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Posted on October 12th, 2012, by

The Real Chocolate Company is a steadily growing company operating in the chocolate industry. The company was traditionally focused on the production of chocolate of the high quality with the use of materials of high quality. Today, the company operates on international markets and develops the strategy of the further international market expansion, with the help of which the company can increase its market share and improve its marketing performance. The company focuses on the production of chocolate and related products, which are distributed through the retailers’ networks in different countries of the world. In such a situation, the company aims at the market expansion by means of the improvement of the quality of its products and formation of a positive customer experience that implies customer satisfaction and the development of customer loyalty. As a result, the company’s mission is to maintain high standards of production and develop a positive public image of the company, which should be associated with products the Real Chocolate Company is selling. At the same time, the company is concerned with the use of raw chocolate materials and natural products with the minimal use of artificial supplements and ingredients.

External analysis

On analyzing the current situation in the chocolate industry, it should be said that the industry has good prospects for the growth and steady development because the elimination of fiscal barriers and the development of free trade encourages the production of chocolate and the growth of sale rates due to the growth of international cooperation and extension of business. In this respect, it should be said that the current situation in the market is favorable for the international market expansion. In fact, it is necessary to take into consideration several factors. First of all, the raw ingredients for the production of chocolate are mainly produced by developing countries, while the Real Chocolate Company is based in the UK. Consequently, the company needs to import products from developing countries for the production of chocolate and related products. In the past, the import opportunities were limited substantially because of high fiscal barriers which prevented the export-import operations en masse. Today, the fiscal barriers have been eliminated due to the introduction of free trade agreements which simplify the trade between countries and minimize financial losses of companies in case of import-export operations. As a result, the Real Chocolate Company can benefit from the emergence of free trade because the company can decrease the costs of production as the price of products imported from developing countries has decreased significantly. In addition, the company can increase substantially the production, which is an essential condition for the ongoing international market expansion. Nevertheless, in such a situation, the company still faces a problem of the growing competition.

Threat of new entrants

Today, the company faces a threat of appearance of new companies that will challenge its current position. In this respect, the emergence of new companies in developing countries can become a serious problem for the Real Chocolate Company because these companies often have larger access to products and ingredients used in the production of chocolate and related products since they are located close to regions of production of these ingredients. At the same time, the deterioration of the marketing situation in other industries forces large multinational corporation to invest in new industries where they can count for a relatively high and stable demand. In this respect, the chocolate industry is highly prospective that stimulate large multinational corporations to enter this industry.

Threat of substitutes

At the same time, in spite of the popularity of chocolate, the Real Chocolate Company is currently facing a threat of the appearance of new products that substitute chocolate. To put it more precisely, many companies substitute traditional ingredients used in the production of chocolate, such as cacao, milk, etc. by other products which are less expensive but which may be condition to substitute the traditional chocolate, which is the main product of the Real Chocolate Company. As a result, the company can lose certain share of its market because of substitutes. In addition many companies producing chocolate refuse form using such ingredient as sugar replacing it by substitutes that also changes the characteristics of their products and forces the Real Chocolate Company to adapt new technologies, since sugar-free products are growing to be more and more popular among customers today.

Suppliers and buyers bargain power

Furthermore, the consumption of chocolate and related products steadily increases in the world. The growth of consumption naturally stimulates chocolate companies to increase their production. At the same time, the increase of the production and the development of free trade contributes to the growth of the competition in the chocolate industry. This means that the Real Chocolate Company is currently facing a problem of the growing competition, especially from the part of the companies which have renowned brands. Such companies can enter new markets and take leading position to the popularity of their brands. In this respect, the implementation of the strategy of international market expansion by the Real Chocolate Company may confront serious problem, if the company fails to take a competitive advantage over its major competitors. In actuality, the growth of the competition implies that the Real Chocolate Company should focus on the quality of its products, which traditionally was one of the major priorities of the company. Due to the high quality of its products the company can get a strategic advantage over its rivals, but it is important to understand that the improvement of the quality will inevitably lead to the increase of the costs of production, while the latter will provoke the increase of the price of chocolate and related products produced by the Real Chocolate Company.

Furthermore, in the contemporary business environment, the Real Chocolate Company has got larger opportunities to develop its business worldwide that means not only the market expansion through the increase of sales and extension of the markets, but, it also opens larger opportunities for the enlargement of production facilities of the company. To put it more precisely, the current situation in the world market stimulates leading companies based in developed companies shift the production to developing countries, where the costs of production are lower due to the lower price of the labor force. Consequently, the shift of production to developing countries can decrease the costs of production and, what is more, they can get access to ingredients and products which are needed for the production of chocolate right at the place where these products are cultivated. In such a situation, the shift of the production facilities to developing countries becomes one of the strategic directions in the development of companies operating in the chocolate industry.  Moreover, the local suppliers can provide the company with a large amount of ingredients used in the production of chocolate at lower prices, saving costs on transportation.

Chocolate becomes very popular product and due to the increase of its production, chocolate becomes available to large masses of people worldwide that increases its production worldwide. In such a situation, the increase of production naturally increases the competition and the chocolate industry turns out to be in a kind of vicious circle where the enlargement of the market and growth of production lead to the growth of competition, while competition raises new challenges and problems companies need to overcome to improve their marketing performance.

Internal analysis

At the same time, it proves beyond a doubt that, in order to improve the marketing performance of the company, the use of favorable conditions in the international market and chocolate industry is not enough. In this respect, the effective organization of the work of the company is needed since it lays the foundation to the increase of productivity and efficiency of work of the company. The development of the Real Chocolate Company is characterized by the steady growth which has been traced in recent years. In this respect, it is necessary to take into consideration several factors which contribute to the development of the company and steady improvement of its marketing performance.

TOWS analysis

The company has a number of strengths (see Table 1). First of all, the company has an extensive experience in the chocolate industry which allows the company to use effective approaches to develop its business. In fact, experience is crucial since it also contributes to the growing customer confidence in the reliability of the products of the company and their quality. In this respect, it is possible to speak about the formation of a positive image of the brand of the company since the brand history is an important factor that contributes to the customer confidence in the brand. Therefore, the company can count for a large number of loyal customers who get used to its brand and, thus, they are ready to buy its products.

Furthermore, the company has a low personnel turnover that contributes consistently to the stable work of the company. In fact, employees are certain in their future in the company. Therefore, they can work productively and efficiently since they do not face any threats of job cuts or deterioration of their position in the company. At the same time, they get used to work as a team since the low personnel turnover contributes to the formation of positive interpersonal relationships since people get accustomed to each other as they work together for a long period of time. In addition, it is important to remember that a low personnel turnover improves the organizational culture because the longer people work in one and the same company they get used to the organizational culture, they learn the rules and norms which are accepted by the company. As a result, the efficiency of work of the personnel increases even more when they share the same values, norms and principles. In such a situation, the low personnel turnover proves to be highly beneficial for the company.

In addition, it is important to remember about the high professional level of managers and employees working at the Real Chocolate Company. The company is concerned with the training of the personnel and, therefore, it focuses on the increase of the professional level of its employees through regular training, which develops professional skills and abilities of employees. Today, training of employees may be a key to success of the company, especially when the quality of products is extremely important. In this respect, it is worth reminding that the quality of products is an integral part of the marketing strategy of the Real Chocolate Company.

However, the company has certain weaknesses, such as the problem of adaptation of new employees abroad to company’s standards and organizational culture. Furthermore, many leading specialists and managers are unwilling to transfer to other countries, where the company launches its business because they are not willing to change their environment and work style.

Nevertheless, the company still has good opportunities for the ongoing international market expansion. It can use its experience and current position in the industry to develop business in new countries. In this respect, the popularity of the company’s brand can be very helpful to facilitate entering new markets. Furthermore, the company can keep improving the quality of its products due to the professional work of its employees.

On the other hand, it is important to remember about existing threats, such as the growing competition. In fact, the company needs to compete with its traditional rivals as well as with new ones which emerge due to the process of globalization. In addition, rivals of the Real Chocolate Company tend to decrease costs of production because use the full potential of free trade and move production to developing countries where costs of production as well as costs of labor force are substantially lower than in developed countries.

Financial analysis

On analyzing the financial position of the Real Chocolate Company, it should be said that the company is developing steadily. Its financial equity ratio clearly indicates to the stable development of the company since it has increased from 26,2% to 32,7%. In such a way, the company increased its financial equity ration which is normally used to define the company financial assets. In fact, the company has a relatively high equity asset ratio that implies that the Real Chocolate company can develop steadily in the future. At this point, it is worth mentioning the fact that the stability of financial assets lay the foundation to the overall stability of the company. In this respect, it is extremely important to avoid unnecessary fluctuations, which can change the financial position of the company in the nearest future consistently.

Furthermore, the company’s return on assets increased by almost 5% within a year in 2007 that indicated to the growth of the profitability of the company’s assets. In actuality, it is a very important trend which indicates to the progress of the company because the growth of return on assets ration implies a positive trend in the profitability of the company. Its assets become more profitable than they used to be in the past. Therefore, the company can count for the stable growth in the future on the basis of its assets which bring higher profits. In this respect, it is possible to speak about an effective use of capital of the company since the growth of the return on assets ration implies that the company increases its capital intensity. In other words, the company uses its capital more effectively, without a consistent increase of the capital.

At the same time, it is important to lay emphasis on the fact that the company’s gross profit margins did not change consistently within the year from 2006 to 2007. This means that the company failed to increased its overall profitability consistently. In such a context, it is possible to speak about a steady development without financial breakthroughs and exorbitant profits. On the other hand, its revenues remain stable and high to maintain a positive marketing performance. In this respect, it is worth mentioning the fact that the company does not increase its fixed assets costs that opens larger opportunity for the development  of flexible marketing strategy and ongoing reduction of costs.

Nevertheless, the net profit of the company keeps growing since it increased by 0,5% from 14,5 to 15% in 2006 and 2007 respectively. In actuality, this means that the net profit of the company, after taxes, grows steadily and it is relatively high, taking into consideration financial problems many of the company’s competitors have already faced within the discussed timeline. In fact, it is very important for the company to preserve its net profits since it allows to develop its marketing strategy on the ground of its current profits.

At the same time, the increase of asset turnover from 1,47 to 1,71 in 2007 is quite disturbing because the company increased its asset turnover that means that the company can fail to develop steadily. In fact the stable development of the company is based on the stability of its assets the rapid growth or downfall of assets can influence expenses as well as revenues of the company. On the other hand, consistent change of asset turnover indicates to the fact that the company can undertake quite risky policy and use its asset turnover to increase its profits, but, simultaneously, the company can suffer from considerable losses if the asset turnover proves to be ineffective and does not bring considerable profits.

Nevertheless, the company has no long term debts that means that the company can develop steadily without consistent financial losses in the nearest future. Potentially the company can borrow capital due to its zero debt, but it is important to avoid the increase of the debt, especially, when  the world’s economy has undergone a serious economic crisis. In actuality, zero debt is a marker of the stability of the company. In such a context, the slight decrease of quick and current ratio do not evoke any serious apprehensions since they cannot deteriorate the financial position of the company consistently.

Current problem analysis

One of the major problems the company is currently facing is the problem of the competition which becomes a serious challenge to the Real Chocolate Company. In fact, the company needs to expand its market share through expansion on international markets. However, the successful implementation of this strategy implies substantial investments the company needs to make in order to enter new markets, overcome existing marketing barriers, promote its products to draw the attention of customers and, thus, take a good position in a new market. In such a situation, the competition from the part of the renowned brands is a serious problem because the Real Chocolate Company has to gain the popularity to increase its market share since customers prefer to buy products of companies, which brands they can easily recognize. At the same time, customers have certain apprehensions when they buy products of companies, which they do not even know.

Naturally, the competition is a problem that will always exist in the market, unless the company takes the monopolistic position in the industry. In the case of the Real Chocolate Company, the prospect of taking the monopolistic position is very obscure and uncertain because of high competition and existing legislative norms, which protect major target markets of the company from monopolization. At the same time, the competition growth is a natural consequence of the implementation of the international market expansion strategy. In fact, the company cannot expands its market share and enter new markets without facing new challenges from the part of new competitors.

In addition, the strategy of international markets expansion has a number of other problems, such as the problem of the adaptation of the company to local culture. In fact, this problem emerges because of the growing cooperation between the Real Chocolate Company and its foreign business partners as well as because of the localization of the production. The latter is particularly important if the company carries on its strategy of the international markets expansion because without the localization of the production the company will face a problem of growing costs of production that will affect the price of its products and, eventually, it will put the company in a disadvantageous position compared to its major competitors.

Generation of strategic options

Basically, the analysis of strategic options available to the Real Chocolate Company implies several options which may be applied in a combination to maximize their effectiveness and complement each other.

Quality improvement

Taking into consideration the fact that the major problem of the company is the high level of competition, it is possible to focus on getting the strategic advantage over competitors through the improvement of the quality of products of the company and decrease of costs of their production that will lead to the decrease of the price of company’s products. To put it more precisely, the company needs to maintain reliable channels of import-export of products which are needed for the production of chocolate and related products of the high quality and their further distribution worldwide. This goal may be achieved through the development of closer cooperation with companies as well as farmers located in developing countries. For instance, the Real Chocolate Company can sing direct contracts with farmers cultivating cacao which is used in the production of chocolate.

It is possible to continue implementing strategies the company is using at the moment. To put it more precisely, the company can continue to improve the quality of its products, which is particularly important in a highly competitive business environment. In fact, the quality of products contribute to the formation of positive customer experience and increases customer satisfaction since the better is the quality of the product the more satisfied customers are. As a result, the current orientation of the company on the improvement of the quality of products and the use of ingredients of the high quality can play a determinant role in the successful competitive struggle conducted by the company. At the same time, it is necessary to remember about the localization of production because the increase of quality leads to the growth of costs of production which can be minimized if the production is localized.

Localization of the production

Furthermore, the localization of the production may be another option that can be used by the company to improve its competitive position. At this point, it is worth mentioning the fact that the international market expansion of the Real Chocolate Company naturally increases the costs the company has to spend on transportation if the production is located in the UK only, for instance. Instead, in the contemporary business environment, the company has to move the production to places where the products are supposed to be solved and, preferably, near the sources of supply of ingredients for the production of chocolate and related products.

Development of effective organizational culture

Finally, the company needs to develop the organizational culture which should be grounded on universal principles, which are acceptable for representatives of different cultural groups. In fact, it is possible to introduce simple, comprehensible and effective norms and principles, which do not contradict to cultural norms of specific groups of people working at the company. In this respect, it is also possible to recommend employment of local specialists and managers to facilitate the implementation of the strategy of the localization of production because local managers can be more effective than transferred ones in relationships with local employees.

Evaluation of strategic options

In fact, among the variety of options discussed above it is possible to focus on the localization of production along with preservation of existing quality standards. In such a way, the company will be able to save costs of production, decrease the price of the product, shape a positive public image and increases its market share in the local market. Basically, other strategies may be used as supportive. For instance, the development of cooperation with local producers may comprise a part of the localization strategy applied by the company since local suppliers can supply their products to local facilities of the company.

Quality improvement strategy

Acceptability

The strategy is important in the contemporary business environment and it should be applied to maintain the competitive position of the company. The company was traditionally oriented on the quality management. Hence, the quality improvement strategy perfectly meets the requirements of the company and its traditions.

Suitability

The strategy has been already started to be implemented in the company. Therefore, the strategy is likely to be successfully implemented.

The extensive experience of the company along with growing competition will contribute to the constant improvement of the quality.

Feasibility

The company has financial and human resources to implement this strategy successfully. The high level of professionalism contributes to the improvement of the quality with minimal investments.

Localization of the production

Acceptability

The localization of the production is acceptable strategy on the condition that the company keeps expanding its business internationally.

Otherwise, the localization of the production will be ineffective since it will need new investments without prospects of the further growth.

Suitability

The strategy is suitable for the company because the Real Chocolate Company operates worldwide and it needs the localization of production to become more competitive and save costs of production.

Feasibility

The strategy can be cost efficient since the international market expansion naturally leads to the development of business in new countries.

Hence, localization will lead to the employment of local personnel and use of local products that will save costs, although the question of the quality of products arise since they have to meet the company’s standards

Development of effective organizational culture

Acceptability

The strategy is acceptable because the company has its own organizational culture, norms and traditions which define the work of employees within the company. They need to spread its norms and traditions and help new employees get integrated in the corporate culture.

Suitability

The strategy can be applied successfully since it meets the current needs of the company. In addition, the company has the basis on the ground of which it is possible to develop the organization culture.

Feasibility

The company does not need substantial investments in the development of the corporate culture. Therefore, the company can use its existing resources to implement this strategy effectively, especially due to professionals who have been working within the company for a long period of time.

Description of selected strategy and action plan implementation

In actuality, the strategy of the localization of production implies that the company will move the production facilities toward major target markets of the company, where it can use local products provided by the local suppliers. At the same time, the localization production of production implies the employment of local specialists, their training and introduction of the company’s quality standards. In addition, the company needs to use local products of the high quality, which may be provided by local farmers and suppliers. The localization of production can contribute to the formation of a positive public image of the company since, while employing local specialists, the company will get support from the part of local communities that will benefit from the development of production facilities by Real Chocolate Company.

The action implementation should start with the research of the markets, where the company is going to launch its new production facilities. It is important to clearly define supply and demand correlation and the power of local suppliers. Secondly, it is necessary to recruit local specialists and train them to work in the company’s organizational culture to meet its high quality standards. Thirdly, the company needs to introduce a system of control over the quality of production. In this respect, quality control officers can fulfill this task. In addition, it is important to find local suppliers as well as distributors. Finally, it is important to promote products and brand of the company and after that products can be introduced to the local market en masse.

Conclusion

Thus, in conclusion, it should be said that the Real Chocolate Company has good prospects for the further steady development. At the same time, the company will confront the problem of the growing competition. But this problem can be solved through the efficient marketing strategy, namely localization of production and high quality of products. In such a way, the company will save costs and develop customer loyalty.

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