Ferragamo’s strategy in Salvatore’s times was a narrow, differentiation strategy by Porter’s definition. They had upper class customers limited in region, and sold shoes differentiated in innovative design and craftsmanship. Now in the family times, Ferragamo has a broad, differentiated strategy. They still have upper class people as their customers and differentiate themselves in quality, but they serve customers from all around the world and produce clothes and fashion accessories as well as shoes.
I recommend that Ferragamo should keep focusing on the global upper class customers and offer quality and luxurious goods, but also broaden their strategy in terms of customer age and gender, and different product lines.
Porter’s Five Forces Model (Exhibit 1) shows the external environment that Ferragamo is in. The luxurious fashion industry is a highly competitive industry. There are many companies competing in the same industry. Also, in the system of external manufacturing and the quality of the product being very important, the suppliers have high bargaining power. Rivals playing in the field must create strategies to differentiate oneself from other competitiors since the customers are not very sensitive to price, but demands value-added products.
Using Barney’s VIRO Model (Exhibit 2), we can see that Ferragamo’s strengths are mainly created in production, design, and organizational structure. Their stringent manufacturing standards and close relationships with the manufacturing suppliers resulted in high quality products. The consistent and practical, yet innovative designs and broad range of sizes gave the customers satisfaction, making them repeat customers. Also, Ferragamo’s informal organizational structure made the employees to be open-minded and creative.
The current problems that Ferragamo have is that the Ferragamo family is valuing family harmony so much that their decision making is very slow and it is not a good factor for a such a competitive industry. Also, they are focusing on product quality so much that they don’t think about the customers very much. They don’t know exactly who their customers are and what they want from Ferragamo. Just making high quality products with a good design is appealing to customers so far, but you never know when they want something more, so Ferragamo should keep an eye on the market.
Specific Implementation Strategies
Ferragamo is doing a good job in creating value for the customers, thus building a good brand identity, starting in shoes. Now what they need to do is to move on to other fashion product lines, like products for all ages. For example, the sound of Ferragamo producing baby clothes and shoes will tempt many current customers since they are well known for their quality. Making products for the whole family would make synergies for the whole company. But it all has to be consistent with the whole Ferragamo image.
Moving into cosmetics and watches would be a little too early, considering that those products need much R&D as well as the design and aesthetic point.
The potential threats that can emerge during implementation are that going into too many products at once can decrease the quality of Ferragamo’s products. That’s exactly what Wanda thought about some of Ferragamo’s rivals and it could happen to them also. The quality and the number of product lines and quantity of the products can have a trade-off relationship if not managed properly. Also, the customers might think Ferragamo is losing their specialty in shoes expanding into other products lines.