Embed Size (px)
Citation preview
7
Business Strategy (FÖ2003)
Martina VALISOVA - Cindie AUROUSSEAU
7
Borlänge 7.4.2015
OVERVIEW
INTRODUCTION.............................................3I. Ferrero’s Organization..............................41. History............................................42. Structure..........................................4
II...............................Analysis of the company7
1. Porters´ five forces framework.....................72. Business system...................................103. Positioning.......................................124. Resources.........................................135. SWOT analysis.....................................15
III.Strategy for Ferrero..............................18REFERENCES..............................................20
7
INTRODUCTION
Model of a brand “made in Italy”, manufacturer of confectionary
products and chocolate Ferrero is one of the best examples for
defining post-war private sector in this country. Since the
creation of the star product, Nutella, the group has
successfully launched more than 30 products. The Group is now
the fourth largest chocolate and confectionary manufacturer,
behind Nestlé, Mars and Mondelez International.
The ability to innovate and invest on new markets led Ferrero
to arouse new consumption habits, aiming a growing target,
especially with the Research and Development department, one of
the main forces of the company, bringing daily new
confectionary concepts.
The family business always refused any partnership or outside
shareholders in the company, keeping privacy in management and
highlighting internal development. Other key to success is the
relation between the company and its employees, imbued in
Ferrero’s values and culture.
Despite its independent status, Ferrero wants to extend its
activities, especially towards Asia and the American market, as
80% of the sales are made in Europe. We decided to focus on the
strategy for the US market, where the challenge lies in
applicable laws and regulations in this country, and in a
context where the increasing concern for healthy lifestyle and
sustainable development are affecting the company’s image.
7
After presenting Ferrero’s organization structure and analyzing
its business system, resources and the environmental conditions
surrounding confectionary market, we will present an
implementation plan for a strategy in the American market.
7
I. Ferrero’s Organization 1. History
Founded in 1946 by Pietro Ferrero, a confectioner chocolate
maker in Alba, Piedmont region, Italy, the family company is
well known for the famous Nutella hazelnut spread recipe,
created when replacing cacao beans, which became rare and
expensive at the time, by nuts, and which had later melted in
the sun.
In 1950, the running of the company goes to Michele, Pietro
Ferrero’s son, who became the single leader of the company and
gave his parents confectionary plant the international
dimension it has today. The company started its European
expansion in 1956 with the opening of a plant in Germany, and
in France in 1960, and then its global expansion later, with
the American market in 1985, Australia and Asia.
Michele developed the other famous brands such as Kinder
chocolate in 1968, Tic Tac in 1969 and Ferrero Rocher in 1982
(Ferrero c2015).
2. Structure
The Ferrero Group is formed by 73 consolidated companies,
managed by its headquarters in Luxembourg, the holding company
Ferrero International S.A., for the Group’s strategy and
operations. According to the 2013 Annual Report on Corporate
Social Responsibility, Ferrero directly coordinates all core
procedures from its headquarters in Luxembourg although it has
also head offices in different countries and cities worldwide
7
which modify the main strategy to adapt local conditions, they
are all bound to the main head quarter.
Ferrero is directly present in 53 countries, and its products
are sold, directly or through authorized retailers, in more
than 160 countries belonging to the entire international
community (Ferrero Group’s CSR report, 2013).
Over the years, Ferrero’s structure evolved, with the expansion
to new markets in the five continents, as well as the opening
of 20 production plants in 17 countries, and eight agricultural
companies, among them 5 for direct cultivations and 3 for
manufacturing.
Ferrero has worked through a model of “corporate governance”
since 1998 (Ferrero Group’s CSR Report, 2013), led by an
Assembly and the Board of Directors, using a committee called
the “Group Leadership Team” in order to support decision making
and implement strategies defined previously by the Board of
Directors.
However, it remains a family-owned business, conceiving its own
products and constantly innovating. Ferrero was created by a
family and its products are intended for families. Its values
system is based on quality, ethical values, emotional
connection with the customer, which makes it unique and aside
from other companies, given the empire it constitutes. In
addition to being a family business, Ferrero is proud of its
independence. According to its former ambassador and president
of the Ferrero foundation identity of the company is based on
its independence and if they had shareholders, they would press
7
Ferrero to increase turnover and as they say: “it takes time to
make a good product”.
In august 2013, the Group was employing a total of 30,105
people around the world, including the 5,308 external
collaborators such as temporary workers or sales
representatives, with 69, 7 % coming from Europe and the rest
outside Europe. Ferrero’s values, “Loyalty and Trust, Respect
and Responsibility, Integrity and Sobriety and Passion for
Research and Innovation”, are encouraging employees and
advocate them the right conducts to adopt with customers and
communities. They “constitute the real legacy of our Group.”
The motto of the company, “Work, Create, and Give” enhances
this willingness for close relationships both with employees
and customers.
Organization’s development
Nutella, which had long been confined to a few European
countries, has expanded to countries such as United States and
Mexico. On the American market, the hazelnut spread recorded a
20% growth of its sales in 2012, and the production is made in
a Canadian factory.
Those past years, Ferrero was seeking to reduce its dependency
to this product, which also suffers from retailers’ owned
brands competition.
In 2012, Nutella was subject to a lot of criticism, especially
for its use of palm oil, accused of causing deforestation.
Since this time, Ferrero is putting forward its “sustainable
supply”.
7
For a few years, Ferrero group dedicated its time and money for
social and environmental purposes. The company has been
investing in developing regions, through a subsidiary called
“Impresa sociale”, meaning social business, in order to rebuild
traditional entrepreneurial business model into solidarity and
development concepts, and enhance the living conditions and
develop the populations in those areas. Ferrero also run the
program “Kinder Sport” that aims to promote healthy lifestyle
and to encourage sports for children. Since 2007, it has
involved more than 6 million children in 17 countries. The
whole industrial policy of Ferrero is led through harmonized
environmental management; including energy saving, waste
management, renewable energies. For now, Ferrero reduced from
20% the water consumption per unit of product.
In 2012, Mars showed its interest in buying Ferrero, while
Nestlé has been looking it for years. "We're not interested in
maximizing revenue in the short term, like everyone else. If we
were listed, we would be under short-term pressure to deliver
dividends and profits”, said Ferrero CEO Giovanni Ferrero.
Instead, within 10 years, Ferrero CEO is planning to double the
size of the company. While 80% of the sales are made in Europe,
he is betting on the US and Asian market, being confronted with
giants such as Mars and Hershey that dominate there. In this
regard, the company is planning to invest in automation of
technologies in order to expand its Canadian manufacturing
plant in Brantford, which serves US market, and meet the needs
of this huge country.
7
According to the Group report, by 2020, the company aims to
ensure 100% of hazelnut traceable, 100% palm oil certified as
sustainable and segregated, 100% cocoa certified as
sustainable, and an increase of 10% in the use of packaging
made from renewable sources, compared to 2009. Talking about
environment, Ferrero aims to reduce CO2 emissions from
production activities by 40% (compared to 2007), and to reduce
by 30% greenhouse gas emissions (tonnes of CO2 equivalents)
from transport and storage activities (compared to 2009).
(Ferrero CSR, 2013).
7
II. Analysis of the company 1. Porters´ five forces framework
In order to analyze the company’s environment we will focus on
Michael Porter´s framework of five forces. This theory is based
on the concept that there are five forces that determine the
competitive intensity and attractiveness of industry. Porter’s
five forces help to identify where power lies and also to
understand the strength of a company´s current competitive
position, and the strength of a position that a company can
look to move into. (De Witt, Meyer, 2010). The confectionery
industry is one of sector which constantly grows in global. The
US industry represents the biggest confectionery industry
globally, ahead of China and the UK. For purposes of this paper
we will consider that the Ferrero participating within
confectionery industry in the US is present mostly in
particular three segments: chocolates (premium chocolates),
spreads and mint segments.
Rivalry amongst existing competition
The rivalry within this industry is affected by big amount of
competitors who strive for the best position. Ferrero,
considering particularly US market, is considered as a one of
the front and profitable firms within the confectionery
industry, especially known for premium chocolates and mints. In
the industry there are numerous industry leaders that offer
similar products either they sell a small amount of a large
variety of sweets or they are specialized in a particular
7
product (Gibson 2011). This factor increases the
competitiveness within the industry and it also has an impact
on the prices of products, and demands on suppliers and raw
material. Another factor that affects the rivalry in this
industry is its growth. Since the confectionary industry is
mature, the growth is gradual which makes companies to compete
to enlarge sales and be profitable. Other component
intensifying the rivalry is the fact that the differentiation
of the products is low, there are few brands that offer
distinct products but mostly the differentiation is on the low
level which causes the rise of rivalry, customers choose what
to buy only according to the price or quality of service. Next
factor affecting rivalry in this particular industry is
perishability of products. When a products are perishable at a
certain time it loses its value completely. This creates
pressure on a competing firm to sell its product at a price
while it still has value. This situation within the industry
means that the rivalry among the competitors is high and
contains price wars, advertising fights, new product lines and
demands higher quality of customer service. Ferrero´s biggest
rivals in premium chocolate segment within US industry are for
example Cadburry, Mars, Nestlé or Lindt. In mints it is Wrigley
or Callard & Bowser, in spreads Hershey´s and also Jif
(National Confectioners Association c2015; Candy Industry
c2015).
Bargaining power of customers
This force has impact on a product´s prices, the level of
quality of service and also on profits and costs in the
7
industry. Within this industry customers have the significant
power to affect the profitability of the industry. According to
the National Confectioners Association consumers spend on
average $103 per person each year for these treats. The most
noticeable periods that influence the profits of companies
within the industry are connected to holidays, such as
Valentine's Day, Easter, Halloween and Christmas (National
Confectioners Association c2015). Also customers will to choose
from many not so different products affects company´s costs
(e.g. services, marketing, quality development expenses etc.).
So the customers may determine the future trends in this
industry for example by spoiling for sugar free or fat free
products. Also Ferrero experienced the power of customers when
it had to pay $3million in class-action suit over Nutella's
“misleading” health claims (Daily Mail 2012).
Bargaining power of suppliers
This force sways a firm’s profitability by raising/lowering
prices or reducing/amplifying the quality of the supplier’s
product. In this particularly industry suppliers bargaining
power is significant because of the limited amount of them. Raw
materials (cacao, sugar, oil, nuts etc.) are grown in tropical
climate areas that make many players in the industry to import
the products. The biggest problem here is that in such areas is
a noted danger of a natural catastrophes or even civic
disorders that affects the number of suppliers and also the
prices of the raw material and suppliers’ services. Another
aspect of supplier´s power is the fact that companies have to
pay attention to the quality of supplies to pass the quality
7
inspections and regulations which makes the companies dependent
on suppliers. In addition candy and desert makers in the US
have to pay more for sugar than foreign counterparts because
federal law limits the amount of sugar that can be grown or
imported (American Sugar Alliance c2014). That also includes
the Ferrero group because they also have plant in US area.
Nonetheless, sugar can be substituted by stevia, monk fruit or
other natural sweeteners. More important commodity here is the
cocoa which bean is demanded ingredient in this industry, and
there is no possible substitution for which suppliers must
compete. So this lack of substitutes increases also raise the
power of suppliers within this industry. Ferrero claims to
honor two principles when it comes to supplies: excellence in
quality and respect for human rights and the environment. All
activities within each strategic supply chain are carried out
through a specific program Ferrero Farming Values that strives
to gain sustainability and achieve strict quality standards.
Also owing to the complexity of maintaining the supply chain,
Ferrero recognizes that a single actor alone cannot transform a
given supply chain into a sustainable one. That is why they
cooperate with organizations participating in programs involved
in supply sustainability (Ferrero CSR Report 2013).
Threat of substitutes
The threat of substitutive products or services can have a
significant impact on the prices of the candy products. If we
consider substitution of the whole industry, the category
possible to replace the candy products is snacks. Many kinds of
snacks are available, such as dried fruits, potato chips, ice
7
cream that can be taken as a substitution for candy. Considered
also the occasion confectionery is also regarded as gifts
during numerous seasons and celebrations, but they can be
replaced by other gift products as flowers, toys or jewelry.
However, in general the substitution of the candy products is
slender. It must be noted that the threat of substitution can
exist also within the industry. For Ferrero the threat within
this industry is perilously high. As mentioned before, there
are many other competitors fighting for customer´s favor and
that rivalry thanks to the lack of differentiation is intense.
Ferrero and its three products sell in US market have serious
competition. Ferrero Rocher as a premium chocolate compete
against other brands as Lindt, Ghirardelli, Godiva etc. which
are known for production of luxury chocolates. Within mints
the substitution threats are e.g. Mentos or Altoids but also
different type of products like chewing gums or sprays. The
biggest Nutella rival in US market is traditional peanut butter
produced by many brands as well as jams (IMB 2012; Statista
2014)
Threat of new entrants
The last of the five forces determines how easily a firm’s
profits can be lowered because of new competitors in the
industry. Regarding all aspects noted above the threat of the
new entry is not significant. There are many competitors in the
industry that have markedly prestigious brand names and they
already gained loyalty of customers which creates a
considerable entry barrier for new companies. Thus, the new
entrants would have increased costs to overcome the reputation
7
and great customer base of the existing companies. Another
element making the entrance of the new company harder is
capital requirement. It is not so easy to start a new business
in this industry; it requires the company to have a weighty
source of capital to get in. The great capital investments
cause spending in areas such as production equipment, human
resources, raw materials, research and development or
advertising and marketing. As in every industry containing
food, also here are government standards. Companies wanting to
start its business must satisfy the guidelines and regulations.
These regulations cause increasing of the barrier to entry for
new companies.
2. Business system
Business system is the company´ s configuration of resources,
activities and product offerings that is intended to create
value for customers. The efficient and effective business
system is the crucial aspect for company to have a competitive
advantage (De Witt, Meyer, 2010)
Product offering
The products offered by Ferrero group are famous all around the
world and the brands of Ferrero Rocher, Raffaello, Nutella or
Tic Tac are regarded in confectionary industry as a one of the
most identifiable producer of candy. The prestige brand name
gained Ferrero loyalty of the customers although comparing to
the US market the position is more prominent in Europe. But the
great brand could not have been gained without the approach
that helps the company to create the value proposition.
7
Responsible products are what Ferrero reckons as an important
pillar of its value proposition: the concept of healthy
nutrition advocating a balanced diet and adequate intake and
providing the highest quality and the freshest product for
consumers all over the world. With every product they produce
Ferrero tries to build exclusive products, thanks to low level
of differentiation within this industry the main aim of this
company was to come up with something exclusive within a narrow
niche that can be gradually expanded. The company is customer-
oriented and so they adhere to produce the most quality
products by talking care of all the activities beginning from
selection of the raw materials through processing, packaging to
promotion and marketing) (Ferrero CSR Report 2013).
Activity system
As mentioned before Ferrero is stressing the quality and the
customers’ satisfaction. In order to achieve these goals
Ferrero developed the value chain of activities that helps to
create the added value and to build the competitive advantage
(Ferrero CSR Report 2013):
Know-how - use of fresh ingredients, no chemicals, special
recipe including procedures adding the unique taste
Raw materials - thorough and precise selection of sustainable
and ethical sources and quality raw materials, traceability and
safety while monitoring the suppliers
Production – stress on quality certification, waste
minimization, environmental respect, 5R packaging (removal,
reduction, recyclability, reuse, renewability)
7
Logistic - efficient, eco-sustainable transportation systems,
energy saving warehousing
Sales – Ferrero emphasizes transparency of nutrition
information, small portions, freshness, product suspension
during summer
End consumer - responsible advertising and communication, here
Ferrero supports the notion that responsible commercial
communications can assist consumers in making appropriate
choices about food and beverage products, as well as in
understanding the role of nutrition, diet and physical activity
in order to achieve a globally healthy and active lifestyle.
Thus, Ferrero, individually as well as through the Associations
to which it belongs (such as WFA, the World Federation of
Advertisers, and IFBA, the International Food & Beverage
Alliance), is an active player in the self-regulatory process
at national, as well as international level (Ferrero c2015;
Ferrero CSR Report 2013).
Resource base
The Ferrero is present in 53 countries and has 20 plants all
over the world of which three are Social Enterprises, plus 9
agricultural companies for direct cultivation. Considering US
market Ferrero has his head officer as well as one factory
located in east coast in New Jersey and newly built factory in
Mexico. That can be considered as a strategic move because USA
put limitations on sugar production and import, but this
restriction does not apply on Mexico. Ferrero also have
agricultural companies that operate as a supply, placed in
7
Chile, Argentina (hazelnuts), Brazil (palm oil, sugar cane) and
Ecuador (cocoa). That can guarantee the freshness of raw
materials used in products sell within US market.
The integral part of the resource base is also the know-how of
the company. Ferrero based its recipes on the traditional
family procedures delegated from generation to generation and
even tough using new technologies, they strictly keep the
original recipe. Also for the human resources Ferrero employs
the professionals in order to create unique products,
developing innovative research and production processes and
using their own technologies. Ferrero has special initiatives
that are targeted to recruit and train talents and also has
special foundation that takes care of former Ferrero employees.
The competitive advantage can be defined as something that
makes the firm special over its rival organizations within the
same business area which should be sustainable over a prolonged
period of time (De Witt, Meyer, 2010).
It seems like the competitive advantage of Ferrero is
orientated towards differentiation strategy, and can be
regarding the quality of its products, which gives the firm
prestige and strong brand image. This quality comes both from
its innovation strategy and its management organization based
on team spirit values and distribution techniques. Ferrero is
inventing new ways of consumption. There are just a few brands,
but always in value added niches, where the latter quickly
become leader. Instead of following a market need discovered
through a marketing test as all the companies in this sector
7
do, Ferrero is aiming hidden needs. To do so, the company calls
on all its resources on one product, developed internally using
its own technologies and its own machines built within the
group in 80% of the cases.
Thus the company is dissuading any imitator thanks to this
strategy based on innovation. Furthermore, the products
developed by the group have a long lifecycle. This advantage
implies an innovation culture in the company to, along with
Ferrero’s values and principles.
3. Positioning Owing to the nature of the industry within which Ferrero
operates, its main objective was to build special products. The
company realized that the most competitive products were ones
that didn’t have to compete head-to-head with what already
exists in the market, so they positioned their products in very
narrow market niches that expanded those niches gradually.
Within the US market Ferrero presents three products.
Its first entrance to the U.S. markets in 1969 was with the
tiniest member of the Ferrero product family: Tic Tac mints.
The company launched the signature tree-shaped displays for the
mint product and advertising campaigns that capitalized on the
unique sound the plastic boxes make when filled with Tic Tac
mints are shaken, which also has its own copyright mark. Tic
Tac was positioned within the mints, gums and breath fresheners
segment as “The 1 ½ calorie breath mint” and reformulated with
an expanded flavour line that included, for example lime,
orange, wintergreen and cinnamon (US Business Executive 2014).
Currently Tic Tac represents Ferrero´s most sell product
7
(Statista 2014); according to the BCG matrix this business can
be considered as the cash cow (mature market, high profit, not
very high investments) (BCG 2014).
Second product offered to US customers is collection of luxury
Ferrero Chocolates. First there was an idea to create a premium
chocolate and as the company has grown a successful Ferrero
product expanded into an entire line of similar products
Ferrero chocolates. The company launched Ferrero Rocher in
1982, with its signature architecture of creamy and crunchy
layers around a hazelnut centre, which subsequently paved the
way for coconut Raffaello, and the new Rondnoir dark chocolate.
These products are presented convenient gifts and it is
stressed on its luxury and exclusiveness. It has been
nationally distributed in US since 1988 and over the next
several years the brand grows into a premium chocolate category
leader (Ferrero c2015). Although in strenuous competition with
other premium chocolate brands, Ferrero chocolates line can be
also considered as a cash cow, thanks to its long-standing
tradition on US market is still profitable.
The third product within US market is hazelnut spread Nutella
which was first imported to the US in 1983. The prevalence of
peanut butter was regarded to be Nutella’s foremost barrier to
market, according to the market research Ferrero discovered
that many Americans searched for an alternative, a niche where
Nutella’s high quality and unique flavour could be successful
(Ferrero Code of Business Conduct c2009). The marketing for
Nutella emphasizes the great taste, uniqueness and ease that it
can bring to breakfast, and how it can even help mothers with
7
the battle that they often face at breakfast with their family.
In spite of all these superlatives there was a scandal in 2012
that caused Nutella´s turndown (see above). Owing this
situation Nutella can be marked as a question mark at the BCG
matrix that consumed great amount of cash but still has the
potential to become cash cow.
4. Resources
Tangible
Ferrero has production plants and offices worldwide, and is
producing 50% of its own production machinery and technology.
Considering US market, Ferrero invested $262m in 2004, with the
Canadian Government help for $5.5m, and then opened a new
manufacturing plant in Brantford, Ontario, Canada in October
2006, in order to provide North American market. Even though
the Group has already sold products on North American market
since 1969, along with Tic Tac brand, the most popular in the
US, the growth was not sufficient to compensate with European
market. This new plant allows then Ferrero to produce most of
its brands, among them Nutella, Rocher, Tic Tac, Raffaello,
Giotto and Duplo, despite the US applicable laws which prevent
Kinder Surprise sales. There are 780 employees, and by
Christmas 2006, Ferrero had managed to cover its targeted
markets with this new plant, by purchasing enough land for the
site (Ferrero Code of Business Conduct c2009).
It has built unique ties with raw material sources around the
world, including traceability and safety, for instance basing
on agricultural companies for direct cultivation in Australia,
7
Argentina or South Africa, and for manufacturing in Turkey and
Italy. This allows the Group to manage the whole production
circuit, including the management of suppliers, and to choose
the best providers, respecting its values and respect for the
environment.
In tangible
The company has an excellent reputation all around the world,
with a powerful brand name such as Tic Tac mints or Ferrero
Rocher, and it developed its own unique product, Nutella
hazelnut paste. Ferrero also knows how to build strong
relationships that can be profitable for its growth. For
instance, the company teamed up with Mars in order to increase
distribution speed and cut the costs. This partnership also
helped cutting down CO2 emissions.
The company has committed itself to only collaborate with
dealers who respect applicable international standards for
workers and human dignity. Besides, a specific clause has been
created in every contract made with suppliers; Ferrero commits
itself to put an end to any commercial relationship with a
supplier who wouldn’t respect those standards.
Innovation is also a key point in Ferrero’s strategy. The
willingness is not to follow a market but to create its own
market. This innovation process is facilitated by the fact that
Ferrero has its own subsidiary in charge of think and build the
machines which will later make new products, Ferrero Ingegneria
Spa. This innovation implies a constant adaptation to wider
7
challenges, such as sustainable development. In 2007, Ferrero
took the initiative to create a structure in order to optimize
quality and energy supply costs, while respecting the
environment.
Knowledge is one of Ferrero bigger strengths. "The recipe for
Nutella is not a secret like Coca-Cola," said marketing manager
Laurent Cremona. "Everyone can find out the ingredients. We
simply know how to combine them better than other people."
Indeed, the family business is sticking to its traditional
roots, the first recipe, and developing the company generation
after generation (Ferrero CSR Report 2013).
Ferrero believes that communication and advertising are
paramount for the company’s image. Through its communication,
Ferrero carries out a positive family image, meeting with
people. Ferrero also carries out the image of an
environmentally and socially responsible company,
Last but not least, commitment for people is strong within the
Ferrero Group, which provides a high level of training and
excellent human resources management. Indeed, employees feel
motivated in this workplace, and feel like part of the
Ferrero’s family (Ferrero CSR Report 2013).
5. SWOT analysis
Strengths
1. Strong brand name worldwide
As was many times mentioned in this paper, Ferrero has built a
strong reputation and image. The strong brand name represents
7
an important value driver for the company and its products are
more sought-after and privileged.
2. High Customer loyalty
The above noted strength has an impact on the customers’
loyalty that has been gained through years of performing and
producing confectionery. This fact allows Ferrero to experiment
for instance with new flavours or even with new products and at
the same time it has the certainty that customers will not turn
their backs on the company. In addition Ferrero is customer
oriented and tries to fulfil their needs, which is appreciated
back.
3. Attractive packaging and quality products
From advertising and promotion of Ferrero products it is
obvious that the company stresses quality of its products in
the first place. That is also reflected in the way the present
the products to its audience (customers). As special segments
of products are targeted, Ferrero tries to perform its
speciality not only by quality materials but also quality
exterior.
4. Globally available
The advantage of being globally available means that customers
who are used to consume products by this company does not have
to switch to other products and are able to permit their
favourite good even if they are travelling or moving. That
7
reduces the possibility of switching products due to
unavailability in the particular areas.
5. CSR in the areas of renewable energy, water conservation,
environment protection, social initiatives, projects supporting
healthy life style etc.
Ferrero consider itself as a socially and environmentally
responsible company and they show it off by participating on
many initiatives and projects etc. These activities are
meritorious and thankworthy as such but from the strategic
perspective such behaviour can positively influence preferences
of customers as well as potential business partners and allies.
6. Innovation and R&D
Although Ferrero worships its tradition and original recipes at
the same time they work hard to develop its product and be
innovative, not only to keep up with its competitors, but also
to bring even more quality for its customers. Thus, Ferrero is
constantly developing the manufactory and also others
activities connected for example with warehousing, logistic
etc.
Weaknesses
1. Nutella scandal consequences
In 2012 the scandal considering Ferrero´s product Nutella
touched the company not only from economic perspective but also
disrupted its reputation especially within US market that
caused the decay of this brand.
7
2. Online shop absence
In this age of technologies and internet primacy it can be
considered as a disadvantage not to operate via online shop. In
this aspect Ferrero is step behind its rivals (for example
Lindt operates its own e-shop). Such a wasted opportunity can
negatively cause the profit as well as image of the company.
3. Lack of using internet for promotion and advertising
Ferrero honours responsibility in advertising and communication
with customers nonetheless for the company it would not take
any harm if they develop a new methods of advertising for
instance via social networks or video portals.
4. Perception of candies being unhealthy
With growing trend of healthy lifestyle the consumption of the
sweets is perceived as something unhealthy and harmful among
increasing amount of people. That can has an impact on sales of
the majority of Ferrero products created from “unhealthy”
materials like sugar, cocoa or palm oil.
Opportunities
1. Introducing new varieties and flavours of products.
Regarding the nature of the industry with its low
differentiation Ferrero has an opportunity to come up with new
products that will differ from others. Its reputation and
7
loyalty of customers allows it to introduce brand new sort of
products without fearing the flop.
2. Advertising on different platforms
There is the opportunity to turn the weakness into strength by
taking advantage of new technologies. And it does not have to
be necessarily only the internet that can be used as a platform
that can helps the company to increase its profits as well as
its image. Ferrero also can use applications or programmes to
develop the promotion or set up the strategic partnership with
other companies (Google, Amazon etc.)
3. Establishment of the online shop
Ferrero also should use the opportunity of new technologies and
abilities in sales and establish the e-shop that can attract
even more customers and at the same time preserve the valued
traditional values. This technology allows customers to buy
from comfortable environment of their homes without necessity
going to shop that
Threats
1. High competition from other chocolate brands
According to the analysis of the industry the rivalry among
existent competitors is high. The distribution of powers is
slightly balanced so there is a great level of danger that any
of the competitors can introduce something that will grip an
attention of buyers.
7
2. Unstable global economic condition
As in every industry also here the danger of descent of
economic exists. Although, according to NCA (c2015) the
confectionery industry is viewed as being resistant to
recession, the total annual sales in the United States are well
above $30 billion, rising about 3 percent each year. But the
economic instability can be present in countries Ferrero takes
the raw material from, which can be reflected in resultant
quality and prices of products.
3. Many brands in the market brings out possibility of brand
switching
Despite the loyalty of customers, their preferences are not a
hundred percent predictable. The floods of product within this
industry plus low differentiation might cause the switch of
customers’ selection from one to another. Such a phenomenon is
usually strengthened by unpropitious circumstances (scandals,
tumbles, lawsuit etc.).
4. Increasing trends of healthier alternatives replacing
candies
The growing trend of the healthy lifestyle begins to
questioning the salutary of existing products within
confectionary industry. Such an initial doubts can grow into
serious inconvenience when customers switch their preferences
to the healthier alternatives that are more frequently
introduced and promoted in this market.
7
III. Strategy for FerreroFerrero´s currently strategy is all about being independent,
following the many years’ tradition and not to become sellouts.
Such an approach is valuable and obviously works regarding the
loyalty of customers gained so far. Nevertheless, there is one
area left that strives for new strategy to be developed. As we
spoke about it formerly, the opportunity to attract even more
customers (not only) within US market, to improve the
connection with them and to take advantage of new technologies
leads to the idea of establishing an online shop.
The US market is known for its great level of complexity and
there are many large players within the market, so to stay
different somehow is the good way how to stay profitable, but
at the same time Ferrero tries to be innovative and follows the
trends. This strategy can be the way how to connect it, to
offer its products online but in its own manners that preserve
the honored traditions and simultaneously be progressive and
trendy. The idea of the e-shop establishment is very suitable
for US market because of the high popularity of shopping
online. USA as a cradle of the internet development and country
of one of the current biggest amount of internet users is a
providential place for innovation of online shop of Ferrero. US
market is marked out by specific culture that is wide open for
online communication and online transactions in general, thus
creation of the online shop is efficient opportunity how to
attract new customers, especially from the “online generation”.
7
In this thought also a special application for smart phones
(considering US market iPhones are the most convenient targets)
could be developed which allows customers to buy Ferrero´s
products directly via this platform.
The customers can browse and order the Ferrero products
comfortably from home. The online shop would also contain
special announcer of holidays and festive days (so prevalent in
USA) with exclusive offers of products. Also every customer can
create his/her own account that would remind them of particular
personal events as birthday, anniversaries and so on.
Implementation of such a strategy can increase the company´s
profit and prestige at US market.
For implementation of this strategy Ferrero needs help of
specialists, either internal or external. According the CRS
Report Ferrero company emphasize the importance of HR base and
has already developed the Talent Centers in order to group
professionals and experts in many various fields so company
does not have to outsource any of its services or activities.
In the harmony of the independency Ferrero strives to preserve,
the intern sources for realization of this strategy are
essential (Ferrero CSR Report 2013). Nonetheless, special
education or training programmers focused especially on this
strategy implementation might be started in this Talent Centers
as supportive and preparatory operations.
Also tangible resources are needed; USA with its great area
would require expansion. For example warehousing and storing
need to be developed in order to suit the requirements of the
7
online shops, the capacities should be enlarged and new
warehouses with strategic positions are need to be built or
added to cover all the demand of customers ordering Ferrero
products online. Also logistic is essential for the successful
strategy; the entire logistic system must be coordinated with
the needs of the online shop and at the same time must not
affect regular transportation within company´s other
activities.
The detailed plan controlling the process of implementation and
objectives need to be set. The online shop should be realized
but in harmony with company values and image. The whole system
of e-shop should be adapted to firm´s statement (visual
aspects, prices, user´s settings, support services) so it will
revere Ferrero´s idea.
The whole realization of this strategy is not short-term issue,
and it depends on many factors for example requirement of
management, technical demands and other specific circumstances,
but implementation of such a strategy might be realizable
within several months.
The important and inevitable part of implementation of strategy
is evaluation of the whole strategic process. According to the
plan, useful for regressive evaluation, control of
implementation and achieved results needs to be carrying on.
REFERENCES
7
American Sugar Alliance. c2014. [online] cit. 14.3.2015. avialable: http://www.sugaralliance.org/us-sugar-policy/
BCG.2014. BCG Classics Revisited: The Growth Share Matrix. [online] cit. 15.3.2015. avialable: https://www.bcgperspectives.com/content/articles/corporate_strategy_portfolio_management_strategic_planning_growth_share_matrix_bcg_classics_revisited/
Candy Industry. c2015. [online] cit. 12.3.2015. avialable:http://www.candyindustry.com
Daily Mail. 2012. [online] cit. 13.3.2015. avialable : http://www.dailymail.co.uk/news/article-2135938/Spread-wealth-Nutella-customers-win-3million-class-action-suit-chocolate-treats-misleading-health-claims.html
De Witt B., Meyer R. 2010. Strategy Synthesis: Resolving Strategy Paradoxes to Create Competitive Advantage. Cengage Learning EMEA
Ferrero Code of Ethics.c2009. [online] cit. 12.3.2015. avialable: http://www.ferrero.com/code-of-ethics/reliability-trust/
Ferrero Code of business conduct.c2009. [online] cit. 12.3.2015. avialable: http://www.ferrero.com/social-responsibility/code-business-conduct
Ferrero Group. Ferrero’s Corporate Social Responsibility Report. 2013.[online] cit. 11.3.2015. avialable: http://www.ferrerocsr.com/?lang=en
Ferrero. c2015.[online] cit. 12.3.2015. avialable:
http://www.ferrero.com
7
Ferrero USA, inc.c2015.[online] cit. 11.3.2015. avialable:
http://www.ferrerousa.com
Gibson, E. 2011. Confectionery News and Trends. [online] cit. 13.3.2015. avialable:http://www.business.com/food-distributors/confectionery-
news-and-trends
International Markets Bureau (IMB). 2012. Market Indicator Report. [online] cit. 11.3.2015. avialable: http://www.ats-sea.agr.gc.ca/amr/6137-eng.htm
National Confectioners Association c2015. [online] cit. 13.3.2015. avialable: http://www.candyusa.com
Persistence Market Research (PMR). 2010. [online] cit. 11.3.2015. avialable : http://www.persistencemarketresearch.com/market-research/confectionery-market.asp
Statista 2014. [online] cit. 13.3.2015. avialable: http://www.statista.com/statistics/276021/us-households-most-used-brands-of-breath-mints--strips--sprays/
US Business Executive 2014. [online] cit. 15.3.2015. avialable: http://usbusinessexecutive.com/food-drink/case-studies/ferrero-usa-inc-thinking-globally-acting-locally
