Published by MBA Skool Team, Last Updated: February 27, 2021
PESTLE Analysis of Ferrari analyses the brand on its business tactics. Ferrari PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.
PESTLE analysis is a framework which is imperative for companies such as Ferrari, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.
The political factors in the Ferrari PESTLE Analysis can be explained as follows:
Being a company with a huge product portfolio and a strong brand equity Ferrari has a strong presence in the racing world. It's presence worldwide is affected by the political stability of each nation and the government spending. Political stability insurance a good business environment and growth trends. A good governance system for democratic political environment makes the business environment more stable. Growing instability's in the global political environment could affect the gold industry growth and limit the growth opportunities for the brand. The taxation policies and changing in the tax rate plays a major role in its business performance. This is so as it determines the ability of a consumer to spend on luxury goods. Trade restrictions and intellectual property protection are also two factors that directly in fluence the profitability of Ferrari as higher the taxes lesser would be the exports and vice versa. Intellectual property protection and anti-trust laws play major role in the industry the insured right business practices as well as a healthy competition in the industry.
Below are the economic factors in the PESTLE Analysis of Ferrari:
The economic development of a country Influences the business conditions in the country.
Growing economies Offer a good business prospect for a luxurious product like that of Ferrari. This is because a greater number of people would be able to purchase expensive products of the company. Some of the economic factors that affect the company’s operations are exchange rates, inflation, employment and interest rates. Fluctuations in exchange rate could prove to be a disadvantage for the company. Inflation also has a great impact on the long-term growth opportunities of the company. A higher unemployment in a country would result in cheaper labour availability. This is because the supply of Labour would be greater than its demand. The demand and supply of Labour may also determine the wage rates of the skilled and unskilled Labour and hence, Ferrari must have a thorough analysis of the. Higher interest rates on loans may refrain people from taking loans for investing in luxuries and on the other hand higher interest rate on savings may courage investments and thereby leading to increased business opportunities. The fluctuations in the financial markets of the country also affects the growth prospects of the car company.
Following are the social factors impacting Ferrari PESTLE Analysis:
Changing consumer preferences in the luxury automobile sector is the factor that affects the company’s existence to a great extent. Analysis of demographic patterns may help the company to determine Segments that could be interested in such products. Latest trends in the society also affect the consumers buying pattern. For a luxury brand like Ferrari, it's compliance with the labor rights and employee safety also effects its growth prospects. There also may be pressure from the consumers or the government based on the level of social concerns and awareness in the society hence a brand like Ferrari should be ready to handle such scenarios. Gender plays a major role in deciding the marketing campaigns that should be taken and strategies that should be adopted to serve all genders. Niche marketing strategies need to be adopted as not everybody in a society would be able to or would want to buy such an expensive product. Hence social class stratification is very important for the company.
The technological factors in the PESTLE Analysis of Ferrari are mentioned below:
Any customer or potential customer of Ferrari would look forward to purchasing the best technology available and hence technological advancement should be taken care of by the company to stay ahead of its competition. Technological innovations me bringing a lot of changes along with them and thereby transforming the market of luxury cars. Today technology is increasing at a very fast pace and hence the company needs to develop the products with new technology Fast and with an option to integrate flexibility thereby adding onto its value. Investment on research and development must be very high in this case as this could help to capture the best resources in the market.
This would also keep the company updated and ready for the upcoming changes, so that modifications in the infrastructure and the business models are also possible when required.
Following are the legal factors in the Ferrari PESTLE Analysis:
The products that Ferrari launches are unique and hence it has risks associated to data and information protection. Apart from this there are various laws that would be binding to protect the consumers from any malpractices from the company side. These laws could include employment laws and laws related to trade practices. The employment laws differ from one country to another and are meant to be looked upon to ensure that there are no legal charges held against the company. The trade practices maybe restrictive not only to protect the consumers but also protecting the company depending on the competition in the industry. The intellectual property laws of different nations are also in place to protect the company’s ideas and patents. This is very necessary in the industry in order to maintain the competitive edge against the market players. Any legal charges would also lead to the company losing a lot of time and money on the same and hence must take care of these legal factors associated with the industry.
In the Ferrari PESTLE Analysis, the environmental elements affecting its business are as below:
The company along with complying to the environmental regulation standards should also contribute to the upliftment of the environment. Adopting to renewable technologies could benefit the company ensuring long term sustainability and growth. This is because if company start using renewable sources of energy then it wouldn't be affected by the rising costs of obtaining energy or resource depletion in future. Waste management and recycling should also be an area where the company should focus.
This is because various nations put restriction on waste management or disposal in the urban areas and that is where a Ferrari car would certainly be. The companies are also now trying to control their carbon footprint and hence they should also invest there. As a part of the corporate social responsibility culture, it could also take initiatives to spread awareness about eco-friendly products thereby increasing its value proposition.
To conclude, the above Ferrari PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
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