Management Economics Report: Ferrari's Market Structure Analysis

This report provides a detailed analysis of Ferrari, the Italian sports car manufacturer. It begins with an overview of the company's history, products, and services, emphasizing its global presence and financial performance. The core of the report examines the market structure in which Ferrari operates, identifying it as an oligopoly dominated by a few major players like Audi and Porsche. It explores the company's historical market position and assesses the potential benefits and drawbacks of operating in a different market structure, particularly a monopoly. The report considers the implications of government intervention, offering suggestions for optimizing market strategies and ensuring long-term success. The analysis covers market dynamics, competitive strategies, innovation, and potential challenges associated with different market structures, providing insights into Ferrari's business environment and strategic considerations.

Management
Economics

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Description of the company, its products, services and history..............................................1
2. Analysis of the market in which the organisation is operating ever since its inception..........2
3. The company operated different market structure in the history or not..................................3
4. a. Review regarding operating in a different market structure will be optimal for the
organisation..................................................................................................................................3
4. b. Suggestion related to lesser and greater government intervention......................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Management economics is the term which is focused with the management of different
types of resources, incomes, expenses, finance, community and the entity. While planning to
develop the business it is very important to pay attention towards it. If the organisation that are
planning to grow the business are focused with development of economy then it can help them to
meet all the long-term goals and objectives (Alkhudary, Brusset and Fenies, 2020). The
organisation which is selected for this report is Ferrari which is an Italian sport car engineering
company and it is operating business all around the world. It was founded in year 1939 and the
person who founded it was Enzo Ferrari. This assignment covers various topics such as overview
of the enterprise, analysis of the market in which the entity is operating business and different
market structure in which company had operated. Apart from this, assessment of operating
business in different market structure and suggestion regarding lesser or greater governmental
intervention are also covered in this assignment.
MAIN BODY
1. Description of the company, its products, services and history
Overview of the company: Ferrari is an automobile manufacturer which is selling all its
products all around the world. It was founded by Enzo Ferrari in year 1939. It is an Italian
company but it is having headquarters in different countries such as Amsterdam, Netherlands and
Maranello, Emilia Romagna, Italy. The area which is served by it is world wide and according to
a report in year 2017 it has generated profit of almost 537 million euros. Current owner of the
company is Exor N. V., Piero Ferrari and Public. Total number of employees of the organisation
is more than 3300. There are various subsidiaries of the entity which are Ferrari S.p.A. and
Scuderia Ferrari S.p.A(Overview of Ferrari, 2020).
History of the company: Ferrari company was founded in year 1939 and the founder
Enzo Ferrari was not interested in manufacturing road cars when the idea of Scuderia Ferrari was
formulated in year 1929. During the year the headquarter was in Modena. In year 1940 a racing
car was produced by Ferrari which was Tipo 815 which was based on the flat platform. The car
was very successful but due to world war 2 it faced hue competition. With the time the company
became one of the most luxurious brands of sports cars and now the cars that are manufactured
by Ferrari are highly in demand and the prices of them is also very high.
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Products and services of the company: Ferrari is an automobile manufacturer which is
serving the whole world. All the cars that are produced by it are highly in demand all around the
world because of good market image of the entity quality of cars. The main product of the entity
is sports cars (Basile and Ferrari, 2016). Apart from the cars there are various types of products
that are also sold by it. These are perfume, cell phones, laptop, pencils, pen, eyewear, electronic
goods, clothing, hi-tech bicycles etc. The entity also makes sure that it provides after sales
services to all the customers so that they could eb retained by it for long run in future.
2. Analysis of the market in which the organisation is operating ever since its inception
Market structure could be defined as the characteristics of the market. All the entities that
are operating business in a market follow specific market structure. There are two main types of
market structures which are oligopoly and monopoly. When the whole market will be dominated
by small groups of large sellers then it is known as oligopoly market structure. When the market
competition in this type of structure will be decreased then the prices for the customers will be
increased. If a single seller is ruling the market and deciding prices of all the products that are
sold by it without any external influences then it is considered as the monopoly market structure.
While planning to reach all the long as well as short-term business goals it is vey important for
all the entities to analyse the market structure so that strategies for future could be formulated
(Battini, Bogataj and Choudhary, 2017).
Ferrari is one of the largest sport car manufacturers which is operating business all
around the world. The market structure in which the company is operating business is oligopoly
where small number of large sellers are ruling the market (Market structure of Ferrari, 2020).
Some of the main competitors or the major players in the sport cars manufacturing market are
Audi, Porsche, Aston Martin, Ford, McLaren, Mercedes Benz etc. All of them are large
producers of automobile products and competitors for each other. In order to sustain in the
market, it will be very important for Ferrari to make sure that it is offering something unique to
all the customers so that it can reach to the desired level of sales (Chang, McAleer and Wong,
2018)x. Due to the oligopoly market structure the entity can adopt highly competitive strategy
which will help it to deal with the level of competition in the industry. Ferrari could be efficient
in dynamic manner in term of innovation and the development of the products and processes of
it.
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3. The company operated different market structure in the history or not
Ferrari is very large organisation and when it was founded by the Enzo Ferrari it was an
oligopolist because there was a little bit competition for it in the market. Since the year of
establishment, it is operating business under oligopoly market structure. All the products that are
sold by the entity could be controlled by the entity for pricing purpose. Apart from this, it also
facilitates the business by providing it price stability within the market (Chang, McAleer and
Wong, 2018). When the competition in the oligopoly market will be very low for Ferrari then it
can enhance the prices of all the cars which are sold by it as the customers will have very less
choices for buying the sport cars. Ferrari had never operated business under any other market
structure since the year of establishment. When it was founded it was executing under oligopoly
market and currently the market structure of it is same because the seller of sports cars in the
market is limited. All the competitors of it can decide the prices collaboratively under this
structure which can help to sustain in the market.
4. a. Review regarding operating in a different market structure will be optimal for the
organisation
When operating business under a specific market structure it is very difficult for an
organisation to shift to another one. As Ferrari is operating under oligopoly market so if it will
plan to move in to the monopoly market then it will be very difficult for it. For entering in this
structure, it will be very important for it to make sure that it introduces such product in the
market which is not sold by any other seller. If it will be able to introduce such type of item in
the market then it will be very easy to enter in the new market structure. It will be optimal for the
organisation to enter in a new industry because there are various types of benefits of it (Ferrari
and Rodosthenous, 2018).
If monopoly structure will eb selected by Ferrari to replace its old structure then it can
attain different benefits. It will help the entity to enjoy economies of scale. With the help of it,
the average costs will be decreased and also enhance the sales. If there will be only one seller of
an item in the market then the company can decide the price of all the items by itself. In this
situation the profits for the entity will be very high which will also help it to maximise sales.
When the profitability of Ferrari will be high because of monopoly market structure then it can
spend funds on research and development activities. It will be beneficial for it to retain its market
position and find the ways to make improvements in its products and services. If a new car will
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be launched by Ferrari in the market with some specific features that are not yet offered by other
sellers then it can help it to patent the same car. With the help of it, investment in the company
could be encouraged which will help to strengthen the market image as well as the position
(Gillen, Jacquillat and Odoni, 2016).
If this market structure will be selected by the organisation then it can result in high level
of efficiency, innovation etc. for business. Apart from this, it can also help to become the most
successful company in the whole industry. All the companies that are having monopoly market
structure are supported by legal authorities because they contribute in the development of
economy. This market structure can facilitate the organisation to ignore the possibility of
duplication which will also reduce the wastage of all the resources. When there will eb price
discrimination in the market then it can also benefit the section of the society which is
economically weak. If Ferrari will choose this market structure then it will be very beneficial for
it. As there are various benefits of monopoly market for the companies so it will also be very
important for all the entities like Ferrari to be aware of all the drawbacks of this structure
(Popescu, 2017).
In monopoly market single seller rule the market which increases the price for the
customers and due to this they can loose interest in buying the item. It can affect the sales and
market share of the enterprise. The level of incentives to cut cost, innovate and invest will be
very low for the businesses in monopoly market structure. If Ferrari will eb operating under this
structure then it may result in such types of challenges for business. The allocation of the cost
under this structure is very inefficient which is also a drawback that could be faced by the entity
while operating business under monopoly market. Monopoly market structure have protentional
diseconomies of scale which leaves negative impact upon the businesses that are having this
structure (Teece, 2019). If Ferrari will be operating under this structure then it may have to deal
with this problem. Monopolies pay lower wages to workers and due to this the staff turnover of
all the entities with this structure is very high. It affects the overall productivity of the
organisation and also results in inappropriate execution of the businesses. As the items that will
be sold by Ferrari after choosing monopoly market structure will be unique and different from
others so the prices of them will be very high. Due to this, very low customers will get attracted
towards it because they will not be able to afford the new car or any other product that will be
introduced by the organisation in the market.
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All the companies with monopoly market structure may have political interferences
because they can generate higher profits. The ruling party may formulate specific policy for
success businesses that are related to tax, tariffs etc. If rate of such expenses will be increased for
businesses then it can affect the overall profitability. In order to make sure that only benefits are
acquired by Ferrari after selecting the structure the entity find solution for all the issues that may
take place because of it in advance.
On the basis of above discussion, it has been analysed that there are various advantages
and disadvantages of selecting monopoly market structure. If it will be selected by Ferrari then it
will be very important for the organisation to make sure that it finds solution for all the
upcoming issues (Wani, Anantha and Garg, 2017). Selecting monopoly market structure will be
optimal for the company because when it will be selected then the enterprise can attain various
benefits such as higher profits, increased sales etc.
4. b. Suggestion related to lesser and greater government intervention
All the actions that are taken by legal authorities to pay attention towards societal and
economic development are known as governmental intervention. If the government will not be
focused with growth of economy then it can affect the whole nation. For all the businesses it is
very important to make sure that they are following all the rules, regulation and policies that are
imposed by the legal authorities. It can help to carry out all the operations in systematic manner.
If the business entities such as Ferrari which is a very large company of automobile industry will
set very high price for its cars that are too much for a customer to pay then the governmental
interventions can create barriers for the entity to take such type of step. It shows that all the
governmental interventions are good for the society because it helps to protect the customer
rights (Willey, 2017). With the help of it, all the legal authorities try to take control over all the
organisations that are operating business within the country. If there will be no governmental
interventions then it may result in negative implications upon the customers because they will
not be able to file any type of complaint against the company which is selling them goods on
very high costs. It shows that if the legal authorities will be focused with the development of
society then all the interventions will be formed in their favour which will be good for the
society.
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CONCLUSION
From the above project report it has been concluded that management economics could
be defined as the process of managing and evaluating all the resources that are used by all the
businesses so that all the operations could be carried out successfully. There are various types of
market structures in which companies are carrying operations. These are oligopoly and
monopoly. If an entity is following a specific structure since last few years then it will eb very
difficult for it to change it. While planning to change the structure from oligopoly to monopoly it
will be very important for the companies to be aware of all the benefits and drawbacks of it. For
example, if monopoly will be selected to change the old structure then it can help to enhance the
profits, become the cost leader in the whole industry because of the only seller in the market.
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REFERENCES
Books and journals:
Alkhudary, R., Brusset, X. and Fenies, P., 2020. Blockchain in general management and
economics: a systematic literature review. European Business Review.
Basile, I. and Ferrari, P. eds., 2016. Asset management and institutional investors. Springer
International Publishing.
Battini, D., Bogataj, M. and Choudhary, A., 2017. Closed loop supply chain (CLSC): economics,
modelling, management and control.
Chang, C. L., McAleer, M. and Wong, W. K., 2018. Big data, computational science, economics,
finance, marketing, management, and psychology: connections. Journal of Risk and
Financial Management. 11(1). p.15.
Ferrari, G. and Rodosthenous, N., 2018. Optimal management of debt-to-GDP ratio with regime-
switching interest rate (No. 589). Center for Mathematical Economics Working Papers.
Gillen, D., Jacquillat, A. and Odoni, A. R., 2016. Airport demand management: The operations
research and economics perspectives and potential synergies. Transportation Research
Part A: Policy and Practice. 94. pp.495-513.
Popescu, G. H., 2017. Organizational e-learning and knowledge management in higher
education. Journal of Self-Governance and Management Economics. 5(1). pp.87-93.
Teece, D. J., 2019. A capability theory of the firm: an economics and (strategic) management
perspective. New Zealand Economic Papers. 53(1). pp.1-43.
Wani, S. P., Anantha, K. H. and Garg, K. K., 2017. Soil properties, crop yield, and economics
under integrated crop management practices in Karnataka, southern India. World
Development. 93. pp.43-61.
Willey, K., 2017. “Bringing Canadian women on board”: A behavioural economics perspective
on whether public reporting of gender diversity will alter the male-dominated
composition of Canadian public company boards and senior management. Canadian
Journal of Women and the Law. 29(1). pp.182-210.
Online
Overview of Ferrari. 2020. [Online]. Available through:
<https://www.ferrari.com/en-IN>
Market structure of Ferrari. 2020. [Online]. Available through:
<https://ethicsplayground.wordpress.com/2015/11/14/free-competition-the-ferrari-
porsche-duel/>
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