Analysis of Ferrari

Analysis of Ferrari

The general car industry is growing steadily at 4%. The luxury car industry is growing much faster at 10%. The players in the luxury car industry include the famous Porche, Bentley, and Lamborghini etc. Ferrari was able to stand out thanks to its differentiation business strategy. The company applies this strategy to all aspect of the business, including product, promotions, and place to target the market. Ferrari’s primary goal is to be the leading differentiator - it is all about branding, as the company derive from its dual identity as the famous racing team and luxury car maker. This easy will discuss how Ferrari was able to create and capture value with its differentiation strategy, and how the brand exclusivity was able to increase willingness to pay, price and customer surplus.

The biggest component that enabled Ferrari to sustain its differentiation strategy is the product. The company focus on quality rather than quantity, as it only produced 7664 vehicles in 2014. Every Ferrari cars are produced with pride and enthusiasm as the company aim to archive the best quality and design. Designers and engineers are incorporated in cross-function groups. They work together to produce the best performance and most trendy cars with ultimate comfort, luxury and driving pleasure. The engineers and designers are constantly experimenting with new ideas. Every detail, including the sound of the engine, is important. Therefore, Ferrari’s production timeline is rather slow, allowing the production team to focus on those details. According to the case, on average, it takes 40 months for Ferrari to develop a new car from concept to production. Ferrari’s R&D expenses are much higher than the industry at 20% of sales. Ferrari cars also are highly customized, as 15% of the company’s revenues came from personalization features on the vehicles in 2014.

Ferrari is also a big differentiator in terms of promotion. The company spend very little in marketing and the car sells itself. In fact, to maintain its exclusivity, the customers of Ferrari are subject to a selection process and often are being placed on a long waiting list. The exclusivity and derivational marketing strategy enabled Ferrari to have a very niche and royal customer base. According to the case, in 2014, 60% of Ferrari are sold to pre-exiting customers. Ferrari’s customers gain emotional satisfaction when