Introduction to the Ferrero Company
Ferrero is a famous snack company
from Italy. Meanwhile, the great leader of the Ferrero Group’s development is
Michele Ferrero. His invention of the new product with state-of-the-art ideas
has revolutionized the food habit of millions of consumers successfully. He was
also known as the first Italian manufacturer after World War II to open
production sites and office abroad in the confectionary sector which turned the
company into a truly international group. During the time back in the ‘40s,
Michele’s parents Piera and Pietro modified a pastry shop into a factory. These
first decision steps to move forward were thankfully because of the products
“invented” by Pietro Ferrero and the very young Michele. Besides that,
Michele’s parents Piera and Pietro modify a pastry shop into a factory. The
effectiveness of the sales organized by Giovanni was another successful key as
well. Sadly, Pietro’s brother unfortunately passed away in year 1949. Ferrero
is currently generating by the third generation, Pietro and Giovanni Ferrero,
the sons of Michele and Maria Franca who worked together on the top of the
group as Managing Directors for more than ten years. In April 2011, Pietro
Ferrero passed away while working on the humanitarian mission that were
inspired and operated by him that aimed to re-launch the Ferrero Social
Enterprises. Not only have that, Giovanni run Ferrero successfully until today.
In fact, more goals were aimed by him to increase his achievement and also
ensuring that the company inventiveness and provocation that were strongly
shared with his parents and brother. Ferrero Foundation’s motto is “Work,
Create, and Give” (The Story of a Family, 2009).
Determinants of demand for Ferrero’s Chocolate
Whenever there
is Demand, it means that someone wants the goods or services, able to afford it
and planned to buy it. However human wants are unlimited but resources are
limited. The law of demand stated giving that all factors remain constant,
whenever there is an increase in price the demand will fall vice versa. Considering
Ferrero’s flagship product the Ferrero Rocher is a normal good, these are the
few factors that changes its demand
1) Substitute
product
Substitute
product means that when the price of Ferrero Rocher increase, the demand of it
substitution such as Cadbury’s Chocolate will increase.
2) Expected
future price
If
the price of Ferrero Rocher expected to increase in the future, current demand
of Ferrero Rocher will increase and the demand curve shifts rightwards.
3) Income
Whenever
the income increases, people tend to buy more goods to satisfy themselves as
their purchasing power increases. Normal goods like Ferrero Rocher the demand
will increase as income increases. For example, project manager, information
technology in Malaysia is RM105, 820 annually, however in Singapore is S$79,
534 annually, this shows that consumer in Singapore has higher purchasing
power (Average Salary, 2012).
4) Expected
future income and credit
When
people expected their income or credit will be higher or easy to obtain in the
future, the demand of Ferrero Rocher will increase as well. When credit card is
easy to obtain, people tend to spend more.
5) Population
When
the population of a place is greater, the demand of Ferrero Rocher at that
place will be higher. Population in America is 313.9 million and in Malaysia is
29.24 million, so the demand at America is higher than Malaysia.
6) Preferences
Preferences
mean that when people have the same amount of income but there is a change of
demand. Some people maybe prefer Cadbury’s Chocolate last time but they prefer
Ferrero Rocher now, so the demand of Ferrero Rocher will increase.
When price increases, the quantity demand
decreases. Below is the graph show that the price increases and demand
decreases, point A change to point B and D is the demand curve.
Determinants of supply for Ferrero’s Chocolate
When a firm
supplies goods or services, the firm has the resources and technology to
produce it and also they can make profit from the good or services. The firm
planned to produce the good or services and sells it. Law of supply stated that
when price of goods increase, the quantity of goods increase as well.
Supply Curve
1) Prices
of Factors of Production
The cost of the goods
or services increases when the price of the factors production increases. The
prices of the goods or services have to be raised by the producers to cover the
cost they used to produce those products. The increase of the cost enables the
supplier to choose to produce lesser.
2) Price
of related goods produce
A
firm can choose to produce different kind of product by using the same
resources. For example, instead of Ferrero producing Ferrero Rocher, Ferrero
can choose to produce different product such as Kinder Chocolate because
Ferrero Rocher and Kinder Chocolate are same made from Choco.
3) Expected
future prices
When producer expected the price of Ferrero Rocher will increase in the
future, they can choose to produce lesser Ferrero now, therefore the supply
curve shift leftward.
4) The
number of suppliers
Whenever
there is new suppliers enter the market, the number of suppliers will increase
and the markets have to go larger. For example, if there is a new company
producing chocolate and enter the market, the chocolate’s market will grow
bigger.
5) Technology
Advancement of technology create new product and lower the cost of
production. Supply increases in a way of advance technology. For example, last
time Ferrero produces not much of Ferrero Rocher a day but because of
advancement technology, all the machines has improved and become bigger, they
can produce larger amount of Ferrero Rocher.
6) The
state of nature
All the natural forces as a state
of nature influence production such as weather (Supply and Demand, 2013).
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Market
efficiency of Ferrero Rocher
Value of product is basically referring to what customers are
able to obtain from buying the product while price is to pay for the product
that customers desire. Value measured of the product is the maximum price that
somebody is willing to pay for it; willingness to pay for the product
determines the demand. For example, if people are willing to buy Ferrero at the
price MYR38 in a box of 16 pieces of Ferrero Rocher inside, means that the
value of the box of Ferrero Rocher is acceptable by them. Hence, with MYR38 per
box is the maximum price that people are willing to pay for it. Consumer
surplus is the willingness of the customer to pay more than the price of the
product. For example, if a box of Ferrero Rocher price is MYR38, the customer
willing to pay higher than MYR38 like RM39 to buy the product. Ferrero supply
product and sell it to customers to make profit means that Ferrero is a firm
that in business. Generally, to make profit, Ferrero must sell their product at
the price that is higher than their cost. Producer gives up on the cost and
price is what the producer receives. Marginal cost is the minimum price that a
firm is willing to accept. Producer surplus is a product sold at the price
above the cost of producing it. For example if a box of Ferrero Rocher is sold
at MYR38 and the cost of producing it is MYR8, it can be considered as producer
surplus (Price list of Ferrero Products, 2013).
Market
structure of Ferrero Rocher
The market structure of Ferrero Rocher refers to the
monopolistic competition because it mainly competes with other brands of
chocolate company. Monopolistic competition means that there are many firms
selling similar product but different packaging or quality. They have different
market target and slight price making power (Introduction to Monopolistic Competition, 2013). Firms that are selling similar
good with Ferrero are Cadbury, Hershey, Mars, Nestle, CocoaVia, Droste,
Giandor, Guylian, Ibarra, Klik, Mayordomo, Milka, Nugatti, Poiana, Vivani and
many more (List of chocolate brand, 2013). Ferrero Rocher is an unresistable combination of rich, creamy,
chocolaty filling surrounding a whole hazelnut within a delicate, crisp wafer
that are all enveloped in milk chocolate with finely chopped hazelnut. Ferrero
Rocher is packed into a box which reusable and suitable to be given as a gift (Ferrero Rocher Packing, 2013).
The main targets of Ferrero are people who like and enjoy chocolate taste at
the same time while giving importance to their health. In fact, upper middle
class and middle class will also be suitable especially with a touch of elegant
and urban lifestyle (Ferrero Group, 2013).
References list
1) The Story of a
Family [online] (2009). Available from: <http://www.ferrero.com/the-group/a-family-history/a-great-company/> [Accessed 23 October 2013].
2) Economics
Basics: Supply and Demand [online] (2013). Available from: <http://www.investopedia.com/university/economics/economics3.asp> [Accessed 23 October 2013].
3) Average
salary for Singapore and Malaysia [online] (2012). Available from: <http://www.payscale.com/research/SG/Country=Singapore/Salary>, <http://www.payscale.com/research/MY/Country=Malaysia/Salary> [Accessed 23 October 2013].
4) Price list of Ferrero products
[online] (2013). Available from: <http://www.onlylove.com.my/goods-198Ferrero%2BRocher%2BGift%2BBox.html> [Accessed 23 October 2013].
5) Introduction to Monopolistic Competition [online]
(2013). Available from: <http://economics.about.com/od/monopolistic-competition/a/Introduction-To-Monopolistic-Competition.htm>
[Accessed 23 October 2013].
6) List of chocolate brand [online] (2013).
Available from: <http://worldchocolateguide.com/brands/> [Accessed 23 October 2013].
7) Ferrero Rocher Packing [online] (2013).Available
from: <http://www.behance.net/gallery/Ferrero-Rocher-Packaging/1706095> [Accessed 23 October 2013].
8) Ferrero Group [online] (2013). Available from:
<http://hmmyportfolio.blogspot.com/2011/02/presentation-of-brand-ferrero-rocher.html> [Accessed 23 October 2013].
