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Strategic Planning and Sustainability

Student's Name

Institution

Professor

Course
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Strategic Planning and Sustainability

Introduction

Ferrari remains an Italian organization that had generated sports cars from 1947 but finds its

origins back to 1929 when Enzo established the Scuderia Ferrari racing team (Aversa, Schreiter

& Guerrini, 2021). In his paper, we shall analyze environments that may enable the firm to create

an effective strategy. Managers at Ferrari Company need to inspect 3 inter-related environments

to enable them to develop an effective strategy. The 3 interconnected environments are the

company's industry environment, the geographical market or nation in which the firm operates,

as well as the larger socioeconomic or macro-environment. The main purpose of this paper is to

analyze Ferrari’s external environment.

Organization purpose/mission/vision

Ferraris have often been regarded as one of the fastest as well as the most prestigious line of

cars in the world. Today, they symbolize affluence and wealth, even though the key purpose

Enzo had when creating the cars remained speed - the type of speed racing enthusiast and race

car drivers would need (Johnson, Scholes, Whittington, Regn & Angwin, 2017). The vision and

mission, and statement of Ferrari is, "To create unique sports cars intended to epitomize the

excellence of cars from Italy, whether on the racing circuits or the road. The leaderships of the

firm are driven by their passion for both the track and the road. The challenge they relish most

remains to set ambitious targets as well as guarantee their customers’ complete satisfaction.

Ferrari remains an eco-friendly organization that cares about its employees’ well-being.

Analysis of Macro-environment

Ferrari PESTEL analysis remains a strategic technique for analyzing the organizational macro

environment. PESTEL stands for - Political, Social, Economic, Environmental as well as

Juridical aspects impacting the Ferrari macro-environment. Indeed, changes in macro-

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environmental factors may directly affect Ferrari and other auto manufacturers' players (Shams,

Vrontis, Belyaeva, Ferraris & Czinkota, 2021). Macro-environment factors may impact the

Porter 5 forces that shape the strategic & competitive landscape. They may affect the competitive

advantage of individual companies or the overall level of profitability in the consumer goods

industry. PESTEL analysis offers extensive insight into the operational challenges that Ferrari

shall encounter in prevailing macro environments instead of competitive factors.

Political factors

Political factors play an essential role in determining the elements that may impact the long-

term profitability of Ferrari in a certain market or country (Rosario, Mutz, Ferrar, Bernardes &

Conte-Junior, 2021). Some of the political factors that Ferrari ought to consider are the

following:

Government budget size: The government at both local and national levels remains running

deficit budgets, which mainly boost short-term growth and contribute to an upsurge in inflation.

The national government's bond rating remains investment grade (Paolone, Sardi, Sorano &

Ferraris, 2020).

Roles of NGOs, Civil Society, and Protest Groups: The nation has a vibrant community of

civic society, and Ferrari ought to create connections and explore cooperation areas. The civil

society groups remain influential in policymaking and the building of a broad narrative of

society.

Economic Factors

Economic factors of a region and country directly influence the potential attractiveness of a

particular market. Economic factors that Ferrari ought to consider include:

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Foreign Exchange Rate - In recent years, numbers of firms in Venezuela, Argentina, and

Brazil have suffered losses due to Forex risk (Garcia-Muiña, González-Sánchez, Ferrari &

Settembre-Blundo, 2018). Ferrari ought to pay close attention to the history of forex risk before

entering any new market.

Price Fluctuations in both International and Local and Markets: Ferrari ought to inspect the

fact that at the US's deficit levels, high inflation, as well as a severe risk of devaluation, could

contribute to an emergent economy.

Monetary and fiscal policies: The tax break culture of the Republican government has raised

the debt and may lead to economic problems for the economy in future years.

Social Factors

Social factors like demographic trends and power structure in society have a tremendous

influence on not only the economics of the country but also on the level of consumer demand

and the workforce talent availability. Social factors that Ferrari ought to consider include:

Attitude toward Leisure: The firm ought to conduct research to understand both choice of

leisure activities and attitude towards leisure activities.

Level of Social concerns and awareness in society: According to many researchers, higher

levels of social concerns normally occur due to greater consumer activity as well as pressure

from NGOs and pressure groups in society.

Attitude towards authority: numerous cultures in various parts of the universe have dissimilar

attitudes towards authority. The company should examine the attitude towards authority before

creating a marketing campaign for its services and products.

Technological Factors
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Technology is rapidly changing business models in several industries. Some of the technology

advancements that affect the macro environment include developments in artificial intelligence,

the application of machine learning as well as large data analysis for predicting consumer

behavior (Bertello, Ferraris, Bernardi & Bertoldi, 2021). Ferrari should consider the following

technological factors:

Production costs & trends: The firm should assess the production cost & trends in the

economy as well as the level of automation.

Property Rights and protection of TOA (Technology Oriented Assets): The firm ought to

analyze the legal position of diverse property rights as well as the protection of intellectual

property rights prevalent in the United States (Ferrari, 2021).

Environmental Factors

Environmental factors are gradually gaining traction among consumers and policymakers.

Some of the environmental factors that the company should consider include – climate change,

weather, recycling, endangered species, and laws regulating pollution of the environment. The

firm also needs to consider whether their present CSR (Corporate Social Responsibilities) efforts

are applicable in the market.

Legal Factors

Legal factors normally govern conditions for market-entry, market legislation as well as

procedures to tackle any disputes with the stakeholders. Some of the legal factors that the

leadership of Ferrari should consider are discrimination law, employment law, data protection,

Health & safety law, and consumer protection & eCommerce.

Industry-Environment Analysis
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In this part, I shall evaluate the industry of formula one via an analysis of the diverse

organizations.

The threat of New Entrants

In the industry, economies of scale remain fairly difficult to attain. This makes it easier for

firms generating large capacitates to possess a cost advantage. Also, it makes production

expensive for new entrants. The product differentiation remains strong within the industry, where

Companies sell differentiated items instead of a standardized commodity. Also, Consumers look

for differentiated items. There remains a strong emphasis on advertising as well as customer

services. All of these elements make the threat of new participants a weak force within the

industry.

Bargaining Power of Suppliers

Compared to customers, the actual number of suppliers in this industry where Ferrari operates

remains high compared to the customers. This implies that suppliers possess less control over

prices, thus weakening their bargaining power. The products offered by these suppliers are fairly

standardized, less differentiated as well as possess low switching costs. This often makes it easier

for consumers to change suppliers. This, in turn, reduces suppliers' bargaining power. Suppliers

are not competing in this business with other items.

Bargaining Power of Buyers

The actual number of suppliers in this industry is a lot more compared to the number of

companies producing the commodities. This implies that buyers possess a few companies to

select from and so have no pricing control. This makes the buyers’ bargaining power a weaker

force in the industry. Also, the product differentiation in this industry remains high that means

the numerous buyers cannot locate alternative companies manufacturing a certain product. This
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switching difficulty makes buyers’ bargaining power a weaker force in this industry. Also, the

buyers attach great importance to the quality of items, and these buyers frequently buy. This

indicates that the industry's buyers are cheaper.

The threat of Substitute Services or Products

There remain few substitutes available for the items produced in this industry. Low-income

firms likewise manufacture the only possible substitutes available. (Porter & Heppelmann,

2014). This means that in this industry, there is no maximum profit cap. All these elements

weaken the industry's threat of alternative offerings. There remain extremely few alternatives

available which are far more costly. In comparison, firms manufacturing in this industry sell at

low prices in a decent quality compared to other options. Buyers are therefore less likely to

switch to other substitutes. Thus, the risk of substitutes in this industry remains weak.

Rivalry among Existing Companies

There are extremely small numbers of rivals in this industry. Most of these are large as well.

This means that organizations in the industry shall not make moves undetected. This makes the

competition among existing organizations a weaker force in the industry. The very few rivals

possess a large share of the market. This means that they shall participate in competitive

activities to acquire positions as well as become market leaders. Also, the industry where Ferrari

operates is growing annually and is likely to continue to do this in the future. Positive growth of

the industry means that competitors remain less likely to participate in completive actions since

they do not have to gain full control of the market share. This makes the competition amongst

existing organizations a weaker force within this industry.

Overarching Genetic Strategy Used By Ferrari

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The overarching genetic strategy used by Ferrari to gain a competitive advantage in the

industry is cost leadership. According to many researchers, a Cost leadership strategy entails

gaining a competitive edge by reducing the cost (Kaliappen & Abdullah, 2013). Cost leadership

remains the key generic strategy that this company (Ferrari) uses in different markets. The key

goal of this strategy is to maintain the market leadership position by effectively managing the

value chain (Valipour, Birjandi & Honarbakhsh, 2012). This strategy enables Ferrari to widen its

market share via targeting the middle class that makes the greatest proportion of the total

customer market mix in numerous nations. Middle-class customers normally put high importance

mainly on the pricing element, and cost leadership remains the greatest method to meet the

requirements of this consumer sector. Ferrari concentrates on worldwide affordability and

accessibility of its products, leading to a high degree of brand recognition, rapid sales growth,

and a strong competitive edge (Hasna Lumpingan, 2018). Instead of charging low prices by

maximizing the efficiency of the supply chain and lowering production costs, Ferrari frequently

provides coupons and discounts to attain sales targets as well as handle its closest rival’s

competitive pressure. The projected outcome of these promotional campaigns and discounts is to

increase the popularity of the brand as well as encourage consumption.

Indeed, the cost leadership strategy of Ferrari has provided many benefits to the firm, such as

expanding the customer base, gaining fast brand recognition, encouraging consumption as well

as attaining targets of sales by emphasizing affordability and accessibility of products.

Implications for Incorporating Sustainability

Sustainability such as environmental sustainability may be incorporated into all facets of

Human Resource Management practice. Often, worker initiatives for environmental

sustainability remain restricted to motivational interventions created to improve the attitudes of

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employees toward green behaviors (Ajmal, Khan, Hussain & Helo, 2018). Whereas such

interventions may be effective, organizational environmental Human Resource Management

shall have a more lasting effect if sustainability is also included in other essential practice areas.

For instance, environmental initiatives shall be most effective when they are fully integrated into

the core business strategies of the organization —this shall encourage both organizational

decision-makers as well as employees to adopt environmental initiatives. Ergonomics, as well as

workplace design, can also be used to detect as well as eradicate environmental barricades to

green behaviors, such as by placing recycling as well as compost containers, in order to make

these behaviors more convenient, or a centralized platform for organizing the exchange of

carpooling or equipment.

Conventional views on environmental sustainability often claim that economic activity has

negative environmental penalties, so firms must limit their economic growth as well as use

financial resources to repair or prevent environmental damage (Shafiq, Johnson, Klassen &

Awaysheh, 2017). Even though it is true that financial outcomes, specifically in industries that

depend heavily on natural resources (like oil and extraction of gas), are negatively liked to

certain pro-environmental efforts (for example, costs suffered by following sterner regulations),

the view that environmental and economic performance is 2 competing goals remains

increasingly being confronted (Chams & García-Blandón, 2019). Extensive studies of

organizational performance have demonstrated that corporate environmental performance and

corporate financial performance are positively linked; firms that act most environmentally

responsible tend to perform best financially in the industry. That is because firms like Ferrari

with an excess of financial resources possess the most flexibility to device pro-environmental

initiatives. Nevertheless, it is equally essential to note that using financial success to perform in
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an environmentally responsible way provides numerous advantages that may directly support the

organization’s future economic sustainability.

Recommendations

Ferrari may tackle the threat of new Entrants by taking advantage of the economies of scale it

possesses within the industry and fighting off new entrants via its cost advantage. The company

can concentrate on innovation to differentiate its commodities from that of new players. The

company ought to spend on marketing mainly to build strong identification of the brand. This

will help it retain its customers instead of losing them to new players. Also, the company may

tackle the suppliers' bargaining power by buying raw materials from them at a very low cost.

Ferrari should also focus on differentiation and innovation to attract buyers. Quality of products

and product differentiation is critical to customers within the industry, and the company may

attract many consumers by focusing on the two. Also, the company may resolve the threat of

substitute commodities mainly by focusing on offering quality products. This would enable

buyers to select commodities that offer greater quality at a lower price than substitute products

that offer more outstanding quality at a higher price.

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References

Ajmal, M. M., Khan, M., Hussain, M., & Helo, P. (2018). Conceptualizing and incorporating

social sustainability in the business world. International Journal of Sustainable Development

& World Ecology, 25(4), 327-339.

Aversa, P., Schreiter, K., & Guerrini, F. (2021). The Birth of a Business Icon through Cultural

Branding: Ferrari and the Prancing Horse, 1923–1947. Enterprise & Society, 1-31.

Bertello, A., Ferraris, A., De Bernardi, P., & Bertoldi, B. (2021). Challenges to open innovation

in traditional SMEs: an analysis of pre-competitive projects in university-industry-

government collaboration. International Entrepreneurship and Management Journal, 1-16.

Chams, N., & García-Blandón, J. (2019). On the importance of sustainable human resource

management for the adoption of sustainable development goals. Resources, Conservation and

Recycling, 141, 109-122.

Ferrari, G. (2021). Big Tech strategies across markets: the role of self-preferencing in Digital

Antitrust.

Garcia-Muiña, F. E., González-Sánchez, R., Ferrari, A. M., & Settembre-Blundo, D. (2018). The

paradigms of Industry 4.0 and circular economy as enabling drivers for the competitiveness of

businesses and territories: The case of an Italian ceramic tiles manufacturing company. Social

Sciences, 7(12), 255.
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Hasna Lumpingan, L. (2018). The relationship between social capital, entrepreneurial

orientation, cost leadership strategy and the performance of cooperatives in

Malaysia (Doctoral dissertation, Universiti Utara Malaysia).

Johnson, G., Scholes, K., Whittington, R., Regn_r, P., & Angwin, D. (2017). Fundamentals of

strategy. Pearson UK.

Kaliappen, N., & Abdullah, H. H. (2013). Enhancing organizational performance through

strategic alignment of cost leadership strategy and competitor orientation. Middle-East

Journal of Scientific Research, 18(10), 1411-1416.

Paolone, F., Sardi, A., Sorano, E., & Ferraris, A. (2020). Integrated processing of sustainability

accounting reports: a multi-utility company case study. Meditari Accountancy Research.

Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming

competition. Harvard business review, 92(11), 64-88.

Rosario, D. D., Mutz, Y. S., Ferrari, R. G., Bernardes, P. C., & Conte-Junior, C. A. (2021). The

COVID-19 pandemic in Brazil built on socioeconomic and political pillars. Pathogens and

Global Health, 115(2), 75-77.

Shafiq, A., Johnson, P. F., Klassen, R. D., & Awaysheh, A. (2017). Exploring the implications of

supply risk on sustainability performance. International Journal of Operations & Production

Management.

Shams, R., Vrontis, D., Belyaeva, Z., Ferraris, A., & Czinkota, M. R. (2021). Strategic agility in

international business: A conceptual framework for “agile” multinationals. Journal of

International Management, 27(1), 100737.

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Valipour, H., Birjandi, H., & Honarbakhsh, S. (2012). The effects of cost leadership strategy and

product differentiation strategy on the performance of firms. Journal of Asian Business

Strategy, 2(1), 14-23.