The multiformity of confectionery products is really impressive. The confectioneries usually have a mesmeric influence on people because they are delicious and have attractive packaging and elating properties. This paper is going to examine such companies as Ferrero and Mars in terms of key success factors, competitiveness, and business strategies of their internationalization.
Ferrero Group has been one of the most successful producers of chocolate as well as confectionery foods in the world for decades. The company was established by Pietro Ferrero in 1946. Ferrero’s head office is located in Pino Torinese, Italy. Nowadays, its turnover is roughly $ 9.61 billion; the company has more than 21,600 employees worldwide. Ferrero goes the fourth in the world-wide ranking of confectionery manufacturers (Ferrero official site 2013).
Mars Inc. goes the second in the world ranking of confectionery manufacturers after Kraft Foods Co. It produces 7 confectionery products of the top 20 worldwide sweet favorites like Skittles, Mars bar, M&Ms, and Snickers. However, 90% of Mars total revenue is made by snack and pet care goods. Mars Inc. sells its products in 100 countries and has manufacturing facilities and offices in 70 countries worldwide; it employs more than 70,000 people (Mars official site, 2013).
The key success factors of Mars and Ferrero in terms of internationalizing
Mars goes the second in the world wide ranking of confectionery manufacturers after Kraft Fooks Co. Mars’ net sales in 2011 was about 16.20 billion of the US dollars. Nowadays, Mars has 1,353 factories worldwide where 65,000 people are employed. As was said, Ferrero Group goes the fourth after American Kraft Fooks Co. and Mars Inc., as well as Swiss Nestle S.A. Today, Ferrero Group’s net sales in 2011 reach 9.61 billion of the US dollars. It has 18 factories worldwide and employs more than 21,600 people (The Top 5 global confectionery companies 2012).
In my opinion, the key success factors of Mars Inc. and Ferrero Group in terms of internationalizing were correctly chosen foreign markets to enter; both companies correctly chose the time of entry, form of entry, product of entry, and scale of entry. Of course, their success would not have been possible without their unique products above all. For Mars, they are M&Ms, Twix, Mars, Bounty, and Milky Way. For Ferrero, they are Roshe, Nutella, Tic Tac, and Kinder. Both companies are also well-known for their amusing, creative, well-thought, and very aggressive advertising campaigns, which considerably helped promote the unique qualities of their excellent confectionery products (Vahlne & Johanson 2002).
In 1911, in Washington, Frank Mars began his snack food business as the Mar-O-Bar Co. Then, Frank founded his first candy manufacturing facility, which provided a job for 125 people. In 1920, he moved his production in Minneapolis, where were born Snickers and Milky Way. In 1928 Mars built his new factory in Chicago. In the beginning of 1930s, Frank Mars gave his son Forrest the rights to produce the Milky Way overseas, so in England Forrest founded a confectionery and a pet food company; both got a great success. However, in 1940, Forrest returned to the US and established M&M Limited where he began manufacturing chocolate in a special sugar shell. Thus, in 1954, the M&Ms brand was introduced to the US consumer, and the slogan for that brand was: “The milk chocolate melts in your mouth but not in your hand”. The Netherlands became the first European country after England where in the beginning of the 1960s Forrest Mars built his new confectionery factory. In 1967 Forrest united his and his father’s businesses and introduced a radically egalitarian system (Luo & Tung, 2007).
All the events listed above indicate the unique feeling of Frank and Forrest Mars for successful product, suitable timing, and appropriate scale of entry, as well as right markets for their product. The company had already been well-known and highly respected due to its leading brands when it began its victorious procession all over the world.
Germany was the very first market where Ferrero moved in 1956 and established both manufacturing and office facilities; it launched the production of hazelnut spread in Allendorf, next to Frankfurt, and then Mon Cheri was moved to Germany as well. In 1959, Ferrero bought Prevost et Grenier in France. This time, the first product to be introduced was the Mon Cheri chocolate. That was a right step because French consumers immediately fell in love with this chocolate. In 1961, Ferrero also introduced to the French market the Nutella paste known as “La Tartinoise”. At the end of the 1960s, Ferrero Group had office and manufacturing facilities in the United Kingdom, the Netherlands, Austria, Belgium, Denmark, Switzerland, and Sweden. Ferrero Group not only exploited the success of its leading products but created and promoted the special products for each market where the company had representation. Yet, the Nutella brand remained the Ferrero’s strongest money-maker, so from 1964 onwards the Nutella has being sold on all company’s markets. In 1964, the administrative headquarter moved to Torin, and at that time Ferrero decided that it was perfect timing for pursuing markets beyond Europe, namely, the North American market. However, the North American market had already been a field of battle between two confectionery giants such as Mars and Hershey, so for the North American entering Ferrero chose his Tic Tac brand. Thus, in 1969, Ferrero Group opened its first North American office in New York. The launch was supported by aggressive and very impressive advertising campaign that revolved around the slogan: “Put a Tic Tac in your mouth and get a BANG out of life”. The success of Tic Tac later led the company to establish a dedicated production facility in New Jersey. All aforementioned facts indicate that Ferrero’s key success factors were correctly chosen product and thorough marketing analysis that provided company with successful and well-thought strategy of entering international markets (Luo & Tung 2007).
Competitiveness of the two companies in terms of internationalizing
A comparison between competiveness of the two companies shows Ferrero performing better than Mars. Mars has constantly shown creativity and responsiveness to market dynamics within the chocolate industry. However, Ferrero shows more aggressiveness than its competitors in the chocolate industry. One of the major factors that have given the company a competitive advantage is creation of very innovative brands ( Cambieri 2011). Some of its products that have created a niche in the market include Nutella, Kinder, Rocher as well as Tic Tac. After launching Rocher product, Ferrero managed to create an edge in the global demand for candies and chocolate.
It is worth to note that one of the factors that have necessitated tremendous growth and success at Ferrero is creation of innovative products. For instance, inclusion of unique finalities by Ferrero on its products goes a long way in meeting customers’ tastes. The company employs very stylish and innovative methods especially in packaging its products. A good example is the Rocher, where golden wrappings are used, which provides a very good and appealing style to the customer. Since its introduction, Rocher has been a preferred chocolate product for millions of consumers and it is currently the leading product globally in its category (Nunes, Atamer, and Calori 2000). Besides packaging, other innovative aspects are evident in processing of the products. Utmost care is given in the procedure for preparing Ferrero’s products using carefully designed recipes to produce creamy, crunchy and delicious confectioneries whose quality is second to none.
Furthermore, another factor which made Ferrero to succeed was aggressive advertising strategy. The company had employed a lot of resources in advertising and campaigning for the awareness of its products. The company dedicates millions of dollars annually to advertise its products ( Cambieri 2011). More so, this approach is replicated in all other market ventures that Ferrero enters.
The company employs the international strategy model to enhance success of its Rocher as well as other products. According to this category of international business strategy, a company generates value by relocating valuable and fundamental skills to markets in other countries, which are not exhibited by local competitors. Ferrero has grown from just being Italian based to spread its wings to other parts of the world following this type of strategy. Rocher was a success brand in the Italian market. The key competencies were witnessed in the innovative methods of creating and packaging the product. Secondly, the product was advertised and campaigned for aggressively ( Cambieri 2011). One of the reasons that made consumers to prefer Rocher was the fact that the darker chocolate is believed to have some health benefits.
Therefore, based on the international strategy, Ferrero employed its main competencies that were already established and effective in its local market. One of these competencies was innovative products as already discussed above. The company was entering new markets with products whose brand was already well established. Rocher product had already been successfully established in England as well as Germany, Italy and France (Nunes, Atamer and Calori 2000). Therefore, this provided a good basis for venturing into other markets in other parts of the world.
If I were given the responsibility of managing Mars and Ferrero, I would undertake the transnational strategy. The transnational strategy is used when company is operating in various world markets. This strategy includes the reciprocal organizational system and involves activities which take into consideration the local differences and global similarities. The basis is that organization could develop its valuable skills and constantly improve its performance. The main idea of the transnational strategy is a global perspective of the organization, but with manual amendments for local markets and traditions (Havila & Salmi 2002).
I think that the transnational strategy is the best option for any multinational company that operates in different markets. This strategy allows being simultaneously competitive against local companies and global players. Also, the transnational strategy can lower the costs; for example, a local branch can choose the appropriate approach in existing political and socioeconomic conditions for realization of the global strategy of a parent company. The local management can use the knowledge of the local consumer, labor and supply market, as well as tax and political policies in relation to availability of favorable business opportunities or other productive resources. The transnational strategy stipulates global learning as one of the conditions for any company’s successful activity. It assumes that a parent company should be learning from its local representatives and, at the same time, the parent company should give the global knowledge to its foreign branches. In other words, between parent company and its foreign branches the constant and uninterrupted interchange of information takes place, and such exchange keeps the multinational company in necessary balance for successful business activity in various foreign markets (Kobrin 2001).
Except for the transnational strategy, there are international, multi-domestic, and global strategies. As a matter of fact, the transnational strategy is a strategy that united in itself the features of those three strategies. I do not consider the international strategy because it lacks the knowledge and attention to the needs of local markets, and very often such strategy is fraught with loss of market share. I also do not consider the multi-domestic strategy as a universal panacea for multinational companies because such strategy is too expensive to realize. The Global Strategy can be perfect only for products that have a high level of demand all over the world. For example, Ferrero can apply such strategy to its “Kinder Surprise”, as well as Mars can apply it to its M&Ms. However, everything is changing; therefore, companies cannot exploit their well-recognized and proved products forever. Otherwise, some day, they will find themselves in ranks of ex-leaders of the confectionery markets. For this reason, I consider the transnational strategy the most appropriate for multinational companies. Specifically, the Ferrero Group, which applies a lot of efforts to create a distinctive and well-recognized image for each of its brands, understands it very well. While some company’s key products remained unaltered such as Ferrero Roshe and Nuttela, others are evolving. Ferrero continues experimenting with flavors of its successful and well-recognized product Tic Tac; and adds new flavors and colors to it. For example, Tic Tac Mint with law calories’ content, especially for the US market, had the deafening success when it was launched in the early 1980s. In 1989, the Kinder Surprise was introduced to the market and became the most desirable children dream all over the world overnight. The toys, which are inside the egg, are very different from country to country. And, finally, the variety of Ferrero Roshe flavors depends on preferences of the country in which it is distributed. Despite its relatively high price or maybe owing to such price, the Ferrero Roshe is not only desirable confectionery product but a perfect present, because it is delicious and beautiful at the same time (Johanson& Vahlne 2009).
Ferrero Group and Mars Inc. are the leading global manufacturers owing to the following reasons. The very first reason is they have the set of well-recognized and proved brands which provided them with constant and stable profit. The second reason is both companies continue developing new products and experimenting with variety of flavors and forms. The third reason is both companies were able to choose the right timing, country, and strategy for their foreign entering. For Ferrero, it was Germany, and for Mars, it was the United Kingdom. They chose Uppsala Internationalization model, which was the most appropriate back then, and they changed their entering strategy according Network Internationalization model and Evolutionary theory, which are more appropriate in 21st century.
According to Ferrero’s activity, it is quite obvious that Ferrero follows the transnational strategy, and for some products it will employ the global strategy, whereas Mars is more likely to follow the international strategy, also employing a global strategy for some products. As I wrote above, I consider the transnational strategy to be the most suitable strategy for a multinational company in order to control the quality of the product and expenses. Therefore, I think that Mars Incorporation should change its strategy from international to transnational, because in this case scenario the company would avoid the mistakes that it had in the course of the competition with Hershey in its domestic North American market in the 1990s (Luo & Tung 2007).