Comparison between Porsche and Ferrari

Analysis Essay

Innovation Leadership and Comparison between Porsche and Ferrari

Introduction

Innovation leadership is an approach that uses varying leadership styles to influence employee performance (Ayman & Korabik, 2010). The key aspect of innovation leadership is the person. The method can be used as an approach to organizational development. The technique supports the achievement of a company’s goals, mission and vision (Ayman & Korabik, 2010). Due to technological advancements and new processes, companies need to embark on innovative leadership to ensure success and maintain competitive advantage (Pasmore, Woodman, & Shani, 2010).

The paper focusses on innovation leadership in Porsche and Ferrari. The discussion comprises of a comparison of the two companies on leadership styles, skills and qualifications, and the lessons learnt.

Background Information

Porsche

Porsche AG is a legendary company founded by Dr. Ferdinand Porsche in 1931 (Porsche Holding, 2013). Its headquarters are in Stuttgart, Germany. The company is famous for its beautiful and innovative automobile designs. The first independent design by Porsche was the Volkswagen Beetle. The car was unlike the 1930s four-wheel drive gasoline vehicles. It was virtually unbeatable Auto Union Grand Prix cars (Porsche Holding, 2013).

Ferdinand Porsche’s youngest son helped grow the company and played a significant role in designing the first sports car, the 356 (Porsche Holding, 2013). The car made its mark in the industry with its agile handling and unique attributes. The first Porsche presented comfort and reliability.

In the mid-1950s, the company introduced own engines and more powerful versions of the first model (Porsche Holding, 2013). The second model amongst modern automobiles was the 911, which was introduced in 1964. The Porsche 911 evolved during three decades to the new 911 Carrera in 1999. It evolved from the 911 S in 1967, 911 Turbo in 1974, 911 Cabriolet in 1983, and 911 Carrera 4 in 1990 (Porsche Holding, 2013). The Porsche 911 was well accepted in the market. It became the most famous automobile in the world.

Since its establishment, Porsche AG has been focusing on automotive engineering and technology (Porsche Holding, 2013). Studies indicate that the company has been using the sports car racing circuit to create and improve their models to ensure outstanding handling and high performance (Kotler, 2013). Evidently, Porsche AG has had many victories as compared to its competitors in the industry in classics, such as the 24-hour Daytona and 24-hour LeMans races. It is estimated that the company has won 24000 auto-races across the world.

In 1970, Porsche introduced several front-engine models (Porsche Holding, 2013). The first was the 924 introduced in 1976, which was followed by the unrelated 928 model in 1978. The 924 model was improved to the powerful 944 Turbo in the early 1990s (Porsche Holding, 2013). Finally, the 968 was introduced over the same period. Since 1995, the company shifted its focus to the development of mid-engine Boxster and rear-engine 911 (Porsche Holding, 2013).

The company introduced the Boxter in 1997. The model was newly designed and an affordable sports car due to its low market price. In 1998, the company announced its intention to design a peripheral utility vehicle together with Volkswagen.

Amid many competitors in the market, some companies have been absorbed by big manufacturing companies. The Porsche AG still stands as a separate unit. The company is steadfast and profitable. It remains to be the manufacturer of high performance sports and racing cars (Kotler, 2013). The brand of the company remains synonymous with race and sports cars because Ferdinand Porsche and his son were bent on achieving the image when they established the first shop in 1948 (Kotler, 2013).

Ferrari

The Ferrari Company was founded in 1947 (Ferrari, 2015). Since its inception, it has been producing sports cars. Unlike many companies in the industry, Ferrari, a Fiat-group owned company, continues to be successful even after the death of its founder. Today, the organization is amongst the successful companies in the world of sports cars.

The Ferrari Company designs and manufactures sports cars that are tantamount to speed and performance. The company’s sports cars are among the most famous automobiles in the universe. The company’s competitors include Porsche, Jaguar and Alfa Romeo. Research indicates that the brand name Ferrari remains common in the international racing circuit (Ferrari, 2015). Many automotive experts report that the Ferrari GTO is the best sports car ever manufactured. The company designed only 35 Ferrari GTOs. Some of them were sold as items collectors for over 10 million dollars. The business sells 3,800 Ferraris annually. The Ferrari Company also owns the Maserati brand. The company’s largest market of its brands is North America at 20%, followed by Germany at 18% (Ferrari, 2015).

Ferrari founded the Società Anonima Scuderia, an establishment of racing cars and drivers aimed at advancing the sport of competitive racing in 1929 (Ferrari, 2015). The company assured its investors that the operation would go beyond buying and racing cars, but would design and manufacture high-performance items for the sports car industry.

The Ferrari Company decided to join the Fascist Party in 1930 (Ferrari, 2015). The decision was compelled by the increasing strength of the party under the leadership of Mussolini. Through the association, Ferrari aimed at running the racing program for Alfa Romeo, which was then operating under the government-controlled IRI. The ambition was frustrated when Ricart was hired to restore Alfa Romeo and return it to the competitive race car circuit. Ferrari disliked Ricart, particularly when he proposed the buying of 80% of the Scuderia Ferrari and returning its administration to the main office in Portello. Resultantly, he ended his association with Alfa Romeo and Ricart.

After Ferrari ended his partnership with Alfa Romeo, he was not allowed to use the name Scuderia Ferrari or participate in racing for four years. The founder of the Ferrari Company founded Auto Avio Costruzione. With the outbreak of World War II, all racing activities came to a halt. Ferrari passed on in the late 1980s (Ferrari, 2015). In 1991, the company’s shareholders decided to re-launch the struggling Ferrari and appointed Luca di Montezemolo as the new chairman.

Under the new leadership, the Ferrari Company was restored. It introduced a series of new models and opened up new markets while maintaining its core values. Besides, the company adopted Formula One, a program for renovation, which ensures employees are placed at the heart of a company’s life by creating a safe, innovative, bright, and sustainable working environment (Ferrari, 2015).

Skills and Qualifications

Porsche was a German automotive engineer. Since he was young, he was passionate about technology. From the late 1800s to 1934, he worked as a vehicle engineer. Further, he was intrigued by electricity, and acquired a job with Bella Egger & Co. Porsche’s technological skills impressed his supervisors. As a result, he was promoted to a management position.

In 1987, he received remarkable achievements, such as the building of an electrical wheel-hub motor. In 1900, Porsche’s abilities were recognized internationally, especially when the wheel hub was used to power a non-transmission vehicle at the world’s fair. The acclaim he received for the engine gave him great satisfaction.

Porsche brought the same skills to the company to make it successful. The company was able to maintain its competitive advantage in the market because it protected a consistent innovative technology. The company introduced cars that made a mark in the industry due to their agile handling and unique attributes. Additionally, Porsche uses the racing cars circuit to improve its models.

Another qualification for the company is that it has a strong brand image. Porsche’s sports cars are the most famous in the world. The company produces outstanding high-performance models that ensure reliability and comfort.

On the other hand, Enzo Ferrari was the founder of the Italian sports cars manufacturer, the Ferrari Company (Ferrari, 2015). He was a race car driver with little formal education. He was a successful racer with many victories that made Ferrari a renowned name. Ferrari had a drive to build the best and most profitable sports cars. Evidently, the company’s automobiles are highly acclaimed in the world. It indicates the company’s strong brand image.

Besides, he was a clock builder, who developed a tradition of being on the leading edge of automotive development (Ferrari, 2015). Ferrari developed an internal drive that has helped the company remain competitive throughout the test of time. Ferrari ensured that the employees are skilled and equipped to face challenges from the competitors.

Lastly, the company combines aesthetics and performance. Unlike many competitors, Ferrari is not bent on ensuring performance (Ferrari, 2015). Since its establishment, it has ensured that it produces appealing models with a touch of luxury. The approach has attracted more customers than its rivals in the industry.

Differences in Leadership Styles

Ferrari was possessed many traits that make a good leader. They included trustworthiness, enthusiasm, confidence and assertiveness (Ferrari, 2015). Confidence is an important trait in racing, especially when driving cars that are going more than 100 miles per hour. He joined formula one without sponsorship. Ferrari portrayed his assertiveness when resolving company issues.

Moreover, Ferrari was a democratic leader. When he was working under Alfa Romeo, he made sure that the employees shared responsibilities, and he managed the racing team (Ferrari, 2015). Eventually, when he took over the company, he engaged other technicians with the aim of producing the best cars in the industry. Ferrari never underestimated the opinions of his employees. Besides, he was keen to explain about the cars to the racers. He understood that to be a successful racer, a driver needs to know his car.

On the other hand, Porsche was a proactive and aggressive leader (Kottler, 2013). He was bent on achieving the goals of the company at all costs. Besides, he emphasized a culture of collaboration and team-work. For example, he enjoyed a long collaborative relationship with Volkswagen (Kottler, 2013).

The difference in the traits of the two leaders brought about the modification in their leadership approach. Despite the two companies using the idea of innovative leadership, Ferrari’s strategy focusses on producing limited number of cars so as to maintain outstanding performance. Additionally, unlike Porsche, Ferrari is a trend setting company. However, the two organizations have been successful in their innovative leadership, as they have maintained their brands.

Effects of the Different Leadership Styles

Leadership has a direct relationship with the success of a company (Ayman & Korabik, 2010). The leadership style employed by a leader determines the culture, values, employee motivation, and change tolerance. Leadership styles shape a company’s strategies including their implementation and effectiveness (Ayman & Korabik, 2010). Additionally, they influence organizational performance.

For Porsche, business is booming in sales, profits and revenues. The company’s models have a strong global demand (Hetzner, 2014). Before 2018, the company expects to hit the target of 200000 vehicle sales annually (Hetzner, 2014).

Some industry watchers think that the sales surge could increase quality problems for the company. However, Porsche does not consider the aspect as issues of concern. It has been a total steal for the VW Group, since the later paid 11.2 billion dollars for the equity and shouldered 3.3 billion dollars in debt (Hetzner, 2014). In the first quarter, the company made 935 million dollars in operating profit (Hetzner, 2014).

Besides, the leadership approach has helped transform the company into an international market player. The company has been able to introduce unique models such as the Cayenne, which has tripled its revenues.

Porsche anticipates the increased sales and profits as benefits from the global roll-out of the Macan model. In 2015, the company plans to design and manufacture 50,000 Macans annually (Hetzner, 2014).

On the other hand, Ferrari has decided to go against the tide in the industry and limit its annual sales. The move came after the company had reached its peak of 7,318 sales in 2012 (Vijayenthiran, 2014). Ferrari limited its sales to 7,000 sales annually in an attempt to maintain exclusivity. In 2013, the company sold 6922 units (Vijayenthiran, 2014). Though the decreased sales, the Ferrari revenues went up by 5% and the net profit by 5.4%. The company’s growing profits are mostly linked to the personalization of the cars (Vijayenthiran, 2014).

Additionally, the use of both the old and new competencies has helped the company become a leading brand and acquire new partners and advisors.

Lessons Learnt

The research on Porsche and Ferrari and their success stories are educating. To begin with, leaders have to learn how to create a working environment, where employees apply innovative ideas to complete their tasks, solve problems, and develop new services and products. Though Ferrari and Porsche used different leadership styles, innovation approach was a common phenomenon. Both companies used the notion of innovation leadership in the design and manufacture of unique models that ensured their success in the global market.

Second, I have learnt that successful people innovate and make their rules. Besides, the need to be courageous to go their way and achieve their goals is present. Both Porsche and Ferrari faced hardships before establishing the two companies. However, the challenges did not deter them. They were keen to make their rules as the natural innovators they are and used an approach that ensured their success.

Conclusion

In the rapidly changing and growing business environment, organizations and leaders need to adopt innovation leadership to remain competitive. The paper has focused on innovation leadership in Ferrari and Porsche. The discussion indicates that though the two companies used innovation leadership, their leadership styles were different, and they impacted the companies in a dissimilar way. While Porsche was maximizing in the production of more cars to increase its sales, Ferrari was limiting its production to remain unique. Nonetheless, each company benefited from its leadership approach as the two companies have been successful innovators.

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