Porsche Case Multinational Finance

Topics: BusinessLogistics


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Last updated: October 10, 2019

Porsche as a leader in the luxury automobile brands market needs to consider its long-term sustainability and to focus on maintaining the US dollar price.

Despite the fact that luxury brand cars prices are relatively inelastic and a spike of few thousand dollars may not be an issue to the Porsche buyer, it may very well affect its long- term market share especially if the Euro keeps climbing up, and the company’s perception of exchange rate is not properly aligned with US consumers expectations.There are ways, which the company may consider in order to avoid the challenges of exchange rates fluctuations. Logistics is a major one. Even though it is a luxury brand and all the parts are manufactured in Europe a possible US plant may prevent the challenge of exchange rates. Along with this, Porsche needs to do better job in the futures market and by purchasing European call options with expiration date approximately the time of shipment of the vehicles to USA, an eventual rise in the Euro may fill the gap between the maintained US dollar price and desired profit margin.Also, Porsche may want to re-evaluate its shipping policy schedule and the overall quantity of vehicles per delivery.

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Porsche should also be coordinating its inventory with its partners (dealers) in the USA more efficiently. We see all these as areas of opportunities for Porsche, and if revised and executed appropriately could possibly create more solid profit margins without worrying about exchange rates fluctuations.

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