PART ONE
Ferrari is a highly renowned and high end performance trademark Italian automobile manufacturing company. Ferrari products range from street cars to turbo-powered sports cars, Ferrari458 Italia specifically, with high level of agility and performance . In this paper, we will focus on the core competencies, pre-market analysis and industry-market technicalities that Ferrari 458 Italia will encounter in order to intrude in highly crowded and competitive Chinese automobile market.
It’s quite evident that whatever the case maybe, whenever a new project is being started or some parent project is extended, it will be encountered by unexpected threats, uncertainties and vulnerabilities. Analysts have a say that even the best-planned envisions and designs are confronted to various adverse constraints and situations hence proper risk analysis must be done before the project launch in any particular market which takes in the consideration of qualitative and quantitative analysis of the product. Risk analysis not only defines the risk faced by the individuals, policies, agencies and businesses but also critically analyzes the human factors and random natural potentials that will affect the product market. Starting from the little possible things that can go wrong to the extent and likeliness of their happening, how adversely and badly they will affect the envisions if such things will happen and lastly what are the possible countermeasures and precautions that can be undertaken in order to avoid the adversities.
Ferrari is renowned of its potent ability to do free trade agreements with a lot of governments around the globe. Definitely, if Ferrari 458 Italia has to intrude into highly crowded and competitive automobile market of China it must consider on some free trade agreements with Chinese government. As, in free trade situation, government constraints and other artificial barriers are completely omitted that gives a free hand flow of goods from the source firm to the actual customers. The inclusion of taxes and custom charges not only retard the flow of goods but also allow domestic firms to take advantage over international firms. Free trade gives reasonable advantage to the firm in that particular specialization and hence helps increase its product cost and production. This not only favors the production firm in terms of higher productivity and continuous innovation in its production and distribution methods but also privileges the customer as they can get a large variety of vehicles and automobiles at their doorstep in quite economical prices.
Ferrari must also focus on gaining some sustainable competitive advantage over its rivals and competitors in order to make robust progress and excel in today’s crowded automobile market of China. Talking about the competitive advantage, the firm must gain competitive as well as differential advantage in the design of Ferrari458 Italia over its competitors by generating such indigenous values and standards within it that not only benefit its shareholders but also dominate its existence in the market. Cost structure of the firm, its product realizations and offerings, its customer support network and product distribution channels comprehensively defines the competitive advantage of a firm. For low cost production, Ferrari has to focus on effective technology usage, variety in products and high levels of production. Though Ferrari already has established a strong brand loyalty around the globe but it should continue its trend of patenting its products, hiring the key individuals who are connected members, continuous up gradation and innovation in the products, careful execution of long-term contracts with customers and incentivizing the clients.
Market industry analysis is another important factor which defines the future of a product. Industry analysis focus on the overall match between core competencies of a firm to the market needs. Potential profits of a firm can easily be determined by its dominating technology, innovative product manufacturing, effective distribution networks and wholesale supply of the product. Technologically advanced firms must critically focus on market industry analysis in order to get dominance among their competitors. Moreover, taking under consideration the buying habits and consumer demographics, a firm can easily analyze the market demands relevant to product variety and product prices. Industry-leading firms use this analysis to examine the rate of rise and fall in the product usage and customer demands and consequently focus on their product designs that are more liked by the customers. This analysis is comprehensively considered by the corporate managers to envision the financial performance of the product and proactively makes the firm focus on such potential problems that can prove dangerous in future.
Five-force analysis is a useful tool to understand the difference and relationship between the competitive position and strengths of a firm before and after getting into a new market. This analysis not only gives a fair idea of the company’s core competencies and strengths but also helps it to avoid any wrong decisions that can endanger its future product life. According to five force analysis, Ferrari should focus on five crucial forces that define its actual competitive power to dominate the market. Firstly, a firm must focus on its supplier power that how easily can its supplier gear up the prices so a variety of suppliers should always be in contact with it. Similarly, the buyer power holds the same importance to the firm’s business. Secondly, the in-depth knowledge of competitive rivalry and threat of customer substitution must also be avoided by continuous innovation in the manufacturing process. Lastly, the terror of new entry can also be averted by securing the key technologies of the firm.
As Ferrari458 Italia is going to enter a new China market, it must also do tree analysis to examine what are the possible options available to it regarding making improvements in the existing products or introducing new products. Tree analysis not only provides the possible outcomes of the options available but also gives the balanced picture of the whole scenario regarding risks and benefits. It helps the firm to quantify the possible outcome values that can be achieved and making the best possible decisions taking in account the expert advice and existing facts .
In today fast growing industry, it’s evenly important to remain in complete relation with the customers after the sale of the product. Ferrari must also consider on Customer Relation factor that in order to improve the future product and its relevant sales and cost. Highly-developed firms have added up an important option of online customer support which is run by highly technical employees to respond to the continuous feedback by the customers. This customer data analysis not only helps in making the customer relation strong in terms of product sales but also aids the firm to improve its supply chain management.
PART TWO
Contract details also known as contents of contract consist of some common terms and conditions between two trading firms or countries. It clearly defines the target customers of the products. The Ferrari 458 Italia is not designed for normal street use, its engine power and system efficiency prompts its usage on long roads so it’s quite obvious that it will only hit some rich individual’s wallet only . As China automotive industry is the largest automotive industry in the world in which more than 45% are local brand manufactured. The remaining portion is covered by some multinational brands like Toyota, Honda, Nissan, general motors, ford etc. In such a crowded automotive industry it’s quite difficult for a new firm to intrude into it smoothly. Ferrari has to prove the durability, cost effectiveness, luxury, fuel efficiency and tangibility of its Ferrari 458 Italia in order to get some renowned place in China automobile market.
Talking about the product specifications, Ferrari 458 Italia is a great mix of technology and design with combined mid-gear engine and retractable folding top. Engine specifications include V8, 4.5L with 9000rpm and direct fuel injection system. Transmission is dual-clutch 7-speed with GETRAG gearbox technology. Fuel consumption is also quite normal i.e. 13.3L/100km with top speed of 325km/h and Z60 mph of 3.4 seconds only. In fact, Ferrari 458 Italia develops a complete new set of emotions in your driving life. As the trend of organizing international level car rallies is getting quite famous for some past years so Ferrari thinks that it is the right time to hit China auto market .
In this paragraph we will briefly discuss the export documentation required by Ferrari relevant to its end users in order to get paid. It not only includes the letter of credit and quotations but also legalizes the payment method by the end user either in the form of open account or cash in advance. The quotation should be present in standard format including the international export terms, payment terms, country of origin, transaction term and conditions, values of goods, starting and expiry date of the contract, and other such details. Purchase order confirms the acceptance of an order and customer’s credit history is taken under consideration while providing the quote. Moreover, the documents required to clear the customer’s custom also needs to be identified. Other important documents include commercial invoice, bill of lading, packing list, certificate of origin, and document requirements from buyer’s embassy. Besides all this effort in documentation preparation by the production firm, it depends upon the customer’s ability to get the custom clearance in its own country when the product will be delivered to some agreed point .
The documents like Free on board which states that seller has fulfilled his obligation of delivering the goods up to some certain agreed point and now the loss or damage of product will be paid by the end user. Cost and Freight means the OEM has to pay the cost of delivering the product up to customer’s doorstep. Ferrari has also to submit the inspection certificate for quality clearance to the Import and Export Commodity Inspection Bureau of China. Consular invoice which includes identification and control of the product is also to be purchased by the seller from user country’s consulate. Similarly, customs invoice is necessarily to be submitted by the importing country which includes customs clearance, buyer’s order no., shipment terms, invoice number, unit price, rebate, total amount payable, description of goods, insurance, exporter signature etc.
Payment methods and terms are still being strictly followed by the Chinese export import companies. These methods helps the user purchase the product without giving transactions by cash or checks instead the payments are made in payable management modules and likewise received in receivable management modules. The terms include the rejection of goods prior buyer inspection and test drives of the vehicle. All payment must be in US dollars.
Automated export processing is another advance way of doing trade nowadays. Ferrari just has to make online contracts and agreements with China end user and AEP will be responsible for validation, custom clearances, duty and tax accounting and processing of the legal documentations. All the updated data regarding Ferrari 458 Italia safe delivery including validations, prohibitions, calculations and preferential rates are included in the AEP. Both the parties have to sign and base on the Harmonized Coding System which is an international standardization system for classified trade products around the globe. The collection of internal taxes, transport tariffs, custom tariffs, risk assessment and monitoring of trade negotiations is also included in HS system. Similarly, Harmonized Tariff System implies specific duty and tax rates for any type of product. If some Chinese has to buy Ferrari 458 Italia and he is also eligible to import it then he must pay the due import assessment like excise tax, import duty tax, goods and services tax, provincial tax, excess weight tax, air conditioning tax, gas guzzler tax and duty taxes. Almost every vehicle delivered via shipment has to pass through this duties and taxes payment phase of the customer’s government. These taxes are based on country of OEM, product usage, trade agreements, product value, air way bill and HS code of product .
Only legal citizens or residents are permitted to import the permitted cars in China. Individuals holding business visa ("F") or a tourist visa ("L") are not allowed to import any kind of vehicle at all. Individuals with permanent resident permit or holding “Z” visa are allowed to import a vehicle in China. Furthermore, not everyone qualifying as resident is allowed to import a vehicle, only those people who have the status of "foreign expert” as provided by Chinese Public Security Bureau (PSB) as well as Chinese visa departments. The returning Chinese are permitted to import a vehicle in China in case if they have the status of returning diplomats and/or are able to get the import permit. The foreigners residing in China are permitted to import only one car and only in the case if the Chinese Customs Office’s import permit is already sought. In order to get Ferrari 458 Italia shipped to China, the company will have to pay all the VAT, import duties, and the sales tax as per the custom policies. The import duties are up to 200% in China for cars which could be a big hindrance in offering reasonable prices to Chinese; however since Ferrari 458 Italia has a good brand name so the rich Chinese will still be interested in buying this luxurious car. The specifications of each car to be imported in China is required to be supported by proper verifiable documentation. An importer of a vehicle in China is required to write an application to the Import Cargo Declaration and Customs Office with the invoice of the purchased car. An importer must also present business license, original passport & work permit (in case of foreigner) and customs certificate. Furthermore, each destination city in China has and Environment Bureau which checks the specifications of each imported vehicle to ensure it compliance with the local Environment regulations which is generally equivalent to Euro 3 emissions test standards. Ferrari 458 Italia has highest level of environment friendly specifications in compliance with the Euro 3 emissions test standards which will make it easier for importers of China to import it in any city across China . Italy joined World Trade Organization (WTO) on 01 January, 1995 whereas China did so on 11 December, 2001 hence both of these countries come under WTO which makes it even simpler for Ferrari to export its Ferrari 458 Italia to China.
Insurance certificate must also be taking under dire consideration by Ferrari for its vehicle 458 Italia that includes vehicle’s policy number, name of insurance company bearing coverage and expiration and validation date. Packing list and warehouse receipt are other important documents which will go with the vehicle to the end user as packing list states the content of package including pallets, skids, tires, accessories etc. usually. On the other hand, warehouse receipt includes transactions involving future commodities which help the seller get a proof for the existence of specified goods within the vehicle package. In addition to it, product classifications must also be mentioned in the documents which may include the tangibility and durability level of the product. According to product classifications, Ferrari 458 Italia falls in the category of durable products, so in order to fulfill the customer satisfactions and specifications; seller requires more guarantees and services to offer in the product.
Conclusion
Taking in account all the trade complexities like market values, exchange values, commercial transactions, shipment costs, variable business costs, quoted prices, insurance prices and other documentation costs and, on the other hand, the robust design, technology, beauty and advance features of Ferrari 458 Italia, its selling price is quite economical as compared to the same generation vehicles offered by other competitors like ford, general electric etc. taking about the product competitiveness, 458 Italia can be personified as a great mix of engineering activity by Ferrari and the market demand of China. Based on the competitive comparison, the level of comfort and engine efficiency that Ferrari 458 Italia provides to the driver is matchless. Experts have a say that according to long-term research based analysis on consumer automotive product usage, 458 Italia wins a certain renowned position in automotive industry because of its sophisticated outlook, great road grip, mid-gear engine with retractable folding top, high fuel efficiency, luxurious interior design, smart Z60 mph time, durability and extended life-time warranty. That is the reason why it has gained most reasonable correlation ratio with no major drawback in reliability and serviceability among its competitors.
References
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