Case Study Description of Ferrero Group: Securing Supply for Hazelnuts
Ferrero Group is a confectionery manufacturing company which produces a line of chocolates and chocolate spreads with hazelnut as the main ingredient. The company is the largest buyer of world hazelnuts (25%). The company procures hazelnut from Oltan, the world's largest manufacturer of processed hazelnuts with a market share of 25% to 30%. Ferrero purchases almost 70% of Oltan's hazelnut production. Recently, there was crop damage owing to which the harvest of hazelnut crop is low. This has increased the prices of hazelnut. One of the customers (Esha in the case) is concerned about the price increase of Nutella owing to such hazelnut supply issues. Hazelnut is a major ingredient of this chocolate spread. Esha is considering Ferrero's vertical integration, in which it may decide to purchase large producers such as Oltan. Further, she is also evaluating the implication of such a strategy on final market prices of Nutella.
Swot Analysis of "Ferrero Group: Securing Supply for Hazelnuts" written by Tarun Jain, Jishnu Hazra includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hazelnut Hazelnuts facing as an external strategic factors. Some of the topics covered in Ferrero Group: Securing Supply for Hazelnuts case study are - Strategic Management Strategies, Mergers & acquisitions, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Ferrero Group: Securing Supply for Hazelnuts casestudy better are - – there is backlash against globalization, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, geopolitical disruptions, increasing transportation and logistics costs,
digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Ferrero Group: Securing Supply for Hazelnuts
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Ferrero Group: Securing Supply for Hazelnuts case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hazelnut Hazelnuts, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hazelnut Hazelnuts operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Ferrero Group: Securing Supply for Hazelnuts can be done for the following purposes –
1. Strategic planning using facts provided in Ferrero Group: Securing Supply for Hazelnuts case study
2. Improving business portfolio management of Hazelnut Hazelnuts
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hazelnut Hazelnuts
Strengths Ferrero Group: Securing Supply for Hazelnuts | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hazelnut Hazelnuts in Ferrero Group: Securing Supply for Hazelnuts Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Hazelnut Hazelnuts are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Effective Research and Development (R&D)
– Hazelnut Hazelnuts has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Ferrero Group: Securing Supply for Hazelnuts - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Hazelnut Hazelnuts has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Ferrero Group: Securing Supply for Hazelnuts HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Hazelnut Hazelnuts digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hazelnut Hazelnuts has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Hazelnut Hazelnuts is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Hazelnut Hazelnuts is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Ferrero Group: Securing Supply for Hazelnuts Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Hazelnut Hazelnuts is one of the most innovative firm in sector. Manager in Ferrero Group: Securing Supply for Hazelnuts Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Technology & Operations industry
– Ferrero Group: Securing Supply for Hazelnuts firm has clearly differentiated products in the market place. This has enabled Hazelnut Hazelnuts to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Hazelnut Hazelnuts to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Hazelnut Hazelnuts is present in almost all the verticals within the industry. This has provided firm in Ferrero Group: Securing Supply for Hazelnuts case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management
– Hazelnut Hazelnuts is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Hazelnut Hazelnuts
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hazelnut Hazelnuts does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Hazelnut Hazelnuts in the sector have low bargaining power. Ferrero Group: Securing Supply for Hazelnuts has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hazelnut Hazelnuts to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Hazelnut Hazelnuts has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hazelnut Hazelnuts has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Ferrero Group: Securing Supply for Hazelnuts | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Ferrero Group: Securing Supply for Hazelnuts are -
Skills based hiring
– The stress on hiring functional specialists at Hazelnut Hazelnuts has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hazelnut Hazelnuts is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Ferrero Group: Securing Supply for Hazelnuts can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Hazelnut Hazelnuts, firm in the HBR case study Ferrero Group: Securing Supply for Hazelnuts needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Hazelnut Hazelnuts has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Hazelnut Hazelnuts even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Need for greater diversity
– Hazelnut Hazelnuts has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Increasing silos among functional specialists
– The organizational structure of Hazelnut Hazelnuts is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Hazelnut Hazelnuts needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hazelnut Hazelnuts to focus more on services rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Hazelnut Hazelnuts has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High cash cycle compare to competitors
Hazelnut Hazelnuts has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Workers concerns about automation
– As automation is fast increasing in the segment, Hazelnut Hazelnuts needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Interest costs
– Compare to the competition, Hazelnut Hazelnuts has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Ferrero Group: Securing Supply for Hazelnuts, in the dynamic environment Hazelnut Hazelnuts has struggled to respond to the nimble upstart competition. Hazelnut Hazelnuts has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Ferrero Group: Securing Supply for Hazelnuts | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Ferrero Group: Securing Supply for Hazelnuts are -
Manufacturing automation
– Hazelnut Hazelnuts can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Developing new processes and practices
– Hazelnut Hazelnuts can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Loyalty marketing
– Hazelnut Hazelnuts has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hazelnut Hazelnuts can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Hazelnut Hazelnuts can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Hazelnut Hazelnuts can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Hazelnut Hazelnuts to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Leveraging digital technologies
– Hazelnut Hazelnuts can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hazelnut Hazelnuts in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hazelnut Hazelnuts to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Hazelnut Hazelnuts to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Hazelnut Hazelnuts has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Ferrero Group: Securing Supply for Hazelnuts - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hazelnut Hazelnuts to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Hazelnut Hazelnuts to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hazelnut Hazelnuts can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Buying journey improvements
– Hazelnut Hazelnuts can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Ferrero Group: Securing Supply for Hazelnuts suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats Ferrero Group: Securing Supply for Hazelnuts External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Ferrero Group: Securing Supply for Hazelnuts are -
Consumer confidence and its impact on Hazelnut Hazelnuts demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Hazelnut Hazelnuts.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Hazelnut Hazelnuts business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hazelnut Hazelnuts in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Ferrero Group: Securing Supply for Hazelnuts, Hazelnut Hazelnuts may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hazelnut Hazelnuts can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Ferrero Group: Securing Supply for Hazelnuts .
Stagnating economy with rate increase
– Hazelnut Hazelnuts can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology acceleration in Forth Industrial Revolution
– Hazelnut Hazelnuts has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Hazelnut Hazelnuts needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing wage structure of Hazelnut Hazelnuts
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Hazelnut Hazelnuts.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Hazelnut Hazelnuts will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High dependence on third party suppliers
– Hazelnut Hazelnuts high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hazelnut Hazelnuts with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Ferrero Group: Securing Supply for Hazelnuts Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Ferrero Group: Securing Supply for Hazelnuts needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Ferrero Group: Securing Supply for Hazelnuts is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Ferrero Group: Securing Supply for Hazelnuts is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Ferrero Group: Securing Supply for Hazelnuts is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Hazelnut Hazelnuts needs to make to build a sustainable competitive advantage.