THE EXECUTIVE SUMMARY
The Ferrari organization was started in the year 1929 by an individual known as Enzo Ferrari. This organization majorly focuses on the production of sports cars. Nevertheless, the firm officially began in the year 1947 when the output of the first Ferrari car was launched. Enzo used much of his life to design and create a sports car. The capital percentage of the company has been shared between Piero Ferrari and the Fiat group, whereby the fiat group secures 90%, and Piero Ferrari secures 10% (Arik Wynkoop, Rex Jariwala and Marin Dyakov, 2009). Besides, there is a program utilized in this firm known as formula Uomo. This Uomo is an innovative program that directs the workers of the firm towards the firm’s goals and objectives by providing a creative, economically friendly, bright, and safe working environment.
The Ferrari organization has expanded its yearly sales for the last few years. The company has as well undergone several challenges while operating internationally. For instance, the diversifying of a portfolio of the products, changed patterns of clients’ behaviors, and increased level of competition, etc. Nonetheless, the Ferrari organization has been able to maintain the strength of its brand by overcoming these challenges. In the last few decades, the company has decided to put more effort into innovation to operate better at the global level. The firm has three key factors it concentrates on a while working at the worldwide level. These factors include driving sensation, superior technology, and design beauty (Fellice Physioc, 2013).
The firm is doing product differentiation by utilizing the race color red. Furthermore, the organization is putting more effort into its performance development in Abu Dhabi because it’s catering to too much economic growth in the Gulf region. Moreover, the company is utilizing its competitive strategy i.e.; it is permitting its clients to customize their cars by the use of a program known as Carrazzeria Scaglitte. The firm is using a centralized structure of the organization. This means that all decisions in the firm depend on the department head and the board of directors. The company has maintained its process of decision making as centralized because it ensures high-quality standards for each car that the firm manufactures (Syed Arif, 2013).
THE HISTORY OF THE FIRM
The company was founded in the year 1929 by Enzo Ferrari. The firm mainly produces extravagance sports cars. Conversely, the firm was formerly started in the year 1947 when the first Ferrari car was launched. Enzo Ferrari spent most of his life designing and create sports cars. Initially, in the year 1938, he was employed by Alfa Course, but he decided to leave the organization to establish his firm. Firstly, the firm he found was known as Auto Avio Costruzioni. But later after World War II, the firm was shifted to Maranello from Modena. After the end of World War II, a competitive proposal of Ferrari was presented in the industry that made this firm well-known among other manufacturers of an automobile. The Ferrari Organization has attained more than six thousand wins on the road. After that, the company’s 50% share was sold to the Fiat group by Enzo in the year 1969 (Arik Wynkoop, Rex Jariwala, and Marin Dyakov, 2009). The company’s logo has a heroic symbol that is historic. It was first utilized by a pilot from Italy known as Francesco Baracca. Afterward, his parents provided Enzo Ferrari to use it as a company’s logo. The logo is a symbol of a prancing horse, but Enzo designed it further in such a manner that he placed the horse on a yellow guard and utilized three Italian colors at the pinnacle (Fellice Physioc, 2013).
Vision: The vision of the firm is to ensure that excellent Italian cars attain the dream of the world.
Mission: the mission of the company is to create different sports cars that prove the supremacy of Italian cars on both the racing tracks and roads.
The goal and objective of the firm are to incrementally raise the total sales collected every year without interfering with the exclusivity of Ferrari and its power of pricing. And introducing more than ten new car models, including an SUV like car and a variety of hybrids as it intends to double its revenue by the year 2022. The firm believes it can accomplish this by joining new segments of the market.
Capabilities of the firm: Currently, the firm produces typically about 8000 cars every year. The firm use to put an annual production of every year to be roughly 7500 to be able to reach 8000 and maintain its superiority of brand of a supercar. On the other hand, the firm is expanding its production to produce up to 10,000 cars per year. The firm is capable of manufacturing such a significant number due to the record it has made. In 2015, the firm built 7,665 cars, in the year 2016, the company produced 8,015 cars. Therefore the firm intending to produce 10,000 cars annually is possible for them.
In terms of resources, the firm deals with the massive production of sports cars. Several examples the Ferrari Company manufactures to its clients are Ferrari F40, Ferrari F50, Ferrari FF, Ferrari California, Ferrari 458 Italia, etc.
PRESENT ANALYSIS
The SWOT Analysis of the Ferrari Company
The Strengths
- Activities automation in the firm brought consistency to its products and has made it possible for the firm to scale down and scale up based on the conditions of demand in the industry.
- The Ferrari Company is investing massively in the development and training of its employees, thus resulting in a motivated and high skilled workforce in the firm.
- The firm is highly successful at the strategies of entering the market for its main products.
- The organization has a strong foundation of suppliers that are reliable for providing the raw materials, thus enabling the firm to overcome problems of the supply chain.
- The organization is known to be comparatively prosperous at the implementation of new ventures and produce favorable returns on capital expenses by creating new streams of revenue.
- The firm has successfully incorporated several technology organizations in the last few years to create a consistent chain of supply and make its processes more efficient.
- The organization is well recognized for its product innovation; it keeps successful records of developing new products.
- The firm is committed to a right relationship with its clients, and it has achieved a high intensity of consumer satisfaction among current clients.
The Weaknesses
- Although the company’s product is known as a success in terms of selling its exceptional selling proposition and positioning into defined clearly, this can result in the competitor’s attack in this field.
- The structure of the organization is compatible with the current model of business, thus restricting the increase in the adjacent product segments.
- In comparison with its competitors, the Ferrari firm has a rate of attrition. Therefore it has to increase its expenditure on the development and training of its employees.
- The firm does not do the planning of finance efficiently and adequately. The present liquid asset and asset ratios indicate that the firm can utilize the funds more effectively than what is currently doing.
- As analyzed from the vision of the firm, the firm needs to put more resources on technology to incorporate the processes all over the board.
- As stated earlier, though the firm is successful in incorporating small organizations, it as well as its fraction of failure to integrate firms with different cultures of work.
The Opportunities
- The new policy of taxation can significantly influence the way business is done and can result in new opportunities for development; Ferrari can utilize the opportunity to expand its profitability.
- The new policies of an environment may establish the same field for firms in the market; this may create a favorable opportunity for Ferrari to make its awareness and obtain the market share in the new category of products.
- The development of the market will result in dilution of the benefits of competitors, thus allowing Ferrari to expand its competitiveness contrasted to other competitors.
- The green drive by the government may open an opportunity for the procurement of products from the Ferrari Company.
- New emerging trends of customer’s behavior may create a unique market opportunity for Ferrari. It may offer a favorable opportunity for the company to develop new streams of revenue.
- Reducing the cost of transportation may act as an opportunity for the firm because it will lower the prices of shipping, thus bringing down the price of the firm’s product. This may expand the company’s profitability or obtain the market share bypassing the benefit of low –amounts of products to the clients.
The Threats
- An insufficiently skilled workforce in a particular worldwide market poses a threat to the consistent development of the company’s profit in those markets.
- The demand for the firm’s highly profitable products is seasonal, so if anything unnecessary takes place during this time may influence the firm’s profitability.
- The fluctuating buying behavior of customers in the online channel could pose a threat to the current physical infrastructure and model of chain supply.
- Counterfeit and low-quality products may as well pose a threat to the firm, particularly in the new markets and markets that have low income.
- Rising costs of raw material can also result in the reduced profitability of the firm.
- Rules of liability are different in various countries, and the company may be out in the open to several liabilities claims from changing policies in those markets.
- Increasing pay levels and costs in China can result in severe threats on Ferrari profitability.
Company’s Staff, People, and Structure
By use of figures and facts of 2018-2019, the company employed 115 individuals at the executive level, approximately 1700 persons as white collars, and roughly 2000 individuals as blue-collar. The firm is using a centralized structure of the organization. This means that all decisions in the firm depend on the department head and the board of directors. The company has maintained its process of decision making as centralized because it ensures high-quality standards for each car that the firm manufactures (Syed Arif, 2013).
The Ferrari Organization Financial Analysis
Balance Sheet
This is a financial statement that indicates an organization’s equity of shareholders, liability, and assets at a particular end in time, and offers a basis for rates of computing returns and analyzing is the capital arrangement. It is merely a statement of finance that indicates what a firm owes, owns an investment from shareholders. The figure below shows the Ferrari Company balance sheet from the year 2015 – 2019.
Income Statement
It is a financial statement that indicates the loss and profit of an organization for a given period. It also displays the firm’s administrative and selling expenditures, gross profit, costs, and revenues. The figure below shows a summary of the income statement of the Ferrari Company for the last four years.
Cash Flow Income
This is a financial statement that identifies where a cash entry is generated and where funds are being spent over a particular period. The figure below shows the cash flow income of Ferrari Company from 2015-2019.
The Present Marketing Strategies of the Ferrari Company
Product
This policy of marketing reflects a lot to the solution of consumer’s requirements. Ferrari Company is developing exceptional design, features, and names of products to be prominent in the competitive industry. The organization is considering the following factors to improve the strategy of products augmented, name, brand, packaging, features, variety, and quality services.
Pricing
This element of marketing strategy needs an assessment of the product’s value for anticipated clients. The Ferrari Company is focused on setting the list of discounts, the period of payment, terms of credit, and prices. The Ferrari Organization decided that it has to set reduced costs than its competitors when penetrating a new market, for a better price joining strategy. This idea has enabled the company to acquire the leading share of the market based on price discounting. However, this idea as well may result in possible retaliation that may, in turn, lead to an undesired war of prices with competitors.
Place
This element of marketing strategy demands the Ferrari Company to ensure several essential decisions when improving its plan of distribution. The firm has decided that there is a need for a distribution partner to assist in the requirements of clients; this ensures that the products are available to intended clients at a targeted location. Also, the firm decided to use indirect (involving intermediaries) channels of distribution to ensure it covers a broader market all over the globe due to high demands. The firm has as well decided to utilize both physical and online forms of distribution strategy; it has its website to sell products through the internet. This idea has made the firm ensure that it has reached all its customers in the corners of the globe, both physically and through the internet. Currently, the firm is researching this element of marketing strategy; the firm is assessing different places to find out the mode of distribution that is most preferred by their clients. The firm is as well as studying the competitor’s pattern of distribution to analyze the cost-benefit and conduct comparison, which may help in an efficient plan of distribution.
Promotion
Promotion can be categorized below, and above the line strategies of advertising to attain marketing goals, the Ferrari firm may blend on one or both. This is one of the most crucial elements of marketing strategy the Ferrari Company is concentrating on. in the above line of promotion alternatives, the firm is using print advertising, radio, and television. In the options of below the line promotion, the institution is utilizing direct mails, tradeshows, and catalogs.
To fulfill this element, the firm is clearly defining the exceptional selling propositions to let clients better understand the product and how it is diverse from available options. The firm is also ensuring that when posting a message of advertisement, it analyzes the news accurately to make sure that the client will perceive a clear picture of the product provided. The company is ensuring that it is maintaining a high professional will of advertising by offering a prestigious brand that attracts clients all over the globe. Finally, the firm makes sure that it puts into consideration the information of the intended market such as social status, income, gender, and age so that it incorporates a suitable plan of promotion.
Ethics
On 23rd September 2016, the Ferrari Company initiated the new Ethics Helpline; this channel permitted all partners, suppliers, consumers, and employees to report, advice, and request about alleged actions, events, and situations which might be incompatible with the company’s conduct code. This Ethic Helpline is available 24/7 in a week and administered by an independent supplier. The allegations are usually supervised by the Internal Audit head of the firm and decided following the procedures of the whistle-blowing to all group organizations of Ferrari. To activate the investigation and verification process of any individual reported, the accusation must offer objective data which may be useful in finding out the relative duties, individual involved, the company, and the occasion. If you are an employee of the Ferrari Organization, you may look for advice concerning the interpretation and implementation of the company’s conduct code by discussing with your direct supervisor, your representative in Human Resource.
Corporate Social Responsibility
The Ferrari firm believes in working for individuals, and also working together with individuals. With the development of the business across the globe, the firm makes sure that it employs many persons and establishes new livelihood gaps for numerous individuals around the world. The company has achieved this through direct contracts and employment, together with inclusive opportunities of business. The organization works together with the community and intends to assist them in becoming happier and healthier. The firm offers support and nutritional boosting to the neighborhood near their operations, along with regions that live below the poverty line. The firm also distributes and produces hygiene and health products to ensure the well-being of its consumers and the community it is involved with. In the year 2012, Ferrari launched two facilities to cater for those who have finished their studies in Ishinomaki with massive donations gathered since the Great Eastern Earthquake. The first ceremony took place in the presence of the Mayor of Ishinomaki, ambassador of Italy in Japan, and children who had just finished schooling. Donations were collected, and over 85 million was gathered as a result of numerous charity plans made by the Ferrari firm. Also, in June 2012, the firm, together with its employees, did an online auction and collected massive amounts of funds that were used to assist families who were survivors of Emilia-Romagna Earthquake.
Environmental sustainability
The firm has continuously put individuals and their respective passions at the heart of every activity it does in the involvement of motorsport, beginning with their workers to their families and further outwards to customers and the community at large. The Uomo program has changed the plant’s face with the application of technology for better protection and life quality. The firm dedication to the environment is through the formation of a program that ensures the reduction of pollution through emissions from the process of manufacturing. The company makes sure the car manufacturing is efficient and in the process of production, implementing current standards of the environment in the building of new site of construction, and utilizing renewable sources and trigeneration plant to cover its whole energy requirement. The firm also works to lower its footprint of the environment by making sure that it permits the rules concerning carbon release and production. It as well works towards organizing an operational program that lowers land and water pollution. All products that are distributed and manufactured by the Ferrari organization come along with a technique of disposal to reduce wastage and encourage recycling.
Leadership
The style of leadership of Ferrari Company is flexible since they are all united in the idea and vision of Enzo, which is to be the best team in racing. The members of the firm are involved in the performance of the company because they are allowed to share their views during decision making. The Ferrari firm is centralized leadership and centralized employees because both parties participate in final decision making.
Diversification
It is the process of making a firm to be widely known or diverse. Several actions have to be undertaken for a company to be distinct. The Ferrari Organization has performed some activities that have made it different. The activities include;
The logo: in the entire world of motoring, the Ferrari logo seems to be the most iconic as compared to the other company’s logos, such as Audi and Mercedes. Since Enzo just talked about this logo once, most individuals have wished to understand the meaning of the logo. Enzo said that the logo was responsible for the good luck he has experienced even in the firm, and he said that every car that bears the logo would have the same success.
The success of formula 1: the firms diversified out of this victory, Ferrari does not only turn the head on the road but also in the track. This firm’s product (sports car) has won more than 200 victories in the globe championship for the last 50 years. This victory has played a significant role in the widespread of the brand in several ways.
Fiat: The decision that Enzo decided to let the fiat hold some share was a remarkable idea. This decision as well contributed to the vast diversity of the firm. The firm experienced an enormous increase in investment cash. Therefore, numerous cars would be manufactured, and the company becomes more popular, and the brand turns out to be robust as a result.
Strategies for competing in global markets
The Ferrari organization has expanded its yearly sales for the last few years. The company has as well undergone several challenges while operating internationally. For instance, the diversifying of a portfolio of the products, changed patterns of clients’ behaviors, and increased level of competition, etc. Nonetheless, the Ferrari organization has been able to maintain the strength of its brand by overcoming these challenges. In the last few decades, the company has decided to put more effort into innovation to operate better at the global level. The firm has three key factors it concentrates on a while working on a worldwide scale. These factors include driving sensation, superior technology, and design beauty (Fellice Physioc, 2013).
Also, the firm intends to raise its revenues by improving its volume of sales. Therefore, the company is concentrating on improving the markets and incorporates versatility in its design. For instance, now the firm is selling four models to clients who desire Ferrari but wishes to extend seats by adding kid’s seats and grocery in the car too. Furthermore, the firm has continued on a broader scale to China (Fellice Physioc, 2013). China has turned out to be one of the largest markets for the firm. This has assisted Ferrari to design innovation according to requirements of the intended market. This worldwide strategy operation is evident to be fruitful to the organization due to the apparent increase in revenues over the years. The company also has vast economic growth in the Gulf region by concentrating on calling attention to its presentation in Abu Dhabi.
FUTURE PREDICTION OF THE FIRM
Based on the past and present assessment of the Ferrari Organization, I see a good future. The Ferrari Organization has been performing astonishingly well, especially by having a return on equity of 60%, this is far beyond the ordinary of the financial institutions by approximately 40%. I think the firm should expect to continue in this way for the next ten years with an expected ROE of about 50%.
References
Syed Arif, November 2013. “SWOT analysis of Ferrari” Marketing management.
http://www.managementparadise.com/sayed123/documents/14822/swot-analysis-of-ferrari/
Felice Physioc, January 2013. “Keeping the dream alive: Ferrari’s strategy to success.”
http://www.wobi.com/blog/ferrari/keeping-dream-alive-ferrari%E2%80%99s-strategysuccess
http://fernfortuniversity.com/term-papers/swot/1433/1285-ferrari.php
https://finance.yahoo.com/quote/RACE/cash-flow?p=RACE
https://www.zacks.com/stock/quote/RACE/balance-sheet