Introduction
Ferrero Group is a successful company specializing in producing chocolate products, and the organization is prominent worldwide. Currently, the company is present in more than 50 countries and has 31 production plants in 5 continents (A global reality, n.d.). Ferrero Group’s owner and the Executive Chairman is Giovanni Ferrero. The company’s CSR strategy implies high quality, innovation, transparent communication, and support for local communities.
Ferrero Group successfully acquires other brands, such as Burton’s biscuit company (Ferrero-related company agreement, 2021). The company was found in 1940 by the Ferrero family in Italy. The small pastry shop was turned into a factory and succeeded during the times of World War II. Having a part in a confectionary sector, the company became successful and has mainly grown ever since (The story of a family, n.d.). The company’s success was also bound to the high-quality products invented by Pietro and Michele Ferrero and to the effective sales network implemented in the company early on.
As the company expanded, there appeared a need for creating production sites abroad. The first country to become a part of an expansion was Germany. Then, Ferrero Group started building production sites around Europe and establishing commercial offices in Belgium, the Netherlands, and the UK. In recent years, the organization has become global, establishing plants in Europe, America, and the Asian region. One of the most recent decisions the company has made was to open a Singapore innovation center in 2017 (Ferrero announces opening of Singapore innovation center, 2017). This paper aims to examine the decision made, analyze its effectiveness and suggest alternatives to the decision-making process.
Opening Singapore Innovation Center
With the expansion of the company to Asia, one of the global decisions was to open a center in Singapore. With the previous development to European countries, Ferrero continued globalization by establishing the first innovation center in Asia. The company has already distributed to China and began exploring the Asian market in 2006 (Ranfagni, 2017). As Ferrero Group has proven to be more than a company producing chocolate goods, innovation has become another core component of the company’s strategy (Ferrero’s code of ethics, 2020). The decision was apparent, considering the latest company’s trend to broaden production outside the European region (Ferrero continues its process, 2017).
The decision preceding the establishment of an innovation center was acquiring more than 20 brands of chocolate goods to gain a better variety of multiple brands. However, the innovation center establishment remains the most significant, as it carries prospects for its future growth.
Decision-making Process
The announcement of the opening of an innovation center in Singapore was made in 2017. The new center aims to strengthen Ferrero Group’s position in innovations and remain the leading company in the area. Singapore was chosen as a location because of its position as the world’s leading innovation ecosystem. The center holds strategic innovation functions, such as health and nutrition, product research, and consumer insight.
The innovation component is crucial for the company as it assists with creating new technologies and broadens the area of understanding the consumer approach. The decision was supported by the Singapore Economic Development Board, a team of qualified experts in multiple areas, including food science and biotechnology (Ferrero strengthens position in Asia, 2017). Innovation center continues working accordingly to the Singapore ecosystem to foster the innovation process.
As Giovanni Ferrero has stated, innovation has always been the priority for the company. The broad ideological construct of the company is aimed at innovation and implementation of new technologies to the business. The resources available to the company at the moment of a decision allowed it to invest into the creation of the center. The decision to establish the Singapore innovation center will assist with cutting-edge technological solutions for the company and offer the best quality products. The Singapore Economic Development Board chairman, Dr. Beh Swan Gin, stated that the decision made reflects the importance of Singapore’s position as the region’s leading food and nutrition center (Xin, 2017).
If assessing the main factors of a decision, it becomes clear that it was a planned strategic decision to foster the company’s growth and increase the quality of the products by applying innovative technologies to them. Moreover, it appears to be a deliberate move supported by the company’s key figures, the CEO, and the EDP, which has become a partner to the company.
Another critical factor of the decision-making process in the opening innovation center in Singapore is the ability to become open to the Asian market, where the demand for confectionery products is growing. Therefore the external factor that influenced the decision was the need to forster development on the Asian market on the same level as the competitor’s companies. Establishing the center gave the Ferrero Group access to a diverse Asian demographic, which made it possible for the company to launch new products that would appeal to a wide range of markets in the area. The external element in the decision was the need for expansion and open prospects of entering the new market.
The effects of the opening of an innovation center in Singapore have been beneficial, proven by faster than average growth in 2018. The sales revenue was boosted by 4.1 percent in the 2018 fiscal year for Ferrero Group (Jing, 2018). Such success rates are connected to expanding the middle-income group in China and the growing demand for high-quality products. Although the highlighted growth may not be linked directly to the center’s establishment, it impacted the confectionery industry in the country. Moreover, the growing percentage of locally hired senior managers in Hong Kong in 2019 was documented in the sustainability report (Ferrero Group sustainability report, 2019). This factor can also imply that the company’s success in the Asian region was achieved through the workforce.
Alternative Decision-making Strategies
There are some alternatives to a decision made by Ferrero Group that are worthy of discussion. The activities always drive the market strategies, so to prove the effectiveness of a process, it is necessary to test it first (Brege, 2020). The decision made by the company was aimed at future expansion on the market, although the initial intention was to bring more innovative technologies into the manufacturing process (Vlados, 2019).
The consumer behavior in Asia, the culture, corporate policies, and perception needed to be evaluated before entering the market (Rajagopal, 2019). The human factor has also played a role in this decision-making case, as the company’s CEO values integrity above all (Haslam, 2018). Therefore, if there was anything to change about the process, the only thing would be the shortening of the period between Ferrero’s first appearance in the Asian market and the establishment of an innovation center in Singapore. However, the effects might be different, as the company was not ready to move at that point in time.
Conclusion
In conclusion, the case study has shown the effects of establishing the innovation center in Singapore by Ferrero Group. The decision-making process was followed through by the key people in the company and affected the Ferrero Group’s spread in the Asian region. The decision has proven to be successful through the future rise in sales in the Asian area. The alternative strategies may include a shorter period between establishment on the market and opening of the center; however, the effectiveness of such choice is not guaranteed.
References
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