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Ferrari SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Ferrari managers to do a situational analysis of the firm . It is a useful technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Ferrari is facing in its current business environment.
The Ferrari is one of the leading companies in its industry. Ferrari maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Ferrari to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The primary purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Ferrari strengths, and eradicate its weaknesses.
Step by Step Guide to Ferrari SWOT Analysis
Strengths of Ferrari – Internal Strategic Factors
As one of the leading companies in its industry, Ferrari has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Ferrari are –
- Automation of activities brought consistency of quality to Ferrari products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Highly skilled workforce through successful training and learning programs. Ferrari is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Highly successful at Go To Market strategies for its products.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Good Returns on Capital Expenditure – Ferrari is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Successful track record of developing new products – product innovation.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
Weakness of Ferrari – Internal Strategic Factors
Weakness are the areas where Ferrari can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- The profitability ratio and Net Contribution % of Ferrari are below the industry average.
- High attrition rate in work force – compare to other organizations in the industry Ferrari has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Ferrari needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Ferrari is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Opportunities for Ferrari – External Strategic Factors
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Ferrari to increase its profitability.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Ferrari to drive home its advantage in new technology and gain market share in the new product category.
- The market development will lead to dilution of competitor’s advantage and enable Ferrari to increase its competitiveness compare to the other competitors.
- Government green drive also opens an opportunity for procurement of Ferrari products by the state as well as federal government contractors.
- New trends in the consumer behavior can open up new market for the Ferrari . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Ferrari to capture new customers and increase its market share.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Ferrari’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
Threats Ferrari Facing - External Strategic Factors
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Ferrari in those markets.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Imitation of the counterfeit and low quality product is also a threat to Ferrari’s product especially in the emerging markets and low income markets.
- Rising raw material can pose a threat to the Ferrari profitability.
- Liability laws in different countries are different and Ferrari may be exposed to various liability claims given change in policies in those markets.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Ferrari
Limitations of SWOT Analysis for Ferrari
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Ferrari
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Ferrari
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Ferrari managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Ferrari
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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