THE RISE & FALL OF PMC-AG“I couldn’t find the sports car

of my dreams, so I built it

myself”.

- Ferdinand Porsche

PRESENTED BY :-

AMIT KUMAR

KARAMJEET SINGH

DIPANWITA MOHANTY

PREETAM PRAVAT MALLA

RAJU PADRA

TIGMASHU

PMC background

Ferdinand Porsche founded the company in 1931, with main offices in the centre of

Stuttgart, Germany.

Initially, the company offered motor vehicle development work and consulting, but did not

build any cars under its own name.

During his 20-month imprisonment, Ferdinand Porsche's son, Ferry Porsche, decided to

build his own car, because he could not find an existing one that he wanted to buy.

In 1948, the first PMC prototypes rolled out of the small manufacturing facility.

By 1960s however, PMC begun to design and build its own parts and launched first car.

Rapidly grew period 1960-1980. 1986 the year of highest production.

In 1972, the company’s legal form was changed Kommanditgesellschaft (KG) or limited

partnership, to Aktiengesellschaft (AG), or public limited company.

Early 1990 cost inefficiency hit, sales decreases. 1995 sales around 20000.

PMC’s craft tradition

PMC workers were encouraged to master long work cycles.

engineers worked independently & occasionally redesigned the

product to fit the manufacturing capabilities

a moving track system assembly system was introduced to improve

efficiency

Employees were encouraged to quickly put all the parts on the car.

PMC vehicles were known to have few defects when sold to

customers

ELEMENTS OF ORGANIZATION

Top level managers, who are

charged with the overall

responsibility for the

organization

Employees who perform

the basic work related to

the production of

production services

Managers, who connect

the operating core to the

strategic apex

Analysts, who have the

responsibility for

effecting certain forms

of standardization in the

organization

People who fill the staff

units, who provide indirect

support services for the

organization

Structural changes Started with a simple structure & evolved into a classic hierarchical

functional structure

Simple structure consisted of engineering and production department.

By 1980’s, employees were divided into more than 10 functional

departments, represented various stages of the production process as

well as upstream and downstream.

In hierarchical structure,

Front line employees reported to work group leaders, who reported to

supervisors, who then reported to group supervisors in each area.

Group supervisors reported to production managers, who reported to

production directors, who reported to PMC’s executive vice president

of manufacturing

In the early 1990s, for example, there were 48 group supervisors, 96

supervisors, 162 work group leaders supervising about 2500 front line

production employees.

PMC- SIMPLE STRUCTURE

Different Structural Dimensions :

Complexity : Low

Formalization : Low

Centralization : High

Design dimensions :Apex - Small

Middle Line - Small

Operating Core - Large

Key Part - Apex

Simple Structure

At the beginning the size of PMC is small and it was in its formative stage, so the structure

at that time was simple.

As we know a simple structure emerges when the control is in the strategic apex similarly at

PMC the control of the decision making lies on the founder Ferdinand Porsche.

Complexity was low because the structure was not elaborated and there is no horizontal as

well as vertical exists.

Initially Porsche was on to motor car development and consulting and there was no

manufacturing of cars, so formalization was very low.

As there was less no of employees, there was no middle line so the authority was centralized

on a single person that was Porsche.

At that time environment was organic, as they were relatively flexible and adaptive.

PMC-PROFESSIONAL BEAUREACRACY

Different Structural Dimensions :

Complexity : High

Formalization : High

Centralization : Low

Design Dimensions :

Apex-Small

Middle Line- Moderate

Techno-structure- Small

Operating Core- Large

Support- Large

Key Part – Operating Core

In 1948, the structure started shifting to professional bureaucracy because the company size

started to increase from medium to big.

First PMC prototype was rolled out of the small manufacturing facility.

Complexity started increasing because highly skilled people were being employed to make

the products.

With increase in the number of employees horizontal and vertical centralisation decreased.

There is high formalisation and standardisation.

Economies of scale and economies of scope started increasing with the introduction of new

products in th market and the expansion of market.

PMC- DIVISIONAL STRUCTURE

Different Structural Dimensions :

Complexity : High

Formalization : High

Centralization : High

Design Dimensions :Apex - Small

Middle Line - Large

Operating Core - Large

Techno-structure - Small

Support - Large

Key Part – Middle Line

In late 1980’s PMC move from professional to Divisional Structure.

As in divisional structure a set of autonomous units exists, similarly in PMC

departmentalization happened and thus emerges a functional design.

In early 1990’s there were 48 group supervisors, 96 supervisors, 162 work group leaders

supervising about 2500 front line production employees.

The complexity is high as the employees are divided into more than 10 functional

departments representing different stages downstream (quality control, marketing etc) and

upstream (design , purchasing).

That time PMC assembling and manufacturing cars so in assembly operation where

employees work in teams they must abide by the strict guidelines of assembling parts onto

the vehicles.

Centralization was high as the power lies with the middle management and coordinated by a

central head quarter.

Strengths and weakness of

divisional structure.

Strengths:

Ineffective performance has little effect in other divisions.

It free’s the headquarter staff from being concerned with the day to

day operating details so they can pay attention long term goal.

Weaknesses:

Duplication of activities and resources

Functional division may create co-realtions as well .

The end of success

Mainly targeted a small niche of everyday use sports car.

The cost of manufacturing was slowly increasing.

Japanese sports car cost of manufacturing were cheaper than PMC.

German currency appreciated against the American dollar, which make car more expensive

in the north American market.

1990 PMC’s sales reduced by half and also due to recession in North America sales reduced

further.

In 1993 its sales dropped to 14000 vehicles compared to 54000 in 1987.

Also high price tag put PMC out of reach of many potential customers.