: an engine in the front. At less than $20,000, more than $10,000 less than the 911, the 924 and later 944 models were once again Porsche’s pitch to affordability. At one point, Porsche increased its sales goal by nearly 50 percent to 60,000 cars a year.
Although these cars were in many respects sales successes, the Porsche faithful cried foul. They considered these entry-level models to be cheap and underperforming. Most loyalists never really accepted these models as “real” Porsches. In fact, they were not at all happy that they had to share their brand with a customer who didn’t fit the Porsche owner profile. They were turned off by what they saw as a corporate strategy that had focused on mass over class marketing. This tarnished image was compounded by the fact that Nissan, Toyota, BMW, and other car manufacturers had ramped up high-end sports car offerings, creating some fierce competition. In fact, both the Datsun 280-ZX and the Toyota Supra were not only cheaper than Porsche’s 944 but also faster. A struggling economy threw more sand in Porsche’s tank. By 1990, Porsche sales had plummeted, and the company flirted with bankruptcy.
But Porsche wasn’t going down without a fight. It quickly recognized the error of its ways and halted production of the entry-level models. It rebuilt its damaged image by revamping its higher-end model lines with more race-bred technology. In an effort to regain rapport with customers, Porsche once again targeted the high end of the market in both price and performance. It set modest sales goals and decided that moderate growth with higher margins would be more profitable in the long term. Thus, the company set out to make one less Porsche than the public demanded. According to one executive, “We’re not looking for volume; we’re searching for exclusivity.”
Porsche’s efforts had the desired effect. By the late 1990s, the brand was once again favored by the same type of achiever who had so deeply loved the car for decades. The cars were once again exclusive. And the company was once again profitable. But by the early 2000s, Porsche management was again asking itself a familiar question: To have a sustainable future, could Porsche rely on only the Porsche faithful? According to then CEO Wendelin Wiedeking, “For Porsche to remain independent, it can’t be dependent on the most fickle segment in the market. We don’t want to become just a marketing department of some giant. We have to make sure we’re profitable enough to pay for future development ourselves.”
So in 2002, Porsche did the unthinkable. It became one of the last car companies to jump into the insatiable sport utility vehicle (SUV) market. At roughly 5,000 pounds, the new Porsche Cayenne was heavier than anything that Porsche had ever made, with the exception of some prototype tanks it made during WWII. Once again, the new model featured an engine up front. And it was the first Porsche to ever be equipped with seatbelts for five. As news spread about the car’s development, howls could be heard from Porsche’s customer base.
But this time, Porsche did not seem too concerned that the loyalists would be put off. Could it be that the company had already forgotten what happened the last time it deviated from the mold? After driving one of the first Cayenne’s off the assembly line, one journalist stated, “A day at the wheel of the 444 horsepower Cayenne Turbo leaves two overwhelming impressions. First, the Cayenne doesn’t behave or feel like an SUV, and second, it drives like a Porsche.” This was no entry-level car. Porsche had created a two-and-a-half ton beast that could accelerate to 60 miles per hour in just over five seconds, corner like it was on rails, and hit 165 miles per hour, all while coddling five adults in sumptuous leather seats with almost no wind noise from the outside world. On top of that, it could keep up with a Land Rover when the pavement ended. Indeed, Porsche had created the Porsche of SUVs.
Last year, Porsche upped the ante one more time. It unveiled another large vehicle. But this time, it was a low-slung, five-door luxury sedan. The Porsche faithful and the automotive press again gasped in disbelief. But by the time the Panamera hit the pavement, Porsche had proven once again that Porsche customers could have their cake and eat it to. The Panamera is almost as big as the Cayenne but can move four adults down the road at speeds of up to 188 miles per hour and accelerate from a standstill to 60 miles per hour in four seconds flat.
Although some Porsche traditionalists would never be caught dead driving a front engine Porsche that has more than two doors, Porsche insists that two trends will sustain these new models. First, a category of Porsche buyers has moved into life stages that have them facing inescapable needs; they need to haul more people and stuff. This not only applies to certain regular Porsche buyers, but Porsche is again seeing buyers enter its dealerships that otherwise wouldn’t have. Only this time, the price points of the new vehicles are drawing only the well heeled, allowing Porsche to maintain its exclusivity. These buyers also seem to fit the achiever profile of regular Porsche buyers.
The second trend is the growth of emerging economies. Whereas the United States has long been the world’s biggest consumer of Porsches, the company expects China to become its biggest customer before too long. Twenty years ago, the United States accounted for about 50 percent of Porsche’s worldwide sales. Now, it accounts for only about 26 percent. In China, many people who can afford to buy a car as expensive as a Porsche also hire a chauffeur. The Cayenne and the Panamera are perfect for those who want to be driven around in style but who may also want to make a quick getaway if necessary.
The most recent economic downturn has brought down the sales of just about every maker of premium automobiles. When times are tough, buying a car like a Porsche is the ultimate deferrable purchase. But as this downturn turns back up, Porsche is better poised than it has ever been to meet the needs of its customer base. It is also in better shape than ever to maintain its brand image with the Porsche faithful and with others as well. Sure, understanding Porsche buyers is still a difficult task. But a former CEO of Porsche summed it up this way: “If you really want to understand our customers, you have to understand the phrase, ‘If I were going to be a car, I’d be a Porsche.’
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Required Questions
Question 01: You are asked to develop a Mission statement and four Marketing objectives for Porsche for the next ten years (2021- 2025) . Draft an ideal mission statement and outline your four marketing objectives (5 marks
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Question 02: Identify , explain and justify the main consumer behaviour characteristics that influences the Porche buyers.
In: Operations Management