Roger’s Chocolate Analysis
Table of Contents 1. History, Development and Growth2 2. Vision, Mission, Objective, Philosophy and Strategy13 3. Functional-level strategies14 4. Business-level strategy. 20 5. Corporate-level strategy25 6. How is the effectiveness of the company’s strategies? (ROIC)26 7. What strategic problems does the company have? 33 8. What strategic issues need to be addressed? 34 9. External environmental analysis35 10. Internal environment analysis60 11. Determine the strategic factors of the company70 12. Generating alternative strategies by using a TOWS matrix73 13. Evaluate strategic alternatives – pros and cons. 74 14.
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Recommend strategic for company (short, medium, and long term)81 1. Describe briefly the history, development, and growth of the company overtime. Rogers’ Chocolates is steeped in tradition and a rich history that has earned the company its current reputation as one of Canada’s premiere hand-made chocolate producer. The first Rogers’ chocolates were made in 1885 by Charles “Candy” Rogers’ in the back of his grocery store in Victoria, B. C. He quickly became a popular man. In 1891, Rogers’ expanded his chocolate operation to the company’s current heritage storefront on Government Street in Victoria and the rest, as they say, is history.
Today, Rogers’ Chocolates is owned by a small group of shareholders located primarily in B. C. The Victoria-based company now has 10 retail stores, several hundred wholesale outlets, and a 20,000-square-foot factory. History & Development Charles W. Rogers’ moved to Victoria from his native Massachusetts in 1885. He established a confectionary shop on the west side of Government Street shortly afterwards, and soon enjoyed a prospering business selling candy products which he and his wife manufactured in the rear of his premises.
In 1891 his original shop was torn down along with other buildings on the block to make way for new B. C. Land and Investment Agency Building. Rogers’ resumed his business in a new shop located in this building, numbered 34 (later 916) Government Street. He remained at this location until 1917. As his personal prosperity increased, Rogers’ invested in Victoria real estate. Among his acquisitions was a new two- storey brick block designed and built for him across the street from his shop in 1903. In 1903 Rogers’ rented his new building.
Then numbered as 31 Government Street, to Brown and Cooper, fish and fruit merchants. By 1905 this firm had moved to 27 Government and been replaced by W. B. Shakespeare, a jeweler. In 1909 a second jeweler, W. B. Wilkerson, was listed as occupant and remained until 1916. In the following year C. W. Rogers’ moved his own business into the building from his former premises across the street. The address of the structure changed from 31 to 913 Government Street around 1907. A number of interior changes were made to the building in order to accommodate Rogers’ candy manufacturing.
The retail area at the front of the structure was shortened, eliminating the original mezzanine arrangement and expanding the work area at the rear. Rogers’ Chocolate Shop has operated continuously in the building up to the present time, although no longer owned by the Rogers’ family (C. W. Rogers’ died in 1927). While alterations and an addition have been made to the manufacturing area at the rear section of the building, the retail shop and its furnishings remain unaltered from the time of Rogers’ personal occupancy in 1917. Similarly, few alterations have been made to either the exterior facade or upper storey living area. 975 plans held in the City of Victoria Engineering Department call for construction of a new rear addition extending to Gordon Street along with extensive interior renovations in order to modernize and expand manufacturing facilities. Source: http://www. rogerschocolates. com/history-press-content. php? aid=67 Workers in the Chocolate Factory Rogers’ Chocolates Achievement 2006| | Superior Taste Award International Taste & Quality Institute – Brussels, Belgium| | | Best Chocolatier The Best of the City Awards- Victoria News| | | Best Storefront Window Display
The Best of the City Awards| 2005| | Lifetime Achievement Award – Greater Victoria Chamber of Commerce For displaying a sustained and significant commitment to the prosperity of Greater Victoria and serving as a positive role model in the business community for more than 25 years. | | | Best Chocolatier The Best of the City Awards – Victoria News | | | Retailer of the Year Award Vancouver Island Business Excellence Awards – Business Examiner | | | Manufacturer of the Year: Runner Up Vancouver Island Business Excellence Awards – Business Examiner| 2004| Best Chocolatier The Best of the City Awards – Victoria News| | | Best Storefront Window Display The Best of the City Awards – Victoria News| | | Best Chocolate Maker Readers Choice “The Best of the Island” Awards – Times Colonist| | 2003| | Time Honored Member: 40 Plus Years Greater Victoria Chamber of Commerce| | | Best Chocolatier The Best of the City Awards – Victoria News | 2002| | Business Excellence Award Greater Victoria Chamber of Commerce | | | Best Chocolatier The Best of the City Awards – Victoria News| | | Retailer of the Year: Runner Up
Vancouver Island Business Excellence Awards – Business Examiner | | 2001| | Best Chocolatier The Best of the City Awards – Victoria News | 2000| | Innovative Retailer of the Year Excellence in Retail Awards – Retail Council of Canada | | | Online Retailing Award Excellence in Retail Awards – Retail Council of Canada | Rogers’ Product Offering Victoria Creams and Squares Made in Victoria, BC since 1885, our cream-filled confections made us famous. Each Victoria Cream is hand-wrapped with care and bursting with one of 16 mouth-watering flavors, including Caramel, Wild Cherry, and Vanilla.
Best of all, you can mix and match to create your own selection of tastes. Our Empress Squares are filled with soft English caramel and roasted almonds while our chocolate-covered brittle must be tasted to be believed. Both available in Dark and Milk Chocolate. | Victoria Creams | Victoria Creams Miniatures | Milk Chocolate Empress Squares | | Dark Chocolate Almond Brittle | Milk Chocolate Almond Brittle | Traditional Assortment | Dark Chocolate Empress Squares | After Dinner Mints Rogers’ Mint Imperials Assortment | | Baking & Fondue ROGERS’ FAMOUS CHOCOLATE NOW AVAILABLE FOR HOME-BAKING
Those who love to bake, and bake well, will only use the finest ingredients in their recipes. Rogers’ new premium baking chocolate is the perfect addition to anyone’s favorite recipe; whether it’s a chocolate souffle, classic chocolate chunk cookies, better caffe mocha or simply a cup of gourmet hot chocolate. Baking Chocolate Block – Milk | Baking Chocolate Block – Dark | Baking Chocolate Block – White | Sweet Ground Chocolate | Fondue Baking Chocolate – Milk | Fondue Baking Chocolate – Dark | | | Collectibles A gift should be special inside and out.
These collectible tins filled with Victoria Creams, Chocolate-Covered Almonds, Gourmet Bar Miniatures, Nougat, Marzipan, and Caramel make lasting gifts. Empress Gift Boxes Need a crowd-pleaser for a group of chocolate lovers, big or small? These premium boxes of Rogers’ Chocolates assortments and specialty candy will steal the show. | Sampler Box | 1/2 Lb Empress Collection | 1 Lb Empress Collection | 3 Lb Empress Collection | Gourmet Chocolate Bars When one bite is not enough or the box doesn’t fit in your secret treat drawer, Rogers’ Gourmet Bars fit the bill.
Premium chocolate becomes even more delectable when blended with the finest ingredients – pure vanilla, peppermint oil, hand-candied orange peel or ginger, and even chipotle peppers and cinnamon. | Butter Caramel Chocolate Bars | Gourmet Truffle Bars | High Tea Bars | Milk Chocolate Bars | Dark Chocolate Bars | White Chocolate Bar | No-Sugar Added Chocolate Bars | Gourmet Chocolate Bars – Gift Box | Ice Cream Made by our experienced candy makers in our very own chocolate factory, Rogers’ Ice Cream uses only the best ingredients that many of our chocolate fans will recognize.
We started off with just a few flavors, and has now grown to 23 delicious flavors including; Almond Brittle, Bananas Foster, Black Forest, Bubble Gum, Caramel Swirl, Chocolate Hazelnut, Cookies Monster, Ginger Chocolate Chunk, Imperial Mint, Just Java, Maple Nut, Milk Chocolate, Mystere Chocolate, Pistachio Cherry, Radical Raspberry Truffle, Rum Raisin, Super Chocolate, Vanilla Bean, Vanilla Chocolate Chip, Very Strawberry, Victoria Cream Supreme, Wildberry, and Zinfandel Chocolate. No-Sugar Added
These chocolates are sweetened with maltitol and sorbitol, and may meet the needs of consumers with special dietary requirements. These chocolates are not a reduced calorie food. Diabetics: this product may be useful in your diet on the advice of a physician. | No-Sugar Added Sampler Box | No-Sugar Added Chocolate Bars | Nuts, Fruits and Nutcorn Chocolate-covered fruit and buttery caramel nutcorn – a selection of unique treats for special occasion. | Chocolate Covered Fruit and Espresso Beans | Nuts And Chews Assortment | Creamy Caramel Indulgence |
Caramel Nutcorn – Bags | Caramel Nutcorn – Six Pack Gift Box | Chocolate-Covered Ginger | Pecan Chews 1/2lb Bag | Cashew Chews 1/2lb Bag | Almond Bark 1/2lb| | | | Premium Gift Boxes All of our most sensuous chocolates – Victoria Creams, Nougat, Chocolate Almond Brittles, Nuts & Chews, Caramels, and many, many more – gathered up in elegant boxes of all sizes. | Marquis Assortment | Premiere Assortment | Rogers’ Selection Box | Rogers’ Signature Dark Chocolate Assortment | Milk Chocolate Assortment | Creamy Caramel Indulgence | Classic Gift Box |
Royal Assortment | Rogers’ Gift Baskets Truffles There are few treats more subtle and delicious than chocolate truffles. | Classic Truffles Assortment | Gourmet Truffle Bars | Ice Wine Truffles | | Source: http://www. rogerschocolates. com 2. Review the corporate strategic plan (Vision, Mission, Objective, Philosophy and Strategy). Mission Vision & Objective “Rogers’ Chocolates is committed to producing and marketing fine products which reflect and maintain our reputation of quality and excellence established for over a century.
All aspects of our business will be conducted with honesty and integrity, upholding our proud Canadian tradition. ” We found out that Rogers’ Chocolate does not mention about its vision and objective. Therefore, we have to think about its vision and objective based on our analysis of the company. Vision: To make Rogers’ Chocolates brand become a well established global brand as well as the world leader of premium chocolate category. Philosophy Objective: To double or triple size of the company within 10 years by market expansion as well as maintain good reputation of quality and excellence.
Rogers’ Chocolates honors its time-tested brand by making only premium products, packaging them elegantly, and choosing our retail partners carefully. At Rogers’ Chocolates, we also believe that the quality of our products starts with the procurement and mixing of fine ingredients but extends to the high level of customer service you can expect from all facets of our organization. Eliminating the use of hydrogenated fats and oils, and using natural ingredients whenever possible, has positioned Rogers’ as a leader in the confections industry, providing healthy alternatives to consumers.
Strategies As quality chocolate continues to gain popularity among health-conscious, educated consumers, Rogers’ products are becoming increasingly revered for their aesthetic appeal, wholesome ingredients, and overall exceptional taste. * Intense advertising to increase brand awareness * Expand retail store to many tourist attraction areas * Expand through wholesales to increase distribution channel Source: http://www. rogerschocolates. com 3. Identify the functional-level strategies that the company is employing.
How can those functional-level strategies improve the effectiveness of a company’s operations and thus its ability to attain superior efficiency, quality, innovation, and customer responsiveness? Functional-level Strategies The functional-level that Rogers’ Chocolate Company employed could bring the superior efficiency, quality, innovation, and customer responsiveness. These bring the competitive advantages to Rogers’ which are described below. Sales and Marketing Strategy * Pricing Rogers’ targeted affluent customer who seeking for the luxury experience and superior.
Therefore, it can differentiate itself to be the premium chocolate which uses high quality ingredient and hand-packaging process. Consequently, it can charge the higher price relative to its competitors. Moreover, Rogers’ has no plan to discount the product or develop cheaper products which may be risk in destroying brand integrity. * Viral Marketing The company can benefit from viral marketing from its loyal customer because most customers of Rogers’ are the gift giver (corporate giver and personal giver).
When their customers buy Rogers’ chocolate as a corporate gift or a personal gift, the recipients become a loyal customer. * Reduce customer defection rate As one of Rogers’ target customers is rich people who want to give a present in the society of indulgence and privilege. However, advertising may not help to reach these people and may be too expensive to do that. Therefore, the best way Rogers’ do is trying not to make the mistakes or disappoint them in any way. Moreover, Rogers’ use the good old fashioned service by apologizing and replacing the product immediately whenever you do the mistake.
This strategy could help Rogers’ maintain their loyal customer. Source: http://victoriabcmagazine. com * Advertising Rogers’ chocolate uses the advertising in travel or transportation magazines rather than TV advertising to attract the tourists. The TV advertising is used only in Victoria which has the highest sales volume. All advertising are use to serve its customers from 3 channels: wholesale accounts, Rogers’ stores, and its website. * Create retail experience to customer that leads to repeat sales Rogers’s try to create the memories and experience at retail stores to the customers.
It can create by its store decoration, sampling, aromas, taste, and service so that the customers feel impressive with the environment and service. Consequently, they will come back to repeat purchase and become the loyal customer. Source: http://www. attractionsvictoria. com/index. php/site/members/rogers_chocolates/ * Social involvement The company supports social responsibility (CSR) by employing the disabled people to work in a plant. Moreover, Rogers’ allow brain-damaged people to help in every Friday production.
These can create the good image of the company in terms of corporate social responsibility. These can build the good image for Rogers’. Moreover, environmental concerns are realized in the company by influencing in packaging, procurement, and operational decision. Human right is also considered by not using forced labor and child labor. Information system * Online business Expanding to online business is attractive because Rogers’ could get higher profit with low costs of sales. There is no intermediary. Therefore, it is a chance to build a loyal following of online customers with their high eorder rate. The tourists who are one of the target market will repeat purchase and become online or mail-order customers especially American tourists. This is due to the fact that there is no American reseller so the best way for these customers is to buy it online. Rogers’ information in the website is available in all types of product. Therefore, it is easy to order the product online via its website which is the key point of contact for online business. Source: www. rogerschocolates. com Financial Strategy Rogers’ has strong financial position.
The company can benefit by ability to charge higher price align with its high quality in the premium market. As Rogers’ is private firm, it has less pressure than a public firm to manage shareholders’ expectation. Therefore, the company focuses on minimizing the taxable earnings. Human Resource Strategy Due to Rogers’ long history and strong family values, its employees are passionate to the company. Therefore, employees commit to the quality and enjoyed in their works. Human resource department gives an opportunity to its employees to learn multiply job functions and enjoy a variety of their works.
Consequently, employees take good care in hand-wrapping chocolates, folding the packaging, and hand-ribbons boxes. This could increase the quality of the products to reduce the defect. Moreover, the wages at Rogers’ are competitive and the turnover is low. Operational Strategy Rogers’ uses the high quality and natural ingredients to produce the chocolate. The main products are high-quality and hand-wrapped in chocolate. The production is labor-intensive because most chocolate were handmade and hand-packed. The company emphasized a lot on the quality of both chocolate and the packaging.
As the target market is the affluent customers who look for a luxury experience with a superior taste, elegant and uncommon gift item, quality is the most important. In addition, the company planned extra employees to work seasonally for the Christmas season because demand during this period is high. Almost 24% of annual sales are from Christmas season. The extra employees are required during the season in order to avoid stock out that can reduce the customer loyalty level to the company. Primary Roles of Value Creation Functions in Achieving Superior Efficiency Value creation function| Primary roles|
Sales and Marketing| 1. Use different communication channels to reach each customer type. 2. Use viral marketing to increase number of rich customers. 3. Reduce customer defection rate by avoid the mistake and use old fashioned service to apologize and replace the product immediately when a mistake occurs in order to maintain customer loyalty. | Information system| 1. Focus on online business which can reduce the operational cost. | Primary Roles of Value Creation Functions in Achieving Superior Quality Value creation function| Primary roles| Sales and Marketing| 1.
Focus on the premium quality and use quality to differentiate the company from the competitor. 2. Use viral marketing to increase the repeated sales from the superior taste and experience. 3. Try to reduce customer defection rate by avoiding the mistake, apologizing and replacing the product immediately whenever you do the mistake. This strategy could help Rogers’ maintain their loyal customer. | Human Resource| 1. Maintain employees’ retention and create passionate to work and company so that the employees enjoy working for the company and come up with the high quality output. Operational function| 1. Use natural ingredient and high quality to produce the chocolate manually. 2. Use the hand-wrapped packaging and various style to suit with customers’| Primary Roles of Value Creation Functions in Achieving Superior Innovation Value creation function| Primary roles| Marketing| 1. Try to customize or provide the innovative packaging for customers. | Operational Function| 1. Generate new taste and include organic ingredients into chocolate. 2. Reduce fat in chocolate to serve demand from health-conscious consumers. Primary Roles of Value Creation Functions in Achieving Superior Responsiveness to Customers Value creation function| Primary roles| Marketing| 1. Realize the customer want and need for the products and reach their customers with appropriate channels. 2. Maintain the corporate social responsibility and environmental concerns in order to create good image to the company| Functional Strategies Superior: -Efficiency -Quality -Innovation -Customer Responsiveness Distinctive competencies Resources Capabilities Differentiation Low cost Superior
Profitability Value creation Build Build Shape In conclusion, Rogers’ use the functional-level strategies to improve effectiveness of the company’s operation. Rogers’ achieve superior quality which enable the company to gain competitive advantages by differentiate itself from its competitors. 4. What is the nature of the business-level strategy that allows a company to attract customers away from its competitors in the industry? How well do the strategic managers adopt for using functional-level strategies to create a competitive advantage over its rivals.
The business-level strategy for a company that wants to attract customers away from its competitors in the chocolate industry can be split into three main criteria: What needs to be satisfied? The need that needs to be satisfied is the target customers. In the case of Rogers’ Chocolate, the target customers are those that are interested in purchasing premium quality chocolate, and willing to pay the prices. Secondly, the way a company can differentiate itself and its product from its competitor, while offering the customer more values to convince the target customer to purchase their products over its competitors.
Values can come in the form of quality of product, customer service, convenience of purchasing product and brand image. * Quality According to the study conducted by Ipsos-Reid Corporation in 2006, quality is the top of the mind consideration for Canadians when choosing food when dining out and the second most important consideration when buying food for the home, especially people who buy premium or luxury product. * Convenience Nowadays, people are keeping busy and do not have much free time to spend. They tend to find the way to purchase products at the place that is most convenient to them or even purchase online.
Moreover, some people do not plan to purchase but they will realize their need when they see the products and make an immediate purchase. * Variety Since increasing of competition in the industry, people have more choices to consider and increase their expectation on variety of product that a brand offer to them. * Customization As consumers nowadays tend to has higher degree of uniqueness, they want to purchase product according to their preference and need it to be customized in order to express themselves to other. * Health and Nutrition
In 2006 Consumer Perceptions of Food Safety and Quality survey conducted by Ipsos-Reid Corporation in 2006 found that 31% of respondents stated nutrition as a top of mind issue when buying food for home compared to 24% in 2004 * Sensational Experience of store and packaging When people buy a luxury product, they expect to be in the beautiful decorated shop and enjoy visually seeing the product and taking in the sensual aspect of buying the product. This is a reason of why packaging, retail store location and store layout are key factors of premium brand. Who will be served?
Focused Market Segmentation In terms of customer and market segmentation, there are three main approaches to market segmentation, No market segmentation, High market segmentation and Focused market segmentation. In the premium chocolate market, it would not be feasible to use No market segmentation as the volume the volume of mass market are much higher and the companies that focus on premium market would not be able to compete in price. Since Rogers’ is a premium chocolate producer, it uses focused market segmentation to do segmentation and focus on serving only small group of high-end customer.
Rogers’ targeted affluent customers who look for a luxury experience with a superior taste, or an elegant uncommon gift item. In addition, premium market segment is divided into sub-segments as the following. * Personal Indulger This group of customers are those who lover chocolate or a confectionary consumer who enjoy delight of chocolates. They buy of their own consumption and usually are loyalty to the brand they like. * Business Gift These consumers buy on behalf of their company in order to be a gift from their corporation to a person or another corporation. They buy a premium product because it will give them a good image. Seasonal & Special Gift These consumers buy the product to be giving gifts to their friend, family or lover. The buy premium product since they want to use the best high quality of product as their expression of their feeling. * Souvenir Tourist is a type of Rogers’ target customers. Rogers’ stores are located at downtown or in tourist area and its beautiful shop decoration in order to attract tourists. How will those needs be served? As the market in consideration is for premium chocolate, there is less emphasis on cost, as normally the margin in this market segment would be less intensive to the lower end market segments.
Therefore depending on the company their competencies or strength in the market, they would focus on superior quality, innovation or responsiveness to customers to win the business. Hence, in conclusion from the analysis made, the best business level strategy to be used for the premium chocolate industry is the Differentiation Strategy. With superior quality, innovation and excellent customer responsiveness, a company can gain market share from its competitors. How well do the strategic managers adopt for using functional-level strategies to create a competitive advantage over its rivals?
As mentioned in the early part, with the target on Differentiation Strategy at business level, the key criteria the strategic should be focused on are: * Superior Quality As Rogers’ already offer a premium grade product, this is not a main worry for management. The retail store also has a good atmosphere and ambience, which help create a good impression to customer who visits the store. However, the key concern would be how to manage the brand and having a core theme across its product range and other products that are related to Rogers’ Chocolate.
By branding and good marketing, this would take into consideration retail store design, ambience, packaging of boxes, bags to have the same unified theme. Sometime, a strong brand can give a product a superior quality feels even if the quality of the goods is lower than its competitor. * Innovation Innovation can come in the form of new products, like sugar free and way to approach, attract and maintain customer relationship through website and purchase online. Moreover, look at alternative untapped channels like franchising or penetrate into US or other markets.
In the innovation side, Rogers’ have been very successful in finding ways to find new channels to sell their products. In addition, the new sugar free product launched has been well received in the market. * Excellent customer responsiveness Customer service at the retail store is excellent and it helps gain good sales. Moreover, the company has the right idea in that online should have priority in product over retail and wholesale as the margins are higher. However, the supply and production would need more effort as the availability of the product also determine whether the customer is able to get what they wanted to purchase
Uniqueness Perceived by the Customers Industrywide Particular Segment Only Low Cost Position Competitive Advantage Strategic Target Focus Differentiation Focus Cost Leadership Differentiation Overall Cost Leadership Broad Differentiation Generic Business-Level Strategy Rogers’ uses “Focus Differentiation” as its business level strategy. The company tries to differentiate itself by creating a high quality of product and service to customer. Moreover, its strategic targets are only some particular segments such as personal indulger, business gifts, seasonal & special gift, and souvenir. The Value-Creation Frontier
Rocky Mountain Laura Secord Hershey Mars Lindt Rogers Bernard Callebaut Purdy’s Godiva 5. What kind of corporate-level strategy that the company is pursuing? Will that corporate-level strategy maximize long-run profitability of the company? Corporate-level Strategies Rogers’ Chocolates strategies at the corporate level focus mainly on the growth of the organization. Because the premium chocolate industry is still growing at the satisfying rate, Rogers’ does not focus on diversification. At the moment, there is no talk about merger and acquisition. It implies that Rogers’ does not rely on this strategy.
It, however, uses concentration strategies as a main driver for growth. Rogers’ product line has already matches wide ranges of customers’ needs. What Rogers’ still lags behind many of its larger competitors is its brand awareness. Rogers’ market concentrates only on Canada and, to be more precise, on Victoria and British Columbia. It also focuses on tourists coming from the United States. Customers outside the areas are hardly aware of its brand. Therefore, Rogers’ is intended to use both market development and market penetration for its corporate strategies. See the diagram below. Market
Penetration Product Development Market Development Product Proliferation Existing Existing New New Products Marketing Segments Rogers’ considers expanding its branches to other locations outside its home base (market development) or it may bring its product to the tourists which are one of its target markets (market penetration). Having larger customer base and from different geography will not only help Rogers’ to increase its revenue, but also help it weather the economic downturn. Therefore, these corporate level strategies employ by Rogers’ would allow it to maximize its long-run profitability. . How is the effectiveness of the company’s strategies? Consider the Profitability (ROIC) and Profit Growth of the company for at least five years comparing with its competitors in the industry? Profitability (ROIC) ROIC measures how well the company is using its money to generate returns, or profitability. However, most of the competitors of Rogers’ are private company so there is no financial statement available. As a result, there are only 2005-2006 financial statements of Rogers’ Chocolate from the case and Lindt from its annual report to analyze. Financial Data of Rogers’ and Lindt
Financial Data| 2006| 2005| | Rogers’ ($)| Lindt (CHF Mil)| Rogers’ ($)| Lindt (CHF Mil)| Sales| 11,850,480 | 2,595 | 11,991,558 | 2,256 | Net profit| 891,082 | 209 | 1,069,326 | 173 | COGS| 5,385,088 | 1,677 | 5,378,187 | 1,456 | SG&A| 5,221,520 | 547 | 5,007,145 | 493 | R&D| – | – | – | – | Working capital| 625,109 | 763 | (776,335)| 631 | PPE| 4,364,527 | 672 | 3,922,183 | 615 | Invested capital| 7,297,131 | 1,559 | 7,293,051 | 1,394 | Drivers of Profitability| 2006| 2005| | Rogers’ (%)| Lindt (%)| Rogers’ (%)| Lindt (%)| ROIC| 12. 21| 13. 41| 14. 66| 12. 39| Return on sales| 7. 52| 8. 5| 8. 92| 7. 66| Capital turnover| 162. 40| 166. 51| 164. 42| 161. 78| COGS/Sales| 45. 44| 64. 62| 44. 85| 64. 52| SG&A/Sales| 44. 06| 21. 07| 41. 76| 21. 86| R&D/Sales| 0. 00| 0. 00| 0. 00| 0. 00| Working capital/Sales| 5. 27| 29. 40| -6. 47| 27. 97| PPE/Sales| 36. 83| 25. 87| 32. 71| 27. 28| There are many ways to improve company’s profitability. Two major ways is to increase company’s return on sales and increase capital turnover. Return on sales can be increased by increasing of sales revenue more than cost, reduce cost of goods sold, reduce spending on SG&A and reducing R&D expense.
Meanwhile, capital turnover can be increase by reducing of working capital and fixed capital. Drivers of profitability diagrams are created as shown below. ROIC Return on Sale (Net profit/Sales) Capital turnover (Sales/Invested capital) COGS/ Sales SG&A/ Sales R&D/ Sales Working capital/ Sales PPE/ Sales Drivers of profitability diagrams Drivers of Profitability for Rogers’ and Lindt 1) Return on Sales (Net profit/Sales) Return on sales shows how well the company manages its operating and overhead costs. Rogers’ performed better than Lindt in 2005 but tends to have decrease return on sales in 2006.
For the year 2006, although sales of Rogers’ decreased, cost still increased especially overhead, selling and administrative costs. For 2006, return on sales of Lindt was higher than Rogers’ because of the growth in sales was higher than the growth in the cost. 1. 1) COGS/Sales For both companies, the COGS/Sales ratios were quite stable indicates that both companies were able to control its gross margin quite well. For Rogers’, this ratio was lower than Lindt. This means that Rogers’ was able to lower its cost of goods sold. 1. 2) SG&A/Sales SG&A/Sales shows the ability of company to control its overhead expenses.
SG&A expenditure of Rogers’ was higher than Lindt as Rogers’ has weaker SG&A expense management than Lindt. In addition, SG&A/Sales ratio for Rogers’ tends to increase while that of Lindt tends to decrease. This means that this problem continues to persist. 2) Capital Turnover (Sales/Invested capital) In 2005, Rogers’ performed better than Lindt in terms of the sales generated from the invested capital. But the situation was opposite in 2006 as Rogers’ performed weaker than Lindt as sales decreased while the invested capital was not much different. 2. ) Working capital/Sales High working capital compared to sales means that the company was not operating efficiently and results in lower ROIC. Rogers’ operated more efficient than Lindt as the company shows lower working capital compared to its sales. 2. 2) PPE/Sales PPE/Sales show how well the company utilizes property, plant, and equipment to generate revenues. For Roger’s, this ratio was higher than Lindt which means that the company was weaker in terms of PPE utilization. Moreover, this ratio for Rogers’ tends to increase while this ratio for Lindt tends to decrease.
This means that Rogers’ problem of PPE utilization will continues further. In conclusion both companies have the ROIC for the year 2005 and 2006 as shown below. In 2005, ROIC of Rogers’ seemed to be superior to Lindt. Meanwhile, for the year 2006, Lindt reported better ROIC than Rogers’. However, these figures do not show the trend of ROIC so these data is insufficient to analyze the profitability of both companies. Year: 2005 ROIC Rogers: 14. 66% Lindt: 12. 39% Return on Sale Rogers: 8. 92% Lindt: 7. 66% Capital turnover Rogers: 164. 42% Lindt: 161. 78% COGS/ Sales
Rogers: 44. 85% Lindt: 64. 52% SG&A/ Sales Rogers: 41. 76% Lindt: 21. 86% R&D/ Sales Rogers: – Lindt: – Working capital/ Sales Rogers: -6. 47% Lindt: 27. 97% PPE/ Sales Rogers: 32. 71% Lindt: 27. 28% Year: 2006ROIC Rogers: 12. 21% Lindt: 13. 41% Return on Sale Rogers: 7. 52% Lindt: 8. 05% Capital turnover Rogers: 162. 4% Lindt: 166. 51% COGS/ Sales Rogers: 45. 44% Lindt: 64. 62% SG&A/ Sales Rogers: 44. 06% Lindt: 21. 07% R&D/ Sales Rogers: – Lindt: – Working capital/ Sales Rogers: 5. 27% Lindt: 29. 4% PPE/ Sales Rogers: 36. 83% Lindt: 25. 87% Profit Growth 005-2006| Profit Growth (%)| Rogers’| -16. 67| Lindt| 20. 81| With only two years financial statement for the year 2005 and 2006 to analyze, only profit growth for the year 2006 can be calculated. Rogers’ seemed to perform weaker as the company shoe lower profit for the year 2006. Meanwhile, Lindt reported profit growth of 20. 81% as of 2006. However, these figures do not show the trend of profit growth as these data is insufficient to analyze. 7. What strategic problems does the company have? Production * The Company used the technology that has been utilized for decades.
As a result, set-up times and equipment cleaning times required more time which caused extra expenses to Roger. Moreover, there had been no meaningful procedures to measure the productivity and efficiency of the plant. * Demand forecasting was complicate to estimate due to the sales seasonality but a long production shelf life. These leaded to out-of-stock and sometimes overstock problems. Such problems distorted the sales data. For example, when there was out-of-stock for a month and then was filled in a short period of time. The sales graph will show unusual spikes which will be further used for production planning.
It is similar to overstock situation, the discount is used to push out the items. As such creates high spikes sales. * The Chinese supplier was sometimes unable to produce Art tins per the agreed schedule resulting in production planning for the next product. Wholesale * Some sales representatives have their own much stronger product lines and just carry Rogers’ as an add-on to their existing items. Furthermore, the remote sale representatives who are not trained well cannot present the brand sufficiently, the accounts would not aware of the brand and do not nderstand the value of the product. Therefore, the sale in those areas would not be high as expected. * Rogers’ incurs more cost from some small wholesale customer orders in a small amount and Rogers’ has to credit them for stale stock and pay shipping fee for them. * Some small accounts sell stock past its expiration date to customer which might erode brand image. * Rogers’ has to incur more cost for keeping inventory for some accounts that order custom products with too little lead time Brand * General customers perceived that Roger is a brand of traditional image.
This image less attract younger buyers. Human Resource * Management Conflict, there had been conflict between marketing and production. Marketing would like to reduce out-of-stocks and launch new products, while production sought to retain control of its own scheduling and production processes. This problem should be solved to get both departments to agree on the company direction. 8. What strategic issues need to be addressed? With the goal to double or triple the size of company, Roger should prepare itself in all departments in order to support the growth. Production
With current capacity of a 24,000- square-foot manufacturing facility, about 110 employees and aged technology would not adequate to bear the capacity expansion. Should Roger consider expanding their internal capacity. Human Resource Current workers were quite proud of the heritage and commitment to quality. Their passion sometimes creates resistance to change since they believe that the change caused compromise the values and heritage of the company. To be ready for expansion, the management may need to explain the requirement of change to employees to make them understand that improvement would create a long-lasting and profitable future.
Another concern is about training new workers to have enough skills for hand-made chocolate. If Roger expands the production, more workers are required since the production is labor-intensive. Brand Awareness: Should Roger introduce its products to tourists during Olympic event to gain broad brand awareness ? Roger seems not to be well known outside of Victoria. Given this circumstance, in order to capture demand broadly, the company has to increase brand awareness. And Olympic is the good period that tourists around the world come to Canada.
This event will help Roger to be well known broadly. Distribution To increase its geographical reach, Roger has to consider whether the company should extend its distribution outside of current place; British Columbia or should have more stores or the company should go with franchise idea. There should be the analysis to see advantage and disadvantage of each option to select the one that is most suitable with Roger. Financial system: Should Roger invest in upgrading electronic bookkeeping system? Currently, the books have been maintained by hand, no software was applied to record the data.
This practice causes delay in preparing the financial data in order to be used for production forecasting or for performance measurement. For example, if use software program, when there is any transaction occurs, it can be recorded online to the system. Planning department would be able to analyze the data for the next production timely. 9. Perform the external environmental analysis to identify the opportunities and threats and draw a conclusion on the industry attractiveness. 9. 1) General Environment a) Economic Segment The scenario in the case is in the beginning of the year 2007.
The economy data that available at that time was the data of 2006. For the year 2006, the Canadian economy continued to grow, but growth slowed as the year moved onward. Real GDP for 2006 grew by 2. 8 percent which mainly came from consumer spending and non-residential investment. Consumer spending was supported by higher employment and labor income. However, GDP growth was limited by slower residential investment and slow export growth. Labor markets continued to improve with employment improved by 1. 9 percent, with the unemployment rate at a 30-year low.
As a result, Canadian consumers had more purchasing power for the chocolate, which was the opportunity for chocolate company to generate higher revenues. For the year 2004 to 2006, the GDP growth was quite stable. At that time, most forecasters expected Canadian GDP growth to be stable with strong consumer spending due to good sign of labor markets, income gains and relatively low interest rates. Business investment is expected to remain strong as well. As a result of the above situation, economic segment provided good opportunity for chocolate business. Canada’s Real GDP Growth from 2000 – 2006 (percent)
Source:Statistics Canada: Canada’s national statistical agency Cocoa Beans Price from March 2000 – March 2007 (US cents per pound) Source:International Monetary Fund Cocoa bean is the major ingredients of chocolate. The price of cocoa bean tends to be higher. The major reason is that West Africa had been hit by bad weather conditions. Another reason came from declining in global cocoa supply. This could be threat for the chocolate industry. Besides, the cocoa beans have to be imported to Canada; therefore, the chocolate producers need to face the fluctuation in currency exchange rate that result from economic downturn all over the world.
Canada’s Sugar Price from 2002 – 2006 (US cents per pound) Source:Agriculture and Agri-Food Canada Another main ingredient of chocolate is sugar. Canadian sugar prices are based on world market prices. From the year 2003 to 2006, the sugar price tends to increase which could be another threat for chocolate industry. However, the price is also depends on the negotiations between the sugar refiner and customers. Furthermore, the price of dairy ingredients is also important. Dairy prices in Canada are considerably higher than those in most other developed countries.
This situation creates cost disadvantage relative to imports for milk-chocolate manufacturer. Competitive dairy prices have been negotiated with the Canadian Dairy Commission. This will encourage investment in the new facilities in Canada for manufacturing milk-chocolate ingredients. b) Sociocultural Segment There are many Sociocultural issues related to chocolate industry. First, consumers tend to give chocolates to others as a gift as mentioned in the case that about one-quarter of chocolate sales typically take place in the eight weeks before Christmas.
Chocolate companies should provide variety of products for customer to choose because they might not happy if they always receive the same kind of products. This could be the opportunity for chocolate company to sell more. The Popular Rogers’ Gift Basket during the Christmas Seasons Second, Consumers tend to concern more about their health. These may come from either their actual feeling or social trend. According to the case, the demand for organic products, including organic chocolates, was booming. Consumers also seek products with no Tran’s fats.
In addition, demand for dark chocolate was also growing because of it contains anti-oxidant component which can make their heart more healthy. If the companies manufacture the products according to these trends, it could be another opportunity for the company to generate higher revenue. Third, corporate social responsibility is one of the major concerns. The case stated that both consumers and employees were also demand chocolate companies to follow corporate social responsibility practices. Fourth, environmental concerns also influenced packaging, procurement, and other operational decisions.
Fifth, human rights concerns were also important for consumers. Similar to other chocolate companies, Rogers’ buys cocoa from West Africa. The case mentioned about the letter from the customer urging the company to contribute to the society by considering more about forced labor and child labor which were still used in some of the cocoa beans production in Africa. Companies who can follow these concerns may generate higher revenues. However, companies that cannot operate in accordance with these concerns may consider these factors as threats.
Some chocolate manufacturers are unable to sell their products to some industrialized countries due to some controversial issues, especially the use of child labor to work in cocoa farms. Currently, some countries do not allow cocoa from Africa to be sold because they believe that Africa used children labor inappropriately. This could be a threat to the chocolate industry. Child Labor Working for Cocoa Producer in Africa Finally, the widespread obesity problem is also another threat for the chocolate industry. Obesity in Canada is now growing and is one of the leading causes of preventable deaths in Canada.
According to Forbes, Canada ranks 35 on a 2007 list of fattest countries with a percentage of 61. 1 of its citizens with an unhealthy weight. This problem makes people become more health conscious and avoids consuming high calories food and sugar products. As a result, consumers tend to reduce their consumption of high fat chocolate products which directly affected the chocolate industry, or considered as threat to the industry. Nonetheless, this concern can also be the opportunity to the chocolate company to produce more of healthy chocolate products such as low-sugar chocolate. Obesity Rates in Canada and Other OECD Nations
Source:Organization for Economic Co-operation and Development c) Demographic Segment According to Statistic Canada, the population in Canada during the year 2005 to 2007 is continuously increasing. The percentage changes during these years also increased, especially in British Columbia. This can be the opportunity to chocolate companies to sell more of their products. Demand for chocolate are also depends on age structure. Baby boomers want quality over quantity According to the case, aging baby boomers tended to purchase more chocolate and emphasized quality and brand in their purchases.
In addition, the heavy user of chocolate tended to be established families, middle-aged childless couples, and empty nesters with high incomes. In 2006, most of Canada populations are age around 40 to 49 years old, which is the age of the heavy user of chocolate. In addition, females are more than males at this age and females tend to consume more confectionary than males. This could be another opportunity for chocolate companies to increase their sales. However, consumer preferences are changing. Children nowadays have more disposable income and willing to pay for chocolate products.
Population in Canada from 2005 to 2007, by Province and Territory | 2005| 2006| 2007| 2005-2006 %chg| 2006-2007 %chg| | persons (thousands)| | | Canada| 32,245. 20| 32,576. 10| 32,932. 00| 1. 03| 1. 09| Newfoundland and Labrador| 514. 4| 510. 3| 506. 5| -0. 80| -0. 74| Prince Edward Island| 138. 1| 137. 9| 138. 1| -0. 14| 0. 15| Nova Scotia| 937. 9| 938| 935. 9| 0. 01| -0. 22| New Brunswick| 748| 745. 7| 745. 6| -0. 31| -0. 01| Quebec| 7,581. 90| 7,631. 60| 7,687. 10| 0. 66| 0. 73| Ontario| 12,528. 50| 12,665. 30| 12,794. 70| 1. 09| 1. 02| Manitoba| 1,178. 30| 1,184. 00| 1,193. 90| 0. 48| 0. 4| Saskatchewan| 993. 6| 992. 1| 1,000. 10| -0. 15| 0. 81| Alberta| 3,322. 20| 3,421. 30| 3,513. 10| 2. 98| 2. 68| British Columbia| 4,196. 80| 4,243. 60| 4,309. 50| 1. 12| 1. 55| Yukon| 31. 9| 32. 3| 32. 6| 1. 25| 0. 93| Northwest Territories| 43. 4| 43. 2| 43. 5| -0. 46| 0. 69| Nunavut| 30. 3| 30. 8| 31. 3| 1. 65| 1. 62| Source: Statistics Canada: Canada’s national statistical agency Age Structure of Canada Population in 2006 Source:Statistics Canada: Canada’s national statistical agency d) Technological Segment Technology is an issue that is quite important to chocolate manufacturers.
Most companies are well informed of processing equipment developments through industry journals or trade shows. The majority of new technology is available, usually from machine manufacturers in the U. S. and Germany. Process improvements, new product formulations and ingredient improvements occur regularly within large multinational companies. These technological advancements are often shared with subsidiaries in Canada. The chocolate manufacture can be highly technical, requiring significant understanding of food technology, processing machinery, software and formulation technology.
Artificial sweeteners are one of the food technology innovations. The trend of health concern is growing toward fat-reduced chocolate products. Chocolate products are also difficult to manufacture in reduced-sugar or reduced-fat form without deteriorating quality and taste since these products have both sugar and fat as main ingredients. New ingredients are key drivers in the innovation of fat-reduced chocolate formulations. As time passes by, there are new and advance technologies available making chocolate production more efficient and help create cost saving.
If chocolate companies adopt these technologies to their production, this could be an opportunity for the company. However, as mentioned in the case, Rogers’ Chocolates have been using the same equipment for many years even though there are technologies available to prolong shelf life of the products and cut down on production time. So it depends on company’s policy and consideration of technology adoption. Furthermore, technological advancements can help reduce packing and shipping costs with less waste and more efficient distribution. These technological advancements could improve efficiency of chocolate productions.
In addition, new communication technologies provide good opportunity to the chocolate industry. Internet technology helps consumers to access advertising of chocolate products and be able to buy chocolate products online without going to the shop. In fact, Canadian people score very high on internet utilization; percentage of people who use web services such as online banking is higher than Americans. Canada ranks number 1 in the world for online banking with 428+ users per 1,000 internet users and still climbing. Rogers’ Chocolate Website e) Political/legal Segment
The United States Food and Drug Administration (USFDA) regulated standards for chocolate and cocoa products. These standards indicate the percentage of key ingredients that must be present in the products. However, chocolate manufacturers are requesting the USFDA to change the definition of the “chocolate” so that they can produce cheaper product and can still be labeled them as chocolate. If this is done, there would be an opportunity for the chocolate companies to produce more versions of chocolate products. Naming and ingredients of Cacao Products Regulated by USFDA Product| Chocolate Liquor| Milk Solids| Sugar|
Milk Chocolate| ? 10%| ? 12%| | Sweet Chocolate| ? 15%| ; 12%| | Semisweet or Bittersweet (dark) Chocolate| ? 35%| ; 12%| | White Chocolate| ? 20%| ? 14%| ? 55%| Source: U. S. Food and Drug Administration Canada governments will introduce a new refundable tax credit called the Working Income Tax Benefit up to $1,000 per year for families or $500 for individuals to help people over the “welfare wall”. The Working Income Tax Benefit has been effective for the 2007 tax year, with payments beginning in 2008. This tax credit would be the opportunity to the chocolate companies in Canada as people will spend more.
Another major issue that has been concerned is the federal Goods and Services Tax (GST). This affects the relative cost of chocolate. This tax applies to all retail single-serving chocolate products. This continues to be a serious concern of chocolate manufacturers. The chocolate market is highly competitive and the industry argues that even small price differences could change the consumer’s choice. Furthermore, Canadian Consumer Packaging and Labeling Act and Food and Drugs Act are another issue of concern to confectionery manufacturers.
The industry views the problem of mislabeled imports as a threat to the overall competitiveness because companies that do not comply with these requirements do not incur substantial labeling costs. f) Global Segment Global trade liberalization, were shaped in the Canada-United States Free Trade Agreement (FTA), the North American Free Trade Agreement (NAFTA), and multilateral negotiations that led to the evolution of the new World Trade Organization (WTO). These agreements have made trade between countries much more convenience. Many ingredients for chocolate are grown in very specific regions.
Trade agreements and organizations that open the distribution channels for the ingredients from many countries are very important as this reduce the transaction costs to import chocolate ingredients. Furthermore, these agreements and organizations can help eliminate trade barriers. As a result, the chocolate companies will have an opportunity to obtain the ingredients at cheaper prices and finally increase their overall profit margin. Furthermore, many countries around the world are becoming industrialized. As a result, new markets are available for all industries.
This provides a great opportunity for the chocolate and cocoa industry to expand their business to international markets and increase overall sales. Furthermore, by locating manufacturing operations in other countries, lower production costs can be attained. Locating manufacturing operations closer to or within a country where the product’s ingredients are found can significantly reduce production costs. Therefore, the chocolate and cocoa manufacturing companies are able to attain the savings if some of their manufacturing operations are outsourced.
However, there are some threats in global sector. Farming areas is continually being used to develop new residential, commercial, and industrial structures. This problem can potentially reduce the supply of cocoa and consequently cause prices for these goods to increase. West Africa accounts for approximately 70 percent of the world’s crop of cocoa beans. However, this region has been experiencing civil unrest. If tensions intensify beyond government control, the chocolate industry will temporarily loose access to their largest supply of cocoa and the price of cocoa might fluctuate.
Although other countries could still supply the cocoa, prices would increase if trade of cocoa is disrupted in West Africa. This could potentially increase production costs of chocolate and negatively affect the chocolate industry. Natural disasters happen around the world without warning. Especially in tropical areas where a majority of cocoa is grown, hurricanes and typhoons happen frequently. With this natural disaster, many cocoa farms could be destroyed and potentially disrupt the supply of cocoa for years. This would reduce the supply of cocoa and increase cocoa prices. Another factor is the exchange rate.
Exchange rates are continually changing and can at times become unstable. The chocolate industry relies on trade of their end product and ingredients across countries. If exchange rates change unfavorably, the market price of goods will increase and this may drive some consumers away. This is a potential threat to the chocolate industry because companies are left with additional inventory that is either sold for a lower profit margin or a loss. 9. 2 Industry environment a) Industry’s Life Cycle As stated in the case, the Canadian market size for chocolates was US$167 million in 2006 and was projected to grow at 2% annually.
Although the growth rate of the overall chocolate industry has been falling, the premium chocolate market was growing at 20% annually as many traditional chocolate manufacturers have been moving into the premium chocolate market and aging baby boomers (customers aged between 46-64 years old) bought more high quality and brand chocolates. For Rogers’ Chocolate, after the current shareholders acquired the company, Rogers’ had gone through a period of significant growth with more than 900% sales from the last two decades.
Nevertheless, the case stated that the chocolate sales had declined since 2004, but the overall company revenues were still growing slightly. As illustrated in the graph below, in the year 2005 to 2006, the sales was declining slightly. With the retail stores sales in fiscal 2007 information from the case along with the fact that 50% of the company sales came from Rogers’ retail stores, we could roughly calculate that the total sales of Rogers’ had increased by 1. 8% from 2006.
The case mentioned that Steve Parkhill who was hired as a new president of Rogers’ was asked by the board of directors to double or triple the size of the company within ten years. This implies that Rogers’ is seeking for opportunities for the company to grow even more. Furthermore, there were problems of out-of-stock for seasonal products as the demands for these products were high especially during Christmas time, with 24% of annual sales occurring in eight weeks before Christmas. This indicates that the demand for Rogers’ chocolate had exceeded the supply.
Moreover, the board of directors of Rogers’ were considering various growth options such as franchising Rogers’ outlets, going to online business, expanding into corporate gift market, obtaining more stores in Vancouver as the Olympics were coming up in 2010, extending product line in British Columbia, and expanding its business to outside of British Columbia. Besides, Rogers’ even considered an acquisition of another niche chocolate company or a joint venture with other firm to expand its market into greater area. For these reasons, we concluded that Rogers’ industry life cycle is in the growth stage.
Rogers Source: alife4info. co. uk/industryreportcontent. html In this stage, the demand for premium chocolate is growing rapidly because the numbers of Rogers’ new customers entering the market are growing. To illustrate, aging baby boomers or middle-aged people who were born after the World War II and the people with high incomes were purchasing more high quality chocolate and also emphasizing the chocolate brand. Consequently, the rapid growth in the demand will enable Rogers’ to increase their revenues and profits without taking the market share away from the competitors.
In addition, the rivalry between premium chocolate companies were not as tense as there were only some strong regional brands plus a few larger players in the premium chocolate segment in Canada. Nonetheless, these competitors do not compete against price but focusing on the unique quality and taste, so price war could be avoided in this industry, and there were still rooms to grow for Rogers’ if they would consider various opportunities such as expanding into online business and expand their market outside Canada.
In order to Rogers’ to increase sales and stay on in the industry, they would need more internal capacity to produce premium chocolates and other Rogers’ products and fill orders. b) Industry’s Driving Forces Health concern Consumers tend to concern more on chocolate itself and the ingredient of the chocolate they consume. In the current trend, the demand of the organic chocolate and more healthy chocolate (e. g. low or no fat, dark chocolate) is growing. Online trend Consumers tend to use and be more familiar with the internet. Buying products, accessing websites and social networks become more and more normal for consumers daily life.
Social responsibility Consumers concern more on the ethical and social responsibility of the company. If they can choose, they will choose the chocolate from ethical and responsible company and will not choose from companies that support unethical operations. C) Strategic Groups: The strategic groups in chocolate industry depend on these strategic dimensions: Quality This dimension refers to the quality of the chocolate. The price and the quality usually come along with each other; high quality comes with the high price and vice versa.
However, there are some cases that the company command price premiums over their quality because of their marketing, packaging, store and distribution; for example, in case of Rocky Mountain, Laura Secord, and Godiva. For homemade chocolate, there are varieties of price and quality. Distribution This dimension refers to how the companies distribute their chocolate products to the consumers. Mass distribution means they distribute to the mass market via several channels e. g. department stores, wholesaler. The specialty means they distribute their products via specific or their own channels e. g. retail stores. Home-made Chocolate
Premium Chocolate Godiva Purdy’s Bernard Callebaut Rogers’ Lindt Mass Chocolate Rocky Mountain Quality Laura Secord Hershey Mars MASS SPECIALTY Distribution LOW HIGH d) Strategic Types (from Miles and Snow’s) Rogers: The strategic type is “Analyzer” because Rogers’ offers many products that are two types of them: 1) The stable area is the premium chocolate products 2) The variable area is Rogers’ specialty items which include for example: chocolate-covered ginger, truffles, caramels or ice cream items.
Godiva: The strategic type is “Prospectors” because Godiva offer broad variety of products and innovate through the sleek and modern packaging. Bernard Callebaut: The strategic type is “Prospectors” because Bernard Callebaut offers variety of products and also innovates through packaging with superior quality and customization. Lindt: The strategic type is “Analyzer” because Lindt offers product on the focus customers 1) The stable area is bars and small bags for immediate consumers 2) The variable area is another “Ghirardelli” brand to focus on the pure chocolate market.
Purdy’s: The strategic type is “Prospectors” because Purdy’s offers variety of products and innovate through packaging and store displays. e) Key Success Factors There are many chocolate companies operated in the premium chocolate market and the competition is very intense. In order to be successful in the industry, there are many important key success factors for companies in the industry to consider. Brand Image and Awareness Consumer’s preference toward brand image is one of the key success factors for the chocolate companies.
The companies who have strong and beloved brand tend to be selected by consumers and be able to generate higher revenue. This is because the well-established brand image can basically ensure the product quality and consumers are more confident to purchase the products. Especially the premium products, the strong brand name over other competitors can help the customer to make a purchase decision much easier. There are many things that can portray the brand image such as logo, flagship store, packaging design, or advertising. These things are useful for the companies to increase brand awareness among target consumer Product Quality
In order to maintain the strong position in the premium chocolate industry, the superior quality of product is mandatory. Splendid quality of the products supports the premium image of the brand and help retaining the customers. Regular consumers for any particular brand always expect the good quality of the product for the brand they purchased. Premium chocolates are priced higher and consumers indeed expect higher quality of products. If consumers feel that the products they purchased have lower quality, they might change the brand for the next time.
However, good quality definitely comes with cost so manufacturers have to achieve competitive cost without deteriorating the produc