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 - – banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, increasing household debt because of falling income levels,
digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
Analytics focus
– Hazelnut Hazelnuts is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Tarun Jain, Jishnu Hazra can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
Ability to recruit top talent
– Hazelnut Hazelnuts is one of the leading recruiters in the industry. Managers in the Ferrero Group: Securing Supply for Hazelnuts are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
High switching costs
– The high switching costs that Hazelnut Hazelnuts has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Ferrero Group: Securing Supply for Hazelnuts, it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Aligning sales with marketing
– It come across in the case study Ferrero Group: Securing Supply for Hazelnuts that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Ferrero Group: Securing Supply for Hazelnuts can leverage the sales team experience to cultivate customer relationships as Hazelnut Hazelnuts is planning to shift buying processes online.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Ferrero Group: Securing Supply for Hazelnuts HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Hazelnut Hazelnuts has relatively successful track record of launching new products.
Products dominated business model
– Even though Hazelnut Hazelnuts has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Ferrero Group: Securing Supply for Hazelnuts should strive to include more intangible value offerings along with its core products and services.
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.
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.
Slow to strategic competitive environment developments
– As Ferrero Group: Securing Supply for Hazelnuts HBR case study mentions - Hazelnut Hazelnuts takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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 -
Building a culture of innovation
– managers at Hazelnut Hazelnuts can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hazelnut Hazelnuts can use these opportunities to build new business models that can help the communities that Hazelnut Hazelnuts operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Hazelnut Hazelnuts to increase its market reach. Hazelnut Hazelnuts will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hazelnut Hazelnuts can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Ferrero Group: Securing Supply for Hazelnuts, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hazelnut Hazelnuts in the consumer business. Now Hazelnut Hazelnuts can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
Creating value in data economy
– The success of analytics program of Hazelnut Hazelnuts has opened avenues for new revenue streams for the organization in the industry. This can help Hazelnut Hazelnuts to build a more holistic ecosystem as suggested in the Ferrero Group: Securing Supply for Hazelnuts case study. Hazelnut Hazelnuts can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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 -
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Hazelnut Hazelnuts in the Technology & Operations sector and impact the bottomline of the organization.
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.
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 .
Environmental challenges
– Hazelnut Hazelnuts needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Hazelnut Hazelnuts can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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.
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.
Shortening product life cycle
– it is one of the major threat that Hazelnut Hazelnuts is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Hazelnut Hazelnuts needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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.