The Dupont Analysis - Porsche V.S. Toyota
Asset Turnover Model: Porsche vs. Toyota
(2011, millions)
Profit Margin Model: Porsche vs. Toyota
(2011, in millions)
Net Profit Margin
Asset Turnover
ROA
Leverage Ratio
ROE
Porsche
13.36%
0.51
6.81%
3.09
21.05%
Toyota
1.98%
0.61
1.21%
2.77
3.35%
Dupont Analysis: Porsche vs. Toyota
Porsche strategy:
From the chart above, we can see that Porsche has a high gross margin (37.6%) and operating expense to sale ratio (15%). It also has relative low asset turnover ratio (0.51). Hence, it is obvious that Porsche focuses on the strategy of increasing the net profit margin and maintaining its brand.
1. High profit margin
In its financial statements, the company mentions that they intend to maintain their position as one of the most profitable carmakers in the world for the long term, with a return on sales of at least 15% and a ROA of at least 21%. Thus, its price is relatively much higher than Toyota, which results in a greater gross margin. To reduce its COGS, Porsche plans to build efficient warehouse system and work with other companies like Volkswagen, whose business model is more about volume. For example, Porsche recently consolidated nine warehouses in Germany and achieved a 10 to 20 percent cost reduction. Also, at the end of 2013, Porsche’s fifth model series – Macan Model – will be launched and is believed to attract new customers to the brand. Then, the new sales will eventually contribute to a higher gross margin and ROA.
2. Brand effect
Porsche establishes itself as an exclusive brand. In order to maintain its brand value, Porsche has to spend more on its asset. As we can see from the chart above, Porsche’s fixed asset including plant, property and equipment and intangible asset consists 78.6% of its total asset. In addition, Porsche values customer
(2011, millions)
Profit Margin Model: Porsche vs. Toyota
(2011, in millions)
Net Profit Margin
Asset Turnover
ROA
Leverage Ratio
ROE
Porsche
13.36%
0.51
6.81%
3.09
21.05%
Toyota
1.98%
0.61
1.21%
2.77
3.35%
Dupont Analysis: Porsche vs. Toyota
Porsche strategy:
From the chart above, we can see that Porsche has a high gross margin (37.6%) and operating expense to sale ratio (15%). It also has relative low asset turnover ratio (0.51). Hence, it is obvious that Porsche focuses on the strategy of increasing the net profit margin and maintaining its brand.
1. High profit margin
In its financial statements, the company mentions that they intend to maintain their position as one of the most profitable carmakers in the world for the long term, with a return on sales of at least 15% and a ROA of at least 21%. Thus, its price is relatively much higher than Toyota, which results in a greater gross margin. To reduce its COGS, Porsche plans to build efficient warehouse system and work with other companies like Volkswagen, whose business model is more about volume. For example, Porsche recently consolidated nine warehouses in Germany and achieved a 10 to 20 percent cost reduction. Also, at the end of 2013, Porsche’s fifth model series – Macan Model – will be launched and is believed to attract new customers to the brand. Then, the new sales will eventually contribute to a higher gross margin and ROA.
2. Brand effect
Porsche establishes itself as an exclusive brand. In order to maintain its brand value, Porsche has to spend more on its asset. As we can see from the chart above, Porsche’s fixed asset including plant, property and equipment and intangible asset consists 78.6% of its total asset. In addition, Porsche values customer