marketing report / coursework

Analysis of the Marketing outlook of Ferrari

4MARK001W Marketing

Principles: Report

Analysis of the Marketing outlook of Ferrari

Company Coursework 1: Apple Inc.

Company Coursework 2: Ferrari S.p.A.

Module Leader: Norman Peng

Seminar Tutor: Norman Peng

Student: Paolo Savio Foderaro W1616642

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Analysis of the Marketing outlook of Ferrari

I. Introduction 3 II. PEST Analysis 4 III. Porter’s Five Forces Analysis 6 IV. SWOT and Positioning Strategy Analysis 8 V. Ansoff Matrix 10 VI. Ferrari’s Social Responsibility 11 VII.Referencing List 12

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Analysis of the Marketing outlook of Ferrari

Ferrari S.p.A

(Ferrari Corporate)

“Give a kid a paper sheet and some colours and ask him to

draw a car, for certain the car will be red” (Enzo Ferrari)

I. Introduction A prancing black horse on a yellow background is not something that could pass unnoticed.

Destined to become an icon of style, luxury and speed, the first Ferrari made its appearance to the

public in 1947, eight years after the foundation by the Italian entrepreneur Enzo Ferrari of Auto

Avio Costruzioni, what would come to be, later on, the well-known brand Ferrari.

Throughout the history the company divided itself into the developing and production of

racing cars, becoming one of the most successful racing team in the world, and of luxury cars

distinguishing itself for the excellence of the Italian manufacture. As a matter of fact Ferrari’s cars

are build following the ideal of perfection in terms of design, power and elegance conveyed by the

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Analysis of the Marketing outlook of Ferrari

founder, Enzo Ferrari, who was used to say: “The best Ferrari is the next one” (Enzo Ferrari, no

date).

From its foundation till today Ferrari’s mission statement has been to build unique sport

cars, symbols of Italian excellence both on the road and on track. At the end of 2015 the Italian

sport car manufacturer can praise more than 7500 cars sold with a presence in 62 worldwide

markets and a net revenues of 2,854 millions of euros (Ferrari, Annual Report 2015).

Herein, the purpose of the report will be to analyse in the first part the external factors that

influence the company’s business. Then I will take into account the industry within which the

company operates in. After that, I will examine the strategic position of the company in the market

and the marketing strategy utilised for its products, namely sport cars. Finally I will conclude taking

into consideration sustainability and ethic-related issues that the company is dealing with.

(Ferrari Corporate)

II. PEST Analysis

The first concern for a company’s business is to understand and deal with all the external

factors that could affect the company’s future performance. It is worth saying that all possible

external factors are not under control of the company, this means that the firm must monitor them

and change its strategy accordingly (Baines, Fill and Page, 2013).

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Analysis of the Marketing outlook of Ferrari

Above all, the political environment can constitute a huge problem if the company does not

detect any possible changes in government regulations and requirements associated with the car

industry. The company has to mediate with the government to avoid or at least reduce the impact of

future political decisions. From Ferrari’s perspective the political threats are, for instance, the

possibility of more severe EU or US regulations on CO2 emissions or minimum wages that could

affect its business (Ferrari, Annual Report 2015). For instance, eco-friendly government

policies, applied in order to preserve the environment, are expected to be followed by cars

manufacturers. It’s very difficult to impede or alter this kind of regulations because most of

them are socially cared and may also influence consumer’s purchasing decisions. Other legal

aspects, formal consequence of political decisions, that Ferrari has to deal with are laws upon

passengers safety and maximum fuel emissions. For a luxury car brand, which stresses the

design and performance of the vehicle these regulations can deeply affect the company’s

business in terms of financial revenues.

Global economic changes could deeply alter the business performances, as well. On

the one hand, for instance, economic uncertainty could lead consumers to save instead of

spending their money and, as a consequence, luxury brands would be the first ones to suffer

losses in revenues (Ferrari, Annual Report 2015). Albeit there always be wealthy people

willing to buy luxury products, economic uncertainty will certainly affect their willingness to

spend money. On the other hand, growing markets represent new possibilities for expansions

of the firm. Indeed raising economies, like India or China, may constitute new profitable

investment opportunities for the company.

In terms of social environment the company must keep track of people’s preferences

and values. Ferraris’s main clients are automobile collectors and enthusiasts who are willing

to pay premium prices to own a great piece of craftsmanship. Moreover it’s worth

mentioning the two main value sought by consumers, hedonic and experiential value. The

former is about the feeling of pleasure due to the ownership of a luxury product. The latter

consists in all subjective feelings the consumer has towards the luxury good that help

perceiving it as rare and unique (Hung et al., 2011). Therefore, the main concern for the

company would be about changes in life style and taste of this small group of costumers,

especially those linked to this two values.

Technological issues also play a major role in an industry where quality is the queen.

All car manufacturers take these concerns very seriously since they have a huge impact on

such sectors like automobile manufacture. For instance, developing a new hybrid system

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Analysis of the Marketing outlook of Ferrari

reducing emissions while maintaining high performances can be a breakthrough in the

market and will constitute a huge competitive advantage. That is why Ferrari invests

massively in research and development to stay at the pace with the newest technology in the

market, offering in this way the best product to its costumers.

(Appnova, 2014)

III. Porter’s Five Forces Analysis

The further step in our analysis is to examine and investigate the industry within which our

company operates, taking into account the five force acting within the market: the bargaining power

of buyers; the bargaining power of suppliers; the threats of new entrants; the threat of substitutes

and the rivalry among existing competitors.

First of all, the customer’s bargaining power can be considered as medium. This is linked to

the fact that the niche segment that buys sport cars isn’t price sensitive, i.e. consumers are willing to

spend great amounts of money to own a specific product. This can be explained by the consumer’s

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Analysis of the Marketing outlook of Ferrari

awareness of the luxury brand superior quality, well-known design, and exclusivity (Hung et al.,

2011). For this reason they could not influence the price of the products and Ferrari could charge

high prices for its cars. On the other hand, wealthy people have bargaining power to some extend;

as matter of fact they can choose wether to buy a Lamborghini rather than a Ferrari (Brugnoni,

2015). Nevertheless it must be said that more than often when a person buys a Ferrari, it’s very

common for him to develop a feeling of loyalty to the brand. This mainly happens because of the

intrinsic value related to the luxury car brand.

Supplier’s bargaining power is generally weak in this kind of markets. This can be explained

by the great amount of suppliers compared to the actual number of car manufacturers. Nonetheless

if we consider only the luxury car market, the supplier’s power become less and less weak. As a

matter of fact, luxury car brands, like Ferrari, look for specific material and most of the times they

choose the same dealer, albeit it isn’t the cheapest one (Leruste, 2013). It does that to guarantee a

certain level of quality for the product to be offered to the public.

The threat of new entrants is relatively low since there are many barriers to enter this kind of

market. The main one is the brand itself; in the luxury market all of the competitors have a history

behind the brand that talks by itself (Brugnoni, 2015). This contributes to create the sense of

exclusivity linked to the product that the consumer is looking for. The owner of car feels a sense of

belonging to the history of that specific brand. Another huge barrier is the initial capital required to

enter into the market. That is why many luxury brand are owned, and in this way supported, by non-

luxury brand, like Fiat for Ferrari or Volkswagen for Porsche.

To understand the risk of substitutes we shall start saying that a luxury car satisfies two main

needs of the consumers; a Ferrari is not only a means of transportations, but also and especially a

status symbol (Leruste, 2013). Indeed, the ownership of a Ferrari comes with a privileged status for

their owner. Therefore, even though there are a lot of substitutes in terms of means of

transportations, like trains or public transportations, the owner of a Ferrari buys this kind of product

for the pleasure to drive a powerful car and to “own” a symbol. Then, the threat will mainly consist

in all the other luxury cars that can offer the same thing, like Lamborghini, Porsche or Bentley.

Thus, the risk of substitutes is high not because of the possible different means of transport, but due

to the consistent amount of automobile brands that have a similar offer.

In the end, the competition between firms is very high. This can be explain by the already

mentioned great deal of substitutes among which the costumer can make his choice. As a matter of

fact the almost identical car manufacturers strive to gain the same market segmentation. Moreover

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Analysis of the Marketing outlook of Ferrari

the presence of high sunk cost constitute a barrier to exit that contributes to enhance even more the

competition within the industry.

IV. SWOT and Positioning Strategy Analysis

The first thing that distinguishes Ferrari from other car brands is the symbolic value

associated to the company itself. Broadly speaking most luxury cars possess a strong brand image,

but Ferrari’s brand is way more well-known than the others (Bhashin, 2016). A Ferrari is considered

a status symbol more than any other luxury car. Consumers know they own a great piece of the

Italian craftsmanship, a powerful car with a great design. This feeling can be explained by the

recognition gained by Ferrari in his racing history, counting 15 drivers’ world titles and 16

constructors’ world titles (Ferrari Corporate, 2016), which contributes to support the costumer’s

awareness about the quality of a Ferrari. Another important strength is the working environment, to

which Ferrari gives a lot of importance. It does care about the happiness and satisfaction of its

employees; in this way all the people involved in the production process will do their best to

produce the best product in the market.

Nonetheless, there are some factors that weaken our company. First of all, the very low

volume of production, while creating the sense of exclusivity linked to the product, it also

constitutes a huge weakness (Bhashin, 2016). Being the demand for a Ferrari very high compared to

the actual supply, many possible costumers won’t be able to buy a Ferrari and, as a consequence,

they may turn towards a competitor. Besides that, the need of specialised workers necessary to

guarantee a high standard of production comes at high costs for the firm. Indeed, to build highly

performing cars Ferrari needs skilled engineers and designers, very difficult to find or train.

Going through the opportunities for the Italian car manufacturer it’s worth mentioning the

new possibilities offered by the development of new technologies. As a matter of fact, R&D

programs helps finding new unexploited technologic frontiers that the firm could explore and gain a

profit from them. Besides that, growing markets represent a further opportunity for expansion for

the brand (Shah, 2012).

Finally, the main menaces that Ferrari has to face are common to all car manufacturing

brand. In the first place the likelihood of more severe emission restrictions can threaten the

company’s business. Then, the fear of an economic crisis that would primarily affect luxury goods

can also constitute a great risk for this kind of brands.

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Analysis of the Marketing outlook of Ferrari

Now, to introduce the position of Ferrari in the market, we will rely on a perceptual map,

which constitutes a visual and straightforward tool to understand where the firm is located in the

market. As it can be seen from the diagram, the two main attributes taken into consideration are

prestige and exclusivity. From the diagram it’s clear that Ferrari is the leader in the market for two

main reasons: it has a higher prestige compared to the others, thanks to his racing history and the

symbolic value associated to the black horse brand; with his “waiting list” marketing strategy it

enhances its exclusivity till the excess, since the brand produces very few cars of the same model

compared to the actual demand. Furthermore this two reasons support the premium pricing strategy

of the firm; Ferrari prices his car way too much compared to their real value. This can also be

justified by the price insensitivity of the target segment.

PERCEPTUAL MAP

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Prestige

Exclusivity

Ferrari

Porsche

JaguarBMW

Volkswagen

Fiat

Audi

Ford

Mercedes-Benz

Toyota

Analysis of the Marketing outlook of Ferrari

� (Ferrari, Annual Report 2015)

V. Ansoff Matrix

At this point of our report Ferrari’s approach to the conception of a marketing strategy

should be considere. The tool we will be using is the Ansoff matrix because it is a useful and

strategic instrument to develop a well-structured strategy for the company’s growth. As a matter of

fact, the Ansoff matrix gives the opportunity to compare current and new products with current and

new markets so that the company can choose the right approach for each of its products. The matrix

is then divided into four parts according to the combination of products and markets; the four parts

are market penetration, market development, product development and diversification.

Market penetration is about improving existing product in existing market. It is not easy to

increase the market penetration of a product within the market. Ferrari could increase its market

shares continuously improving its product or decreasing the price in order to get more consumers.

As a consequence, the rivalry within the market will increase because the other firms would try to

counteract Ferrari’s new strategy.

Market development is typically riskier than the previous one because it deals with the

introduction of an existing product in a new market in order to increase the sales volume. Ferrari

could do that in three different ways: it can expand geographically, seeking growing economies, e.g.

India or China, and enter those markets; it can target new segment, i.e. finding new group of people

willing to share the Ferrari vision, or it can find new users to sell its cars to (Leman, 2015).

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Analysis of the Marketing outlook of Ferrari

Product development means entering an existing market but with a slightly changed or

completely new product. In this part, the firm makes use of innovation and research in order to

continuously design and manufacture products that will effectively meet consumer’s needs and

preferences. This doesn't merely refer to introducing new cars in the market, but also utilising new

technologies, like hybrid engines, to create a properly different car (Leman, 2015). In addition to

that, Ferrari yearly participates to the Formula One racing competition to give a direct

demonstration of the improvements they made on their product.

Finally diversification involves the developing of new products for different markets. Ferrari

achieves this objective by sponsoring universities to create, for instance, specified engineering

courses of Ferrari (Leman, 2015). Moreover, the company also invested in the creation of Ferrari-

themed parks and hotels increasing its offer. This is a good way to increase the value of the

company but can be very costly due to the lack of experience in new markets.

VI. Ferrari’s Social Responsibility

Before concluding this report an evaluation of the social commitment of Ferrari’s brand

must be carried out. Firstly, Ferrari follows a program, called “Go Green project”, to reduce

polluting emissions caused by the production of components for their cars. Then, thanks to the

project “Formula Uomo” it managed to create an eco-friendly and safe work environment for its

employees. Moreover, in 2011 the firm became independent in terms of energy; it actually installed

solar panels in order to use renewable energies instead of other sources. Doing so, it managed to

reduce its CO2 emissions of 42.1% (Ferrari, Sustainability). As far as cars are concerned, Ferrari

aims to reduce by 40% consumptions and emissions; it would succeed in doing so by applying a

road map to improve energy efficiency and, in this way, the entire car. Moreover engineers are at

work to develop the first Ferrari hybrid; the firm is investing to build the infrastructures that will be

utilised to achieve this goal and the first Ferrari hybrid is planned to be issued in 2015 (Newton,

2014).

On a 360 degrees perspective Ferrari participates actively and organises initiatives in order

to help people. In 2012, the company managed to raise more than 80 million yen to support families

hit by the Great Eastern Earthquake in Ishinomaki. In the same year Ferrari arranged an auction,

called “Ferrari for Emilia”, in order to help Italian families victims of an earthquake. The auction

was about selling Ferrari’s rare item and it succeeded in raising over 1.8 million euros, all donated

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Analysis of the Marketing outlook of Ferrari

to the victims (Newton, 2014). In addition to that, the company, in cooperation with Starlight

Children’s Foundation, also organised a project called “The ride of your life”; this consisted to give

passenger rides to terminally or seriously ill children (Newton, 2014).

Finally, it is clear that the main ethical issues the firm has to face are linked to CO2

emissions, dangerous for the environment. To cope with environmentalists Ferrari not only is

investing in hybrid technology but also supports different no-profit organisations, like Ferrari

Owners Charity Organization, which aim to raise funds and awareness about people living in poor

conditions and environmental problems.

In my opinion this kind of approach to solve ethical issues can be very profitable because

even though the company might not succeed in solving directly the problem, namely reducing CO2

emissions, consumers are aware about the efforts of the company dealing with its emissions and

about the fact that it is balancing it with initiatives to help the environment. On the other hand the

sponsorship to many events gives also a great deal of visibility to the company.

(Virtual Car, 2012)

VII.Referencing List - Aforisticamente (2015). Le più belle frasi di Enzo Ferrari. Aforisticamente. Available at http://

aforisticamente.com/2015/10/14/le-piu-belle-frasi-di-enzo-ferrari/ [Accessed 12 December

2016]. - Bhashin, H. (2016). SWOT Ferrari. Marketing91.com. Available at http://www.marketing91.com/

swot-ferrari/ [Accessed 8 December 2016].

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Analysis of the Marketing outlook of Ferrari

- Brugnoni, Y. (2015). Ferrari Strategy Analysis. Share and Discover Knowledge on LinkedIn SlideShare. Available at http://www.slideshare.net/yari1912/ferrari-strategy-analysis [Accessed 8

December 2016].

- Chierici, S. (2012). Ferrari per l’Emilia. Virtual Car. Available at http://www.virtualcar.it/alle-16- di-oggi-6-giugno-2012-al-via-lasta-ferrari-per-il-terremoto-in-emilia/ [Accessed 12 December

2016].

- Deviprasad Goenka Management college of Media Studies (2014). Brand Positioning. Share and Discover Knowledge on LinkedIn SlideShare. Available at http://www.slideshare.net/

DGMediaSchool/brand-positioning-42507748 [Accessed 8 December 2016].

- Ferrari (2015). Annual Report, 2015. Ferrari.com. Available at http://corporate.ferrari.com/it/ annual-report [Accessed 8 December 2016].

- Ferrari (2016). At A Glance. Ferrari Corporate. Available at http://corporate.ferrari.com/en/ about-us/glance [Accessed 8 December 2016].

- Ferrari (2016). Ferrari DNA. Ferrari Corporate. Available at http://corporate.ferrari.com/en/ about-us/ferrari-dna [Accessed 12 December 2016]

- Ferrari (2016). Ferrari Sustainability: All-Round Energy Efficiency. Ferrari.com. Available at http://auto.ferrari.com/en_EN/ongoing-heritage/company/maranello/sustainability/ [Accessed 8

December 2016].

- Ferrari (2015). Product Range. Ferrari Corporate. Available at http://corporate.ferrari.com/en/ media/media-gallery/photos/range [Accessed 12 December 2016].

- Hung, K-p., Chen, A.H., Peng, N., Hackley, C., Tiwsakul, R.A. Chen, C-l., (2011), "Antecedents of luxury brand purchase intention", Journal of Product & Brand Management, Vol. 20, Iss. 6, pp.

457 - 467.

- Leman, S. Analysis of Ferrari and Porsche. Share and Discover Knowledge on LinkedIn SlideShare. Available at http://www.slideshare.net/SharimarLeman/analysis-of-ferrari-and-

porsche [Accessed 8 December 2016].

- Leruste, V. (2013). A Porter’s Five Forces Analysis of the Luxury Cars Industry. Audi AG vs. Mercedes-Benz. Available at http://dasauto-skema.blogspot.co.uk/2013/11/a-porters-five-forces-

analysis-of.html [Accessed 8 December 2016].

- Newton, E. (2014). Ferrari’s CSR. Prezi. Available at https://prezi.com/hq53in1jvpzg/ferraris-csr/ [Accessed 12 December 2016].

- Shah, S. (2012). Ferrari. Share and Discover Knowledge on LinkedIn SlideShare. Available at http://www.slideshare.net/sagar0013/ferrari-11398733 [Accessed 8 December 2016].

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Analysis of the Marketing outlook of Ferrari

- UKEssays (No Date). Ferrari sports cars manufacturer. UKEssays. Available at https:// www.ukessays.com/essays/management/ferrari-sports-cars-manufacturer.php [Accessed 8

December 2016].

- UKEssays (No Date). Marketing strategies in different markets of Ferrari. UKEssays. Available at https://www.ukessays.com/essays/marketing/marketing-strategies-in-different-markets-of-

ferrari-marketing-essay.php [Accessed 8 December 2016].

- Waka, W. (2014). 5 Most Inspirational Car Slogans. Appnova. Available at http:// www.appnova.com/5-inspirational-car-slogans/ [Accessed 12 December 2016].

- Wikipedia (No Date). Ferrari. Wikipedia. Available at https://en.wikipedia.org/wiki/Ferrari [Accessed 8 December 2016].

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