The Real Chocolate Company Incorporated is a chocolate and confectionary company specializing in gourmet chocolates and confectionary. The Vision of the company is to build the company into the premier retail chocolatier in the United States. The Mission of the company is to use only the finest, highest quality ingredients with no artificial preservatives in the Perfection in Handmade Gourmet Chocolates. The company’s products are gourmet chocolates, over one hundred varieties of other chocolates, fudges and varieties of caramel-covered apples, roasted nuts and chocolates, also a variety of confectionary.
Marketing process of the company is in-store promotions and point of purchase materials. The local stores used advertisements, coupons, flyers, and mail order catalogs, Social and community sponsorship. The key stakeholders are the employees, the franchise owners, the customers, the management team and the providers of raw materials such as the cocoa farmers. The strategy of the Real Chocolate Company is to increase is market share in the gourmet chocolate industry by franchising and opening factory out lets in malls in the United States.
This is done by exploring the value chain concept which was developed by Michael Porter in his book Competitive Strategy. Word Count: 189. Part (1) External Analysis of the Real Chocolate Company is the analysis of thinking strategically about two sections of the company’s position, (1) the industry and competitive environment in which the company operates and the forces acting to reshape this environment, and (2) the company’s own market position and competitiveness, its resource and capabilities, its strengths and weaknesses and its windows of opportunities.
The real chocolate company operates in a macro- environment that is shaped by influences coming from the economy, population demographics, societal values and lifestyle, government legislation, technology and the industry and competitive factors. The factors and forces in a company’s macro-environment have the biggest strategy shaping influence on the company’s immediate industry and competitive environment. To fully analyze the strengths and weaknesses of the real chocolate factory an S. W. O. T analysis is one the best analytical tool to achieve this. Strengths: the resource strengths and competitive capabilities of the company are strong, the operations of the company is based on a strong strategy and the proper execution of this strategy. An example of this is the strategy of franchising to enable the company to expand its market share, franchising also minimized the cost of expansion and cost controlling in the area of transportation. Core competencies: the company employees are one of their greatest asset and competencies.
A comprehensive seven days training program is given to franchisees, the quality of the stores design made an attractive customer ambiance, location of outlets and the skill of the management and employees to produce a large quantity of gourmet chocolate and confectionaries. Other strengths include having a strong financial position, good brand name and low marketing cost. Weakness: susceptible to government laws and legislations, having to import their main commodity for the making of chocolate, cocoa from overseas, imports can be disrupted by diseases, drought an other factors.
Cost of cocoa not controlled by the company. Opportunities: the real chocolate company has a number of opportunities to explore, as one of America’s 100 fastest growing small public companies. To increase their market shares in the gourmet chocolate industry, the low calorie chocolates, product placement, promotions, displays, and signage. Growth in the organic and natural chocolate production, new opportunities for sales by focusing on nontraditional candy holidays. Cross selling of products with greeting cards or wine.
Threats: the number of companies in the industries, artisan chocolates from small manufactures are creating a niche market, the ease of new entrants into the industry, the relative ease and low cost of setting up a new company, and restrictive trade policies by foreign governments and the vulnerability of the main component in chocolate “cocoa” to weather and diseases. Two other analytical tools that are appropriate for analyzing the real chocolate company’s competitiveness are Value Chain and Benchmarking.
The value chain tool consists of two factors the primary activities which consist of real chocolate company’s cost and assets linked to purchasing of raw materials production and transportation. Production costs are vigorously monitored and only when production cost is low it is converted form a manual operation to an automated operation. Transportation costs are lower by using the trucks that make delivery to collect raw materials on their way back. Quality checks on finished products are maintained and all stores are customer friendly.
Support activities are the company’s production, research and development of new forms of chocolates and confectionaries, the human resource management of the company, Sarah Smith and her management teams has good knowledge of the industry and formulate and execute good strategies. Benchmarking is a tool that allows the company to determine how its strategy in the chocolate and confectionary industry comports to the industry’s best practice, considering both cost and effectiveness. Word count: 615 Part (2) To identify the main internal of the real chocolate company a core concept of an S. W. O. T analysis.
The internal strengths of the company are a distinctive competence in management and production, the training of new franchisees and employees allow the real chocolate to have a large skill bank that the company can draw from. These competences bring a high competitiveness that is useful in the chocolate industry’s success factor. The real chocolate financial position in the chocolate industry is strong, with a cash flow at the end of 2006 of $3,438,876, and total asset for 2006 of over 19,000,000. The brand name of the real chocolate company in the gourmet chocolate and confectionary industry is one of top brand names in the industry.
This gives them a market advantage over most of the other competitors. The products coming out of the real chocolate company is of a wide variety and the ability to adjust to the needs of the consumers who are now health conscious and there are the sugar free line of chocolate and confectionary. The internal weaknesses of the company Is the lack of storage for raw materials, as they are needed to be fresh for production. This feature of only having limited raw materials can let employees be idle if this supply is interrupted for any reason.
The internal opportunities of the company are openings in the industry market to gain on market share, new openings in the dark chocolate, sugar free chocolates, and low calorie chocolates and confectionaries. The company’s production capacity is expanded every time a new store is opened, as some manufacturing of chocolates is done at the stores. The utilization of the company’s skill personal and technology to create new products, for example the master chocolate mixer developing new recipes. Internal threats are the vulnerability of the raw materials supply being interrupted by a number of external factors.
A comparison of the internal capabilities to the Key Success Factors (KSFs), are that the key success factors that can be defined in the following types: manufacturing related key success factors, distribution related key success factors, marketing related key success factors, skills and capability related key success factors and other types of key success factors (cost). To match the manufacturing related success factors with the manufacturing strengths of real chocolate company one will see that the company was on track with the model of key success factors.
Real chocolate has quality control with quality measures existing at every step of the manufacturing process. Cost control production having both manual and automated production line, with innovative means of production. Managers seek ways to increase efficiencies. An upgrade in technology by the purchasing of automated factory equipment. The implementation of a comprehensive MRP11 system, which includes forecasting, planning, scheduling and reporting. The company due to its brand name can attract skilled labor.
Distribution of a company that uses the key success factors will show a strong network distributors and dealers, strong direct sales capabilities by means of owned retail outlets. The real chocolate has achieved this by having 110 factory outlets 65 stores that are all strategically placed. The company has not ventured into the overseas market and not grasping the concept of globalization. Marketing with key success factors includes a well known and well respected brand name, good customer service, good advertising and a wide variety of products.
Comparing real chocolate to this, real chocolate has good customer service, top brand names and uses a number of advertising strategies. Skills and capability key success factors of companies well possess a staff that is highly skilled and good knowledge of their jobs, managers that implements good strategies and have the latest technology at their disposal. Sarah Smith and her managerial team took real chocolate from a back room factory using a tennis board to a top one hundred fastest growing small company in the United States.
The staff is well trained and motivated. In my judgment using the concept of value chain for the real chocolate is performing well, they have a strong strategy and a good implementation plan. They are using the models to their advantage; the financial position of the company is very strong with assets of over 19 million dollars. Word count: 680 Part (3) To summarize the issues dealt with previously through the S. W. O. T. analysis of the real chocolate factory the internal and external core competencies and capabilities was the company’s pillar of strength.
Form the CEO Sarah Smith and her management team, to ever franchise holder that is carefully selected and trained. The employees of real chocolate go through special selection and training. A strong financial base, that will encourage stockholders and investors, together with a top brand name in the chocolate industry. New innovations in the gourmet chocolate industry such as dark chocolate and low calorie chocolates has increased their product span. The S. W. O. T showed that real chocolate’s main weaknesses were in how they acquired their main ingredient cocoa.
External forces such as foreign laws and natural disasters can severely affect the operations of the industry. New strategies for changing trends in the industry have to be formulated for the future growth of the company. The marketing and advertising strategy used although it may be cost affective it does not have the effectiveness to take the company forward in a highly competitive market. Porter’s five forces model (see appendix) analyzed the competitive environment of the gourmet chocolate industry and the rivalry for market share by other companies.
The pressures of securing raw material from suppliers, compounded with the ease of entrants to the industry by new companies. In the changing confectionary and gourmet chocolate industry the social behavior and new taste acquired by consumers, manufactures of chocolates have to be innovative and produce new brands such as sugarless chocolates, low calorie and no sugar added brands. With these driving forces constantly affecting the industry real chocolate’s major strategies resulted in an internal value chain. This concept identifies the main actives that create customer value and related core activities of the real hocolate company. The managing of outlets, franchises and company owned stores, to product research and developing human resource management and general management is the general frame work of the company and how it operates in the competitive chocolate industry. Word count: 309 Part (4) The Real Chocolate Company like most companies will encounter some difficulties in some aspect of management, production, marketing, and technology. Managers will have to analyze the competitive environment, with all the other change factors in the industry and develop a strategy to deal with all factors.
An analysis of real chocolate shows that the execution of the strategy for growth, acquisition of raw materials marketing and sales needs to be remodeled The balance score card (see appendix) “Kaplan R S and Norton D P” Harvard Business Review, January (1992)”, will measure the performance of the financial and strategic objective of the real chocolate company. This will enable the managers to make adjustment to the implementation of the strategy. The balance scorecard shows the manager’s four key businesses prospective of the chocolate company financial, customer, internal processing and marketing.
The manager will be able to see how the company is performing and how other people are seeing the company. This focuses on what real chocolate has done and makes strategic implementation into performance measurable targets. Ansoff growth matrix “Harvard Business Review, (1957)” (see appendix) is a tool that will help real chocolate decide their product and market growth strategy. Ansoff strategic model has four components market penetration, which is a growth strategy that will deal with the existing chocolate and confectionary products in the existing markets.
Market penetration seeks to increase market share of the chocolate industry, secure growth dominance, market development in which the company’s strategy is to sell existing products in new markets such as by cash out counters. Product development in the industry where there is a changing demand for new chocolate flavors. Diversification is the growth strategy where real chocolate can markets new products in new markets. Competitive strategies are in four generic business strategies that the real chocolate company could adopt in order to gain a competitive advantage. The differentiation and cost leadership strategies eek competitive advantage in a broad range of market or industry segments. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. In the gourmet chocolate using differentiation strategy the company can focus on the top products and setting it at a bargain price giving the customer value for their money. Cost leadership strategy is the real chocolate becoming the lowest cost producer in the chocolate industry. The differentiation focus strategy can be directed to special customers such as the health seekers and those who are environment friendly and want organic chocolates.
Cost focus strategy which real chocolate can lower the price on a few items of chocolate and confectionary that are similar to other producers who sell at a higher price. Word count: 460 Part (5) There are many annalistic tools that are used in strategic management but for the real chocolate company to choose the right strategic tool one must first analyze the company’s position. Real chocolate is a small privately owned company with about 235 employees. The company produces a variety of chocolates and confectionary in a very competitive industry.
The customers are looking for new products and are slowly turning to different exotic flavours. The tool that will be recommended for the company is the value chain concept. The value chain concept is the sum set of activities the company performs internally. The value chain concept consists of two sections primary activities and support activities. The value chain will include the profit margin of the company, as part of the company’s value creating activities is the pricing. Each activity in the value has a cost attached to it and ties up assets leading to cost estimates and capital required.
The value chain concept allows the manager to track the financial cost of every section of the company from the primary activities, the supply chain (activities, cost and assets dealing with purchasing raw materials such as cocoa, nuts, fuel, parts, quality control and inventory). Operations and production cost to the support activities such as research and development of new brands of gourmet chocolates and confectionaries, technology upgrades and systems development, Human resource management and general administration.
The gourmet chocolate industry being a very competitive industry using the value chain will put real chocolate at an advantage to its competitors, keeping cost on the front burner at all times. Sarah Smith and her management team including the franchisee holders can analyze the company and the industry at every step of the production cycle. Any changes in the macro-environment the value chain will disclose the cost involved in these changes allowing management to react at once and increasing the competitiveness of the company . Word count: 307 Part (6) Dr.
Michael porter’s value chain concept is a total of all the discrete activities that a company undertakes to achieve lower cost or differentiation. By grouping the activities of the company managers would be able to analyze the behavior of cost as well as identify existing or potential sources of differentiation. Porter defines Value “as the amount buyers are willing to pay for what a firm provides”. The value chain displays the total value and consisting of the firm’s value activities. The generic value chain of a firm is made up of two factors the Primary Activities and the Support Activities.
Primary activities are those that are involved in production innovation, sales and after sales service. Support activities are supportive to primary activities and include obtaining raw materials, development of technology, human resource management and administrative management. The generic value chain of the real chocolate company identifies individual activities of the firm with in the gourmet chocolate industry. In the generic model each activity can be subdivided into discrete activities. These can also be subdivided into further individual activities providing that they are discrete.
Good judgment and expertise is required to determine which activity goes in which category. All of the firm’s activity should be noted and identified and placed into a category. Some other resources needed to implement value chain system are by purchasing high quality raw materials, by having a high quality production process and a full inspection and testing of finished products. Other methods are having a good schedule for receiving raw materials on time, and having the delivery vehicles not making unnecessary trips, and the management of linkages.
Managers should not only understand the firms own value chain but how it fits and conforms to the industry’s own value system. By looking at the gourmet chocolate industry value system the manager will be able to shape their firm’s value chain system to fit that of the industry. Word Count: 318 Part (7) To describe the action for the proposed strategic model chosen for the real chocolate company, the value chain concept one will have to start with the results of the strategic analysis of the company. The S. W. O. T. nalysis showed the strengths, weaknesses, opportunities, and threats of the internal and external environment of the company. Other aspect of the functions of real chocolate such as company operations, products, distribution, manufacturing, marketing, franchising, finances and the industry were analyze and the value chain concept was selected to be the strategic tool to take the company to achieve its vision and mission. To move with the changing industry all change agents that were identified the strategic plan of the firm will be readjusted to keep the competitive advantage of the company.
The responsibility of overseeing these changes falls on the portfolio of the manager. The manager plans the type of change that is best for the firm from the value chain analysis. Using the three phases of organizational change model ( Lewins model) the first phase is “unfreezing”, it is his task to sell the concept of change and why it is needed to the rest of the managerial staff and the employees. Then the second phase is “moving” the implementation of the desired changes is by choosing the appropriate changes. The third phase is “refreezing” where the changes are stabilized and positive reinforcement is applied.
The changing of strategic implementation to adjust to the changing industry must be done quickly to avoid fears and resistance from staff. As soon as the window of opportunity appears the manager must be prepared to implement the necessary changes. If there is any resistance from middle management or staff the manager must educate and communicate with all staff members of the changes Word Count: 300 Conclusion: The future of the Real Chocolate Company is very stable, the company has a strong financial base and Sarah Smith, the management team, and the many franchisee owners and the taff are one of real chocolate’s core competencies as human capital. The flexibility of the firm’s production and investment in research and development into new frontiers of gourmet chocolates and confectionaries. The brand names of the products are good and although real chocolate is a small privately owned company, can match with the larger companies such as Hersheys and Nestle.