Marketing of Ferrero China - Case Study Example

Marketing Report Student’s Name Course Professor Date 1.0 Executive Summary Chinese economy has witnessed a fast growth over the past two decades making it the second largest economy in the world. China is an exceptional market in Asia for chocolates. There is a high demand of most chocolate. Its traditional and Chinese consumers prefer snacks. Ferrero set up its factory and started packaging and distribution of chocolate in China in 2007. Its key category products include Pralines with Ferrero Rocher as key product. Other major competitors in Chinese chocolate market are in fierce competition with Ferero. However, Ferrero will use it strengths and leverage the possible opportunities to increase its market share. 2.0 Introduction and background to the company & Industry Ferrero is a global company that operates in food industry mainly dealing with manufacture of branded chocolate. It is a leading chocolate producer, with its most famous Nutella and other products like pocket coffee, Hanuta chocolate, Tic Tac breath mints and dark chocolate Ferrero Rocher. Its products bear are known for their uniqueness in tastes including coconut cream, color; pearl and coconut cream. It entered in China market from 2007 and has already obtained a 12% market share. This paper emphasis on its strengths and the opportunities it can leverage to achieve a competitive advantage and increase its market share. 3.0 Market description Chinese economy has witnessed a fast growth over the past two decades making it the second largest economy in the world. Its secondary sector, where Ferrero is categorized accounted for 45% of country’s total output in 2013 (Euromonitor International 2015). China was able to withstand the 2008 economic crisis and it never experienced any worse implications through massive stimulus program. In turn, there is increase discretionary customer spending increasing industrial investment. Apparently, its GDP is growing above 9%, has sound fiscal position and low inflation (Focus Economics 2015). In China, Ferrero competes with Mars, a market leader that holds 39% value share in Chinese chocolate market. Hershey is another competitor with a growing market share in the market. Both Ferrero and Hershey grew their market share to 12% in 2014 making Mars the leading local producer loss some ground (Nieburg 2015). Ferrero Rocher is well known in the market and has met a considerable demand. Market share is increasing for new entrants with in a country with over 1.3 billion people. Local market for chocolate has grown continuously at a rate of 12% annually (Doland 2014). The way Chinese embraces chocolate has also led to high prices of cocoa creating fears of international shortages. 4.0 SWOT Analysis SWOT Analysis Strength Great products and tastes Excellent brand name with high brand loyalty Unique/all sizes product packaging Famous as a global company dealing with chocolate rand Expensive chocolate and products Weaknesses Not easily available Opportunities Having more varieties and use smaller gift packages Tap market in growing cities and other retail chains through promotion Threats Calories conscious consumers Increased completion from major local chocolate brands Tab.1.0: Adopted from Ferrero SWOT Analysis; Jun2013, p1 5.0 Explanation of the SWOT Table Ferrero’s SWOT presents a good sketch of its position in the marketplace. In just 6 years in China, Ferrero has built an impressive reputation getting a 12% market share. China marketing environment for Ferrero represent an overwhelming opportunities. Ferrero can use its core competencies for achieving a competitive advantage as competitors may not provide similar value to consumer as Ferrero does. Already, Ferrero has developed significant competencies. It offers high-quality and branded products with an image recognizable in the market by most consumers. Its products are expensive making them accessible luxury in Chinese market which is often obsessed with ranking (Durvasula & Lysonski 2010). In China, the product which is perceived as best, like Ferrero Rocher, it has a high likelihood of being coveted. Availability of Ferrero products at every corner shop will also promote its reputation among retailers that it is a reliable manufacturer. That means, by delivering the products requested on schedule, retailers will perceive it as reliable and demand its products. The firm has already developed brand-loyal consumers while its sound financial background and management sets it in a good position to grow further. While Ferrero expensive brands might be seen as a weakness in other markets, it is different in China as the culture there promotes brands that are recognizable and that carry a high status. Ferrero should use excellent promotional strategy and develop creative slogans when communicating with its customers or in its adverts. Information about Ferrero should be availed through traditional media, direct marketing campaigns and other efforts that differentiate its products from those of its competitors. When Ferrero products were introduced in Hong Kong, advertising agency wisely introduced them as ‘gold sand’. Such names and slogans are auspicious more so for gifting around holidays and Chinese New Year. To most Chinese, Ferrero Rocher is affordable compared with Godiva that is a little bit expensive. The uniquely packages its products to make sure they are affordable to most Chinese consumers. Its Ferrero Rocher T3 sell at 9.9 Yuan, T8 (100g) @ 68 Yuan, T1 (200g) @ 60 Yuan, T 24 (300g) @ 103 Yuan while T48 (600g) sell @148 Yuan (Yang 2007). Ferrero has expanded its product line by offering different packages and sizes of products. However, Ferrero has to work on the other weakness of failure to have its brands in common shops and outlets. It should work on its distribution strategy. In most countries where Ferrero operates, its products are marketed through food stores scattered in major towns and cities. Over the next years of it operation, it should expand its distribution and include more retail shops throughout the nation. It should also focus in interior and remote areas. It need to scale up it availability in mainland China. Additionally, the firm needs to do more research about most popular colors and use them in products and packaging for consumers to enjoy and buy more often. Chinese most likely do not favor dark chocolates and tend to prefer milk and hazelnut chocolates (Yang 2007). Over the next years, Ferrero need also to expand its product line and introduce other brands other than the Ferrero Rocher alone. They can also add slogans related to love messages and gift-giving culture in China. In turn, it needs to retire some slogan and introduce new ones to keep its concepts fresh. 6.0 Recommendations a. New Product Ferrero can make customized products targeting active consumers. These products should bear trendy colors and slogans depend on a variety of activities the young people involve in. For example, they can come up with concepts for birthdays, graduations, outdoor events and gift for potential partners. The customized products can bear phrases like ‘I love you, congratulations, happy birthday, get over it, take a spin, sunrise pink, sunset red’, and so on. The customized products will sell higher compared to the rest by over 10 Yuan for small packages and higher in sizeable packages. Chinese are obsessed with expensive and foreign food. Ferrero Rotcher is neither too cheap nor is much expensive compared to other brands. This will be a unique point of differentiation and introduce novel product in Chinese market. It is possible to find the right target for the product since Ferrero by now understand the behaviors, beliefs and motivations of Chinese consumers. If the product is launched with effective marketing strategies, it will tap into the identified market segment successfully. Young consumers are rarely loyal and tend to be influenced by fresh concepts and new products. It requires the firm to adopt dynamic marketing mix with an emphasis on product, promotional, distribution and pricing strategies. b. Target Market Chocolate is popular snack in China and major focus for the company should be Chinese between ages 5 to 30 years. The children, teenagers, school-aged and young adults love chocolate most. Teenagers like to pass love gift and mostly buys chocolate for a gift (Yang 2007). Ferrero is also facing competition from its powerful competitors. In turn, it should set niche marketing and competition marketing for its new product. It can regard one city at a time as chosen market and then promote sale of its products to cities and the whole country. Ferrero’s chocolate products should try to create a sense of community among Chinese consumers that often purchases its products. Geert Hosftede perceives Chinise cultural orientation as collectivistic. Chinese emphasizes on connection and communal things. They are strongly grounded in the family, kinship ties and extended connections (Geert-hofstede). Chinese have an exceptional gift giving culture. As Ferrero products have a high status, they will often be given as gift in such a wonderful culture. However, the company requires using clever advertising strategy to appeal to customer on this. c. Customer Value As Trapnell & Paulhus (2012) observes, it is possible to gather multiple values to create typical consumers and consumer behaviors for the new product to be developed. Schwartz identifies common values that guide young Chinese consumers in purchases and buying patterns. Power is indicated through the value for social status and prestige. The product priced higher than the common ones will be actively sought as consumers tries to show their dominance and status. It will add a value of achievement where, presenting a customized gift will differentiate the normal and daily routine and the common ways. The product will promote hedonism where young people like to enjoy themselves. For instance, in outdoor event, they will seek pleasure and can buy such products to use during the events. Launching a new product will stimulate consumers as the products will be bought for specific reason or activity. Some customers always want extreme products that will promote the highest level of excitement or thrill. It will also relate to the benevolence value upheld in China where young people are very giving or provide general welfare and nurture others. Chinese tradition of respect makes them do things because they are customary. The gift will be used in their efforts to preserve order and stability like gift that apologizes, shows togetherness and such messages. d. Justification of the choice of new product The company product strategy is another source core source of strength and massive sale. Ferrero currently offers high-quality products that bear its logo and slogans. It normally packs its Ferrero Rocher in beautiful gift boxes and also put their products in conspicuous position in food outlets. As discussed earlier, the firm has sets its price with competition in mind. It does not set high prices just to signal luxury or prestige and still does not offset low prices as strategy to help it sell high quantities. Value pricing makes its customers feel comfortable while purchasing its products on a daily basis or occasionally. The different pricing strategy makes its products to be good gifts for common, birthdays and graduations among the teens and young adults. Eventually, they will place their products in profitable stores and try to maintain a strong relationship with all its distribution channels despite its expansion. It can increase its competitive advantage against its competitors as other counterparts companies and brand in China like Lindt and Guylian are poorly accessible (Yang 2007). References Doland, A, 2014, ‘Who's Winning China's Chocolate War?’ Retrieved [22 April 2015] from http://adagecom/article/print-edition/winning-china-s-chocolate-war/296091/. Durvasula, S, & Lysonski, S 2010, ‘Money, money, money-how do attitudes toward money impact vanity and materialism?-the case of young Chinese consumers’, Journal of Consumer Marketing, 272, 169-179. Yang, L, 2007, ‘Why are Chinese crazy about Ferrero Rocher chocolates?’ Quora, Retrieved [22 April 2015] from http://wwwquoracom/. Trapnell, P D, & Paulhus, D L 2012 ‘Agentic and communal values: Their scope and measurement’, Journal of personality assessment, 941, 39-52. The Hofstede Centre China Strategy, culture, Change http://geert-hofstedecom/chinahtml Ferrero SWOT Analysis; Jun2013, http://connectionebscohostcom/c/articles/88943278/ferrero-swot-analysis p1. Focus Economics, 2015, February, ‘China Economic Outlook’, Retrieved [22 April 2015] from http://wwwfocus-economicscom/countries/china. Euromonitor International, Feb 2015, ‘2015 Outlook for Emerging Market Economies’, http://blogeuromonitorcom/2015/02/. Nieburg, O, March 2015, ‘Ferrero Plans first factory in ‘strategic’ Chinese market’, Confectionery, Retrieved [22 April 22, 2015] from http://wwwconfectionerynewscom/Manufacturers/. Read More