PESTEL Analysis of Ferrari - Case Study Example

Your name Instructor Course name Date of submission Strategic management Introduction In the business world, whether service oriented or product oriented, strategic management is pivotal to sustaining a competitive edge. Accordingly, businesses succeed through a clear and profound look into the three core aspects of strategic management is significant. Continuously, the three core aspects of strategic management are strategic analysis, strategy formulation and strategy implementation. Thus, as a business of focus in my strategic management paper, I will evaluate formula one industry through an analysis of the diverse companies. Apply the porter five forces analysis to the industry Porter five forces Competitive rivalry in the industry The automotive industry is highly mature and price has become a differentiating factor among the diverse industry players. As such, the prospect of price wars has led to the concept of standardization and effective cost cutting measures to increase profitability. On the other hand, premium companies such as Ferrari have curved out their niche through premium products that are luxury based, Bargaining power of supplies Suppliers for all the competitors are limited in regards to bargaining power. The low bargaining power is as a result of the increase in commoditization of the hardware components (Sparrow 48). However the reduction in bargaining power is a result of the need for product promotion among the consumers. Bargaining power of buyers Customers exude a high bargaining power over the organizations since they constitute the main part of the sales. Additionally, customers have a bargaining power in regards to dictating the demand and preferences (Sparrow 203). The consumer preference for mobility, connectivity and at low costs is aspects that customers want. Threat of new entrants Due to the evident price centric competition and the reduction in profit margins, there are high obstacles for entry for new companies (Sparrow 201). As such, the new companies have to invest highly into research and development which is highly detrimental to a start-up organization. Apply the industry lifecycle to industry as a whole Industry analysis as per Barney (209) is a term used to denote the clear research into the external and internal environment in which the business stakes its operational base. Through understanding of the environment of business operations, formulation of strategy ensues.as such, for the success venture in any business, the use of strategic analysis tools is of importance in order for the clear comprehension of the internal and external environment. In reference to Johnson & Scholes (20), the environment of any organization can be seen as a series of layers. Moreover, the general layer is referred to as Macro environment. Macro-environment is consistent of the broader environmental factors that hugely impact the organization. Within the broad general environment is the next dimension or layer which is industry or sector. Accordingly, it consists of the organizations which produce similar products and services. Intertwined to the industry is the different organizations that produce competing products and services using different marketing and branding strategies. Apply PESTEL to industry as a whole PESTEL ANALYSIS With its unique spectrum of services that Deutsche post world net provides, a critical analysis of its various environmental factors that face it is highly crucial (T and Winston, 201). However, key to note is that the pestle analysis will be done on the Formula one brand which is inclusive of the many service oriented brands such as Ferrari. Admittedly, PESTEL analysis entails a better outlook into the political, economic social, technological, environmental and legal factors that affect Formula one industry marketing strategies. Political i. Liberalization of international trade The international platform has been an aspect of concern for many businesses such as formula one industry with expansionary ideals. Admittedly, the different market economies such as planned and mixed economies have formed a regulatory setback in the expansion mandate at Formula one. Most specifically has been the planned government economy whereby the control by the government in the planning of the economies has resulted into difficult economies for setting up operations (Hartline and Ferrell, 200). Nonetheless, Russia China and many more Eastern Europe countries which were characteristic of the planned economy have inculcated a more free economy which has liberalized the international trade hugely. Through the market liberalization, Formula one has had to rethink their marketing strategies in the various markets that have become lucrative for operations. ii. International trade regulations and restrictions International regulations are important for any business that deems to set up operations in the various locations. Most importantly are the regulations that have been incorporated by the various trading blocs or regions that make business operations on the international frontier daunting. Import tariffs, export duties, taxes and so forth have been subjected to a more holistic setup by trading regions such as EU, ECOWAS and so forth which have caused strategies analysis for business such as Formula one (Musiolik, 201). iii. EU expansion EU growth has been a remarkable aspect for business with both internal and external operations within Europe. As such, the prospect of inclusion of more countries in the Eastern Europe such as Poland has opened up newer markets for operations. Companies such as Formula one and other racing businesses have had to incorporate newer operational policies to venture into the new markets that have opened up as a result of the EU expansion (Musiolik, 201). However, keen to note have been the raised issues by the already established member countries in regards to security, inter-country movement and funding. Nonetheless, despite the setbacks in the expansion of EU, the prospect of newer markets has been a possible beneficial aspect for Formula one in their expansion strategy (Musiolik, 201). Economic i. Economic integration Economic integration entails the joining of economic policies and regulations by different countries within a certain locality. The growing aspect of economic integration has ever been evident with trading blocs such as EU, ECOWAS (Economic Cooperation of West African States), EAC (East African Community) and so forth ever evident (T and Winston, 203). ii. Globalization economic growth Globalizations which entails multi-sectorial growth in terms of infrastructure, communication liberalization and much more has been a key driver to operational growth (Sauvignon, 200). Admittedly, globalization has opened up wider networks of areas of operations for businesses with expansionary motives such as Formula one. As such, globalization has been the key driver to growth of businesses. Social factors i. Lifestyle changes Lifestyle changes as a result of technology have been a subject of concern. Most importantly, the Formula one business has had to incorporate newer strategies in handling the changes in consumer demands (Sauvignon, 200). Growing world population Growing world population has become a phenomenon that is driving the setting up of cities and other metropolises across the world. Sauvignon, (200), states that the world population is growing at the rate of 1.8% per annum which is slightly high in regards to the current energy demands. Through population growth, cities have been emerging at a rapid rate hence opening up new frontiers of operations by Formula one and other companies. Technological factors i. E-shipping E-shipping has been a new technological innovation in supply or Formula one business. As such, e-shipping allows for real-time planning and execution of shipping from the time of sales order. Buyers can access the shipping logs hence obtaining information about their products and how they are being shipped (Sauvignon, 200). Through e-shipping, Formula one organization have had to inculcate new measures in their operational strategies. ii. E-commerce E-commerce entails the money based transactions that are carried out through the internet. The growing internet use has been highly significant and impactful in shaping money transactions (Sauvignon, 200). Admittedly, businesses have had to incorporate e-commerce due to the ease at which transactions are conducted. Environmental factors i. Oil consumption The ever increase consumption trend of oil has been a subject of concern among the various analysts. Admittedly, oil consumption has been on an upward trend in line with the growing population (Sauvignon, 200). Pundits speculate that the oil consumption demands may deplete the many oil reserves by the next turn of the century. Most importantly have been the ever rising oil prices which have had significant impact on the Formula one business such as Formula one. ii. Environmental sustainability issues Environmental sustainability entails the use of the environment in a friendly manner for the future generations. Admittedly, various businesses have embraced the sustainability approach in the running of their operations through safer energy use, recycling measures and so forth (Ranchhod and Gurau 27). Through incorporation of better and sustainable modes of operation, their public image has faced an upward turn. Thus, as a business, Formula one has had to incorporate sustainability approach in their operations to further heighten their public image in terms of environment concern. Legal factors i. Deregulation and opening up of the Formula one industry As aforementioned, countries such as china and Taiwan have been on the steadfast trend in terms of opening up their economies to the world. Admittedly, through the aforesaid countries and many more, the Formula one industry has been deregulated resulting into newer markets in which Formula one can venture into. Further, through the deregulation of the Formula one industry, the road transport division has had to make way for effective transport in Formula one which is much faster and economical (Ranchhod and Gurau 27). ii. Environmental regulation and protection Across the world, the need for environmental protection has ever been evidenced. The notion of global warming has been an imperative factor that has resulted into countries imposing various laws in terms of carbon emissions. Effluent tax has incorporated in the legal framework of many countries especially in the developed countries such as USA, Britain and so forth (Ranchhod and Gurau 27). Thus, Formula one has had to rethink their strategies in carbon emissions in order to reduce their carbon footprint on the environment caused by their Formula one business. Draw strategy canvas graph and talk about it Draw VRIO table for each company and analyses it Draw the value chain and value system for each company and analyses it SWOT analysis for each company and analyses it Malaren Strengths i. High profitability: throughout its operational years, McLaren has maintained profitable outcomes. The success of McLaren has been as a result of innovation. The extensive investment into innovation has ensured that the company continues manufacturing plausible vehicles. ii. Brand reputation: the company has a plausible brand reputation especially in the sports vehicles. Many pundits affirm that the company has a remarkable pedigree and reputation. Most fundamentally, the acquisition of the company by Volkswagen further catapulted the organizational success. Weaknesses i. Ineffective Cash flow management The organization has been grappling with the notion of cash flow management. Changes in the management have had to be implemented. The changes in management have been due to the significant losses that were evident in the organization. Opportunities i. Profitability in UK market The market development of new cars has led to successful outcomes in the UK market. Through its sedan cars, the organization has accrued an increase in sales. The increase in sales has been at a more than 20%. Threats i. Excessive competition The manufacturing sector is highly competitive. As such, the manufacturers inculcate diverse operational strategies that focus on acquiring new customers. Premium car brand such as McLaren face significant competition from companies such as Mercedes and BMW. Honda A SWOT analysis of the organization is as follows: Strengths Plausible reputation Extensive investment into research and development Weaknesses Financial hurdles Ineffective cash flow management Opportunity Emerging markets Extensive online business Threats i. Competitive rivalry Ferrari SWOT analysis of Ferrari Marketing and operational strategies For further comprehension of the internal environment, a SWOT analysis of Ferrari will give a more vivid outlook of its strengths, weaknesses, opportunities and threats that it has. Strengths a. Maintains a leading market share in terms of the worldwide luxury car market b. It has been ranked top in terms of delivery of the most inclusive car products in the automotive industry Weaknesses i. Majority of the competitors are government owned companies which receive a stronger backing in terms of finances as compared to Ferrari thus minimized investment into their marketing strategies (Porter 28). ii. Operates in a highly competitive market segment in which the growth in share is highly limited evident from their current market strategies. iii. Relies on the traditional strategies in segmentation, positioning and targeting which are quite redundant in the ever-growing global market. Opportunity i. Huge opportunities in the financial markets ii. Global market expansion iii. Partnerships with corporates and other business models in E-commerce Threats i. E-commerce has increased at a very huge pace leaving Ferrari behind ii. Natural disasters highly impede the company’s operations From the situational analysis, it is evident that Ferrari has been relying on traditional basis of service delivery in their marketing strategies. However, it is imperative that the company incorporates newer measures in their service operations management to ensure that the various threats and weaknesses are handled effectively. Williams A situational analysis of the company is as follows: Strengths i. Plausible brand reputation pertaining to technology use Weaknesses i. Ineffective management of the research and development Opportunity i. Emergent markets such as US pertaining to preference of Williams technology Threats i. Increasing competition within the automotive industry Red bull An environmental analysis of red bull is as follows: Strengths i. Brand reputation ii. Plausible image Weaknesses i. Financial losses in recent years Opportunity i. Emerging extreme sports that the organization can capitalize Threats i. High competition Table for each company of generic competitive strategies and analyze it Red bull Competitive porter strategies Porter (28), states that companies can obtain competitive edge in myriads of ways through concentration on market niches and other strategies. Nevertheless, courier businesses that provide logistic solutions support the various strategies that businesses may incorporate in obtaining a competitive edge. However, Red bull as a logistic provider needs to incorporate new strategies to ensure service delivery is optimal and profitable to both itself and its clients (Porter 28). Thus, from analysis of the porter’s competition models, concentration on focal areas coupled with a hybrid of cost leadership and differentiation will be a proper marketing strategy for Red bull in its service operations mandate. Williams Cost leadership and differentiation In the courier business, it is highly possible to inculcate a hybrid strategy in maintaining competitive edge (Porter 28). Case in point is the mass customization strategy that may be incorporated by Williams. In the mass customization strategy, numerous units of standardized services or modules are initially offered (Porter 28). In the end product delivery, numerous customized components or service versions are generated, which progress only at the culmination of the value creation process. Thus, in their service operations management, Williams should incorporate a marketing strategy whereby the customers can access individualized services at individualized costs. Moreover which ensure that Williams enjoys economies of scale since mass customization will be incorporated both to the business and individual clients that the company has (Porter 28). Through the incorporation of a hybrid competitive marketing strategy, Williams will enjoy both cost leadership and differentiation which is crucial in sustaining their operations in the global frontier. Honda Concentration on focal areas Porter (28), states that the market strategy of concentrating on the various focal areas entails use of market niches, customer groups and regions that the company has strong foundations in. as such, competitive advantage arises on Honda through adjustment of the customer or business focus, market segment and concentration on the areas of business product and service delivery success (Porter 2008). As a business that is highly successful in the product delivery, Honda should put a more differentiation based approach through new and customized services that ensure success in their strong areas of operations. As such, through concentration on focal areas, Honda will enjoy cost advantages that ensue from flexibility in approach and operations in the main areas of market service delivery success (Porter 28). Furthermore, concentration on the focal areas can result into a simpler service delivery of the logistic operations at Honda. Williams New segmentation strategy Williams greatly relies on the traditional segmentation strategy of demographic characteristics and behavioral attributes of the clients that it has. Through the incorporation of the traditional segmentation strategy, Williams has been lagging behind in E-commerce and its business marketing strategies. However Bhattacharya, (9), states that incorporation of a newer segmentation strategy is crucial that should be based on buyer behaviors. Components of strategic capabilities for each company Competitive performance The strategic capabilities should be focused on ensuring stiff tactics construed towards sustaining market position against the competitors. Admittedly, when implementing a marketing plan, it is highly plausible that the marketing plan is workable and perfectly focused on mitigating competition. As such, when introducing and performance of new products it is imperative that evaluation of the potential buyers is done in order to understand both the consumer base and potential rivals. Client base Focusing on the marketing efforts towards customers is a plausible initiative within the plausible operations of organizations in the Formula one industry. Within the operational plan, it is advisable that efforts are directed towards comprehension of the clients coupled with the reasons as to why the clients have to purchase the product. The marketing plan success incorporated should be directed towards targeting customers in order to ascertain successful product performance. Differentiated Selling proposition In reference to Bob (90), integration of a unique selling proposition secures a competitive edge in regards to what the clients will purchase. Accordingly, Bob (126) affirms that when inculcating a marketing plan for a new product, it is important that the marketing planners incorporate an effective leverage over the rivals. The four fundamental dilemmas in innovation and respond to disruptive innovation Increased levels of research and development expenditure are highly imperative within the formula one industry. From the evaluation of the diverse pundits, focus on innovation poses an analysis of the dilemmas of innovation such as financial injection, focus on plausible human resource and an analysis of core competency. Hence, responding to disruptive innovation entails implementation of the following approaches: Action plan For a successful action plan in the partnership approach, an implementation of a strategic meeting and analysis should prevail. Admittedly, the action plan should be based on the following at the formula one industry: a. Income management Analysts assert that remarkable management of income is evidenced by an effective financial planning frontier within a business. Evidently, businesses that inculcate financial planning manage to ascertain and monitor incomes and expenses in the business. Through effective management of various expenses which emanates from extensive planning, businesses manage to plan effectively and sustain profitability. b. Cash flow management Financial planning is pegged on effective policies in maintaining plausible rates of cash inflow and outflows within the business. Businesses that incorporate financial planning extensively control the cash inflows and outflows within the business. Thus, an effective financial planning mandate yields a business environment that is profitable for operations. c. budgeting Financial planning is construed towards effective management of cash within the formula one industry. Apparently, businesses that invest into financial planning inculcate effective budgets that ensure smooth running of the business. Conclusion It is quite essential that businesses research into the various marketing aspects that ensure the successful information relay to the various prospective customers. Accordingly, for the product development, advertisement launch and so forth, it is crucial for businesses to nurture and inculcate marketing strategies. Market segmentation and elements of the marketing process are some of the principles that the company has incorporated. Nonetheless, it is imperative that the company incorporates other strategies in targeting and marketing to ensure success in the automotive sector. Multi-segmented marketing coupled with behavioral segmentation are some of the aspect of marketing that businesses in the formula one industry can incorporate to ensure further operational success in the sectors of operation. Works cited Bhattacharya, C. Services marketing. New Delhi: Excel Books India. 2009 Carpenter, G., & Shankar, V. Handbook of marketing strategy. Carlifornia: Edward Elgar Publishing. 2012 Ferrell, O. Marketing strategy text and cases, 6th ed.. Connecticut: Cengage Learning. 2012 Hartline, M., & Ferrell, C. Marketing strategy. Connecticut: Cengage Learning. 2010 Musiolik, T. The global player: How to become "the logistics company for the world". Munich: Diplomica Verlag. 2012 Porter, M. Competitive strategy: Techniques for analyzing industries and competitors. New York: Simon and Schuster. 2008 Porter, M. On competition. London: Havard business press.2008 Ranchhod, A., & Gurau, C. Marketing strategies: A contemporary approach. New York: Financial Times Prentice Hall. 2007 Sauvignon, M. The multiple identities of an employer: A case study on dhl. Munich: GRIN, Verlag. 2010 T, A., & Winston, W. Environmental marketing: Strategies, practice, theory, and research. London: Routledge. 2013 Read More