PEST analysis of Ferrero

Ferrero is one of the few globally well known confectionary brands, which specialises in production, distribution and marketing of chocolate based products. It should be noted that the group is privately held which has more than 38 operating companies globally, which are directly or indirectly linked with the 14 factories worldwide. It should be noted that the company has its roots in the modest beginnings in 1946, when Pietro and Giovanni Ferrero started the company as a confectionary shop in northwest Italian town of Alba (Datamonitor, 2009). Drawing upon Keynote (2009), it can be suggested that the company has since evolved into a global entity with turnover in access of $9,142.9 million during 200, while employing more than 21,600 people.

In order to analyse the external environment of Ferrero, PESTEL analysis has been undertaken as follows:

Political: Since the creation of the EU with six members, it has expanded to include twenty seven member states, with Bulgaria and Romania being the most recent in 2007 (Barnes, 2003). This expansion of the market has led to the harmonisation of a number of attributes of the markets and therefore is beneficial for firms like Ferrero to expand with the help of standardised strategy.

Economic: The core national market for Ferrero is Italy, where it has grown since its inception before embarking on the internationalisation process. Drawing upon Mintel (2009), it should be noted that Italian confectionary market is still central to the company’s business and therefore the forecasted growth of 6.7% till 2012 making it worth $4,340.3 million is a good news for the company. Similarly, it should be noted that the Chinese market has shown significant future prospects, where the company has recently revived its business. Drawing upon Keynote (2009) the Chinese confectionary industry is expected to grow at staggering 28.9% rate till 2012 making it worth $8,700 million. However, it should be noted that global financial crisis can impact on the cashflows of the firm and the turbulent forex rates would also impact on its performance.

Social: There has been a change in the social indicators suggesting the rise of premium chocolate market, which is one of the core businesses of the firm. Drawing upon Datamonitor (2009), it can be highlighted that premium segment is one of lucrative in the industry and is worth more than $2,050 million, which is approximately 13% of the total industry revenue. It should be noted that the segment is expected to grow more than 53% in the next five years.

Technological: There have been technological innovations in the field of operations, supply chain management and distribution, which are aimed at generating cost efficiencies. It should also be noted that internet has played a vital role in developing innovative and creative marketing campaigns for firms like Ferrero, which are effective as well as efficient.

Environmental: The issues surrounding global warming, ozone depletion, and recycling have become highly impactful on business around the globe. Drawing upon Datamonitor (2009), it should be noted that the company is considered as a conscience corporate citizen, abiding by not only the legal commitments in respect to environmental but also is involved in a number of voluntary activities.

Legal: The counterfeit industry, according to Keynote (2009) is booming and industry has called for stricter actions and legal frameworks to minimise its impact. Drawing upon Datamonitor (2009), it can be highlighted that the company has been faced with the issue in emerging economies like China, and India. It should be noted that such practices have impacted on low confidence on the Ferrero products as the fake products do not meet customers’ expectations and they attribute this to the Ferrero brand.

References:

Barnes (2003), The new neighbours and proximity policy of the enlarged European Union, Managerial Law; Volume: 45 Issue: 5/6; 2003

Datamonitor (2009), Ferrero Company Profile, Datamonitor, International

Euromonitor (2009), Confectionary Industry, Euromonitor

FAME (2009), Annual Report – 2009 – Ferrero UK, FAME International

Ferrero (2009), Official Website – Ferrero Group, Online

Fill, C. (2002), Marketing Communication. Contexts, Strategies and Applications, Pearson, Prentice Hall, 2002

Gillen, T. (2002), Leadership Skills for boosting performance, Penguin Books

Kotler, P. et al., (2005) Principles of marketing, Pearson, Prentice Hall

Keynote (2009), Profile Confectionaries Global 2009, Keynote

Kotler, P. et al., (2005) Principles of marketing, Pearson, Prentice Hall

Lynch, R. (2003), Corporate Strategy (3rd edn), London, FT/Pearson Education

Mintel (2009), Industry Report – Confectionaries, Mintel UK

Porter, M. (1983), Competitive Advantage: Creating and Sustaining Performance, The Free Press

Porter, M.E. (1980), Competitive Strategy: techniques for analyzing industries and competitors, New York, Free Press

Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance: with a new introduction, New York, The Free Press

Solberg, C.A. (2002), The perennial issue of adaptation or standardization of international marketing communication: organizational contingencies and performance, Journal of International Marketing, 10:3, pp.1-21

Stefania, S & Salvo, T (2002), Strategic Management in the Fashion Companies, Etas.