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Strategic Marketing : Evaluations Of Co-Brands

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Question:

Discuss about the Strategic Marketing for Evaluations of Co-Brands.
 
 

Answer:

Introduction

Strategic marketing is mainly used by an organization to create a strategy to better reach and satisfy customers by augmenting the profit and productivity of the company. Strategic marketing helps a company to identify the needs of the customers as well as to generate a marketing plan in order to achieve customer satisfaction. It also helps to improve the performance of the company and to create those programs that will help to improve relationship with the customers. Strategic marketing also helps to recognize one or more sustainable competitive advantages that a company has in the market (Wilson and Gilligan 2012).

Over 75 years ago, Godiva began as a small praline-making industry run by the Draps family out of their home in Brussels, Belgium.  Previously the company was called Chocolatierie Draps until Joseph Draps determined that he wanted to manufacture a more elite chocolate and open up a chocolate shop. Draps chose the name Godiva for his chocolate company. In the year 1966, the Draps family got in touch with the American company Campbell Soup Company. The Campbell Soup Company obtained one-third of a stake in Godiva in the same year. Godiva persists to be the leader in the premium confectionary category with more than 450 boutiques worldwide (Spiggle, Nguyen and Caravella 2012).

Analyse the company's history, development, and growth

Pierre Draps Sr. began making pralines in his confection workshop in Brussels in the year 1926. He had three sons who were young and their names were Joseph, Francois and Pierre Jr. They all worked for the family business from an early age. However, they took over the business when their father died. The family was intensely enthused by the legend Lady Godiva and named the company in her honour. The values that were associated with Lady Godiva were that she was courageous and generous. Godiva sweets are mainly defined by their look, smell and taste.

In the year 1946, Pierre Draps Jr. idealized his Truffle Original masterpiece that includes an intense dark chocolate mousse in fine dark chocolate that is rolled in pure cocoa powder. This chocolate was named as Godiva dark chocolate and this chocolate became iconic for the industry. Godiva was also appointed as an authorized chocolatier to the Royal Court of Belgium in the year 1968. Godiva established its role as an ambassador to its home country after receiving the prestigious Royal Warrant. It also established itself as a high-quality Belgian Chocolate industry. In the year 1966, Godiva travelled across the pond to the United States that made Godiva available to the most graceful departmental stores in the USA. Today, the company has more than 266 boutiques in the United States (Garrone, Pieters and Swinnen 2016).

 Godiva USA

Figure: Godiva USA

(Source: Mohegansun.com 2016)

The signature offering that is generally made by Godiva is a creamy “ganache” that is inserted into a replicated shell of high quality chocolate. The best-known creation by Godiva was Comtesse that was celebrated by Lady Godiva herself. The speciality of the chocolate was that the chocolate was a milk chocolate rather than a dark chocolate with a chocolate cream centre. Another most important speciality was Autant that was a hand tinted chocolate leaf mainly made from coffee and chocolate creams covered in milk chocolate. In the year 1972, Godiva opened global boutiques in USA that helped the company to gain importance, by the year 2016 Godiva has more than 600 boutiques, and it has presence in over 100 countries (McCabe 2015).

Godiva is mainly perceived among the premium brands that include Louis Vuitton and Estee Lauder. The ultimate goal of Godiva was to increase the sales goal and to make a turnover of $5 billion within 10 years. The USA plant in reading, PA, manufactures the same amount of chocolate for the US market as the Belgian plant manufactures for the rest of the plant (Mathias and Raspa 2016).

Analyze the external environment

Pestle Analysis

Godiva is identical with consumption of chocolate worldwide. It has emerged as an international brand with departments situated in USA. The following Pestle Analysis on Godiva will help to shed light on various external factors that have an effect on the chocolate industry (Grünig and Kühn 2015).

  Pestle Analysis

Figure: Pestle Analysis

(Source: Created by Author)

Political: In the context of the USA, Godiva had managed investment and payment to shareholders. The USA economy was hit by a serious downturn at the end of 1980s that resulted in the decline of sales of Godiva products. For example, Government and NGOs in the USA invest heavily in cocoa farmer development programs.

Economic: Though the economic downturn affected the expansion plan of Godiva, the sales of the company remained quite steady. For example, Godiva was able to gain a 30 percent increase in its annual sale.

Social: Godiva was mainly introduced due to opposition to alcohol that made the company so popular.

Technology: Godiva used the technology to elevate the online experience of the customers by launching ecommerce sites. Small team of Godiva had been limited in its aptitude to create and launch experiential content prepared with robust digital functionality (Winkelmeyer et al. 2016).

Porter’s five force analysis

Threat of new entrants (Low): As far as Godiva chocolate industry in USA is concerned, the threats of new entrants are low due to the existence of economies of scale as well as need for large capital wants. The existence of switching cost and the lack of access to distribution channels had also lowered the threat for new entrants for Godiva.

Bargaining power of buyers (High): The bargaining powers of buyers are largely increased for due to a large volume buyer in the market. Since, chocolates have a large number of substitutes so it becomes easier for customers to switch their brands. As a result, the buyers have the power to drive down prices (E. Dobbs 2014).

Porter’s five Forces

Figure: Porter’s five Forces

(Source: Created by Author)

Bargaining power of suppliers (Low): The bargaining powers of suppliers are relatively low as Godiva is an important customer to the supplier group. As a result, the supplier does not pose a threat of forward incorporation. However, due to concentration of the supplier group the bargaining power sometimes become moderate.

Threat of substitute (High): The threats of substitutes are always high when it comes to chocolate industry. Godiva has a high number of substitutes that includes non-chocolate snacks that are mainly preferred by health conscious people (Magretta 2013).

Competitive Rivalry (High): Godiva has two major competitors that include Lindt and Ghirardelli Chocolate Co. Intensity of rivalry is always high as both the chocolate companies are equally famous in the USA and they supply equally delicious chocolates.

The industry lifecycle model

 Industry lifecycle model

Figure: Industry lifecycle model

(Source: Annettestephen-marketingjournal.blogspot.in 2016)

Introduction: Godiva was introduced in the year 1926, when Pierre Draps Sr. started the manufacture of chocolates in Brussels mainly for sale in the local shops. At the introduction stage, there are no such threats from substitutes and in the year, 1926 there was hardly any well-known chocolate industries that produced delicious chocolates. As a result, the bargaining power of buyers also remained comparatively low. This was mainly because the buyers will try their best to get hold of the suppliers, as they are limited (Balland, De Vaan and Boschma 2013).

Growth: The growth of the industry started from the early 1970s and sales started to grow rapidly as it reached to $22 million within four years. However, in the growth stage the number of competitors also increases rapidly as other firms also enters the growing market. However, the power of buyers will remain comparatively low as demand exceeds supply. Godiva had also expanded its market in New York and America by setting up a second headquarter to expand its growth. As a result, Godiva earned profit due to increase of its growth (Stark 2015).

Maturity: At this stage, the bargaining power of buyers’ increases as the capacity matches or exceeds demand. Godiva began a chain-wide remodel of its stores in the USA. Godiva also initiated a new promotional campaign in order to boost sales for Valentine’s Day. However, at this stage losing a large customer could be negative to suppliers (Bos, Economidou and Sanders 2013).

Decline: The decline stage mainly poses new challenges as capacity exceeds supply. This in turn raises the power of the buyers. However, the weakest competitor of Godiva will withdraw from the industry that will lead to decline in the rivalry between industries. However, the threat of substitutes will become high for Godiva.

Strategic group maps and apply a framework to evaluate your closest competitors

A strategic group is a group of firms in an industry that follows the similar strategy along the strategic dimension.

Competitor Analysis:

The competitor analysis compares Royce and Laurent Bernard as Godiva two major competitors in terms of product range, traits of the chocolates as well as price and channel of distribution (Tarakci et al. 2014).

Identification of Competitors’ objectives

Brand

Vision

Traits

Price

Product

Channel of distribution

Lindt

The vision of the company is to make the finest product as well as to match the high standards with equally ethical and sustainability standards

1. Delicate

2. Fine

3. Quality

4. Smooth

 

$10 per 100g

1.Lindor Milk Stick

2. Lindt Milk Can

3. Hello Mini Sticks

4.Lindor Cornet Dark

5. Hello Diva Jewellery Box

1.Boutiques

2.Stores

Laurent Bernard

To spread the world about how truly brilliant chocolate can be

1.Craetive

2.Styled with Love

3. Quality

4. Delicate

$23 per kg

1. Cakes

2. Jams

3. Pralines

4.Chocolate Bars

5.Confectionary

 

1. Boutiques

2. Hotels

3. Banks

4. Online

5. Restaurants

Market Segmentation

Markets are usually categorized into diverse market segments that provides to a subgroup of individuals as well as organization that shares one or more characteristics that cause them to have identical product needs. The selection of a target market is a very vital decision for Godiva, as it requires significant effort as well as commitment to put into practice a suitable marketing mix. In the premium confectionary brand, Godiva continues to be the leader. Godiva mainly targets the wealthy retail markets as well as business market segment. The wealthy retail markets mainly targets the customers who prefer premium confectionary products as well as look for something beautiful to indulge. On the other hand, business market segment seeks for gifts for special events that include weddings and parties (Wedel and Kamakura 2012).

Analyse the company

SWOT Analysis

Strength:

Godiva is the world largest leader in chocolates. The company is known to have the best manufacturing and a broad distribution channel. It is also a highly expanded company operating in different parts of the economy.

Godiva is also known to have an eye-catching design that acts as a plus point for the company.

 Godiva Boutique

Figure: Godiva Boutique

(Source: Moda4.com 2016)

The image shows the first shop in USA that is featuring new global design of Godiva. This was mainly designed by New York based design firm d-ash design (Hollensen 2015).

Godiva has also following promotional strategy in order to expand its business. Godiva has launched a new wedding collection to make it more available to the individuals. It also introduced large wrapped chocolate bars, Godiva gems such as chocolate truffles and caramel-filled chocolates in the USA.

Weakness:

One of the most important weaknesses about Godiva is that the company diversifies their product. In other words, they become unsuccessful on numerous instances.

Porter’s Value Chain

 

Figure: Porter’s Value Chain

(Source: Preplounge.com 2016)

Inbound Logistics: These procedures related to Godiva are receiving, storing and distributing inputs internally. The main inputs that are used by Godiva that needs to be stored are cocoa beans. Cocoa bean is mainly available from large pods of cocoa. Godiva needs to build a good relationship with their suppliers in order to create value (Miller and Mork 2013).

Operations: These activities transform inputs into outputs that are mainly sold to the customers. The cocoa beans are mainly spread out on large tables to dry them. Once the chocolate is sold to the customers, the company creates value to the customers.

Outbound Logistics: With the help of this activity, chocolates are delivered to the customers. With this strategy, Godiva had decreased their price to $10 from $50 so that the customers can purchase the chocolates on the daily basis (Priem and Swink 2012).

Marketing and Sales: With the help of this strategy, Godiva will convince its customers to purchase the product from them rather than its competitors like Ghirardelli Chocolate Co. The type of marketing that is followed by the company is trade marketing. Godiva mainly worked to continued to exist the trend by marketing its products as an expensive gift items (Powell 2012).

Service: With the help of this strategy, Godiva will be able to maintain the value of their product.

VRIN framework

Is valuable?

Is Rare?

Is difficult to imitate?

Is organization organized around?

Result

Yes

Yes

Yes

Yes

Sustainable competitive advantage

Yes

No

No

Yes

Comparative advantage

Yes

Yes

Yes

Yes

Temporary advantage.

The rare resources that are used by Godiva include Grade A dairy butter and heavy cream that are used in large quantity. Any other American candy manufacturers rarely use this resource. They mainly use an exclusive Belgian recipe that makes the product different from its competitors. Under sustainable competitive advantage, the recipes are not possible to get imitated. Under comparative advantage, it is valuable however, it is not difficult to imitate the recipe (Talaja 2012).

Collaboration

Godiva mainly collaborates with the Ritz-Carlton and Beijing premium chocolate brand. This relation will prove effective, as with this collaboration, Godiva had also launched afternoon tea with a unique chocolate experience. The company also introduced eight iconic pieces of chocolate and a brand new flavor in order to celebrate 90 years anniversary. Godiva has a good lateral organizational relationship with its workers. The individuals have fun while working at Godiva. The individuals are also able to learn about different things while working at Godiva. Godiva also has a stronger relationship with the highly engaged customer base. For example, Godiva has recently opened a chocolate rewards club that is known as the Godiva Chocolate Rewards Club that offers customers with free chocolates. Godiva also shares a vertical organizational relationship with the higher up managers that helps the company to develop (Fukawa and Niedrich 2015).

SWOT and TOWS

Godiva has a large distribution channel and it involves eye-catching design that will provide an opportunity for the company to expand its product line. This will lead to expansion of the market and provide an opportunity to the company to open new boutiques in new countries. The biggest threat for Godiva is that most of the people are becoming health conscious and as a result, the individuals will mostly prefer to have fruits rather than chocolates. One of the biggest weaknesses of Godiva is that it becomes unsuccessful on numerous instances or occasion. Godiva mainly earn profits during festivals however, if these festivals drop the sale o the product will also drop (Hamel 2013).

Godiva can maximize most of their strength by building their brand image to increase their brand recognition. This will help Godiva to use most of their strength to take advantage of their opportunities. Godiva also needs to improve the variety of products it offers so that new entrants in the confectionary industry are not able to take away its market share. Godiva can overcome its weakness by introducing new alternatives and smaller and cheaper stock keeping units. As a result, Godiva will be able to overcome its threats by exploring new markets in the global market.

Corporate level strategy

Mission and goals of Godiva

Mission of Godiva is to expand business globally with high quality products and services. Product diversity is the goal of the company. It specializes in dark chocolates. However, gourmet biscuits, coffee and cocoa, party snacks, chocolate eggs are also sold in different boutiques and stores of the company. Keeping good finical position in the business along with the business expansion is another objective of the company (Ertek et al. 2013). The company emphasizes the taste, smell and quality of the product. It focuses more on product quality rather than quantity.

Nature of subsidiaries, acquisitions and portfolio investment

Godiva first started its business in Belgium. During 1966, it set up business in USA. In order to expand business in market, the company has taken several strategies like merger and acquisition with another global company. Yildiz Holdings from US-based Campbell’s Soup Company acquired Godiva during 2008. This year has been marked as the year of globalization for Yildiz Holdings. As Godiva is a global company, this acquisition has facilitated the acquirer company to have a global presence. The organization strategies of management for both the companies were different. Yildiz Holdings is privately owned and entrepreneurial company (Cavusgil and Cavusgil 2012). Therefore, management style was different from that of Godiva. As Godiva was a global name, owner of Yildiz Holdings kept the brand name of the product same due to recognition. The acquisition was successful, as Godiva became top performing retail company during 2008 despite having global financial crisis.

During 2014, the Godiva maker Yildiz Holdings bought DeMet’s Candy Co for $221 mn. The acquisition was successful for Godiva. The new acquisition has helped the company to expand business in North America. This investment has helped the company to make its asset base strong. The acquisition was successful as the corporate objective of both companies was similar. Both the companies were well-recognized and strong brand in North America. The acquired company had growth rate before merger with Yildiz Holding. Distribution channel of the acquired company was extensive in North America (Eisner, Baugher and Korn 2012). Therefore, Yildiz got advantage for expansion of existing business. Godiva has been befitted in many ways. It has the market share of DeMet’s Candy Co, its skilled laborer, company’s assets. During 2013, the Yildiz Holding made $8 billion revenue after making 10 joint venture and acquisition in total. However, during 2013, Godiva’s share was dropped from 56% to 50% (Cho, Fiore and Russell 2015).

Exchange of resources

After acquired by Yildiz Holding, the new owner transferred the resources from Yildiz Holding to Godiva. The resources have been utilized to improve performance of the company. The main ingredients of the Godiva chocolate are cocoa, which is imported from Africa, central and South America and a few parts of Asia. This company collects the ingredients directly from farmers to get the resources at a lower cost. The unique flavor of chocolate used in Belgium based subsidiary is imported in USA to keep the taste of Godiva product unique worldwide (Lamb, Hair and McDaniel 2015). This company exchanges resources across different subsidiaries.

 

Business level strategy of Godiva

The business level strategy of Godiva includes product differentiation, market segmentation and cost leadership in the market. In order to fulfill the vision of Godiva, the company uses strategy such as focusing on best quality chocolate, which is accessible at reasonable rice in the market. Being a global leader in the market is another business strategy of Godiva. The strategy of using best quality chocolate indicates that the company gives priority to the innovation and new product development at a regular basis. Adding local flavor in the market is a part of the brand strategy of the company (Bateman 2015).

The distribution channel of the company is very strong for years. Online shopping facilitates the technologically advanced consumers. Attractive graphics and design of the official webpage are made in order to influence the consumers to purchase the products. Online shopping facilities make the products accessible to the consumers (Shen, Fishbach and Hsee 2015).

Market segmentation of Godiva is done based on different types of customers. There are experimenters among the customers, who are impulsive buyer. This type of customers has no choice of planning to buy in future. They take decision based on the product price. Some customers of Godiva prefer quality of the product. There are customers, who like to get gifts with chocolate package. Utilizing the market segmentation theory, the company has been able to reach the broad markets in the world (Anderson and Martins da Silva 2015).

Cost leadership is a common business level strategy. A company is said to have cost leadership, when it has economies of scale, economies of scope in production. These factors facilitate the firm to keep cost of production at low level. Low cost further facilitates the firm to keep product at competitive level. Economies of scale of a firm indicate that the firm has falling average cost over the production level of single type of product. Economies of scope is said to have, when the firm has low average in producing different types of products. Godiva has both economies of scale and economies of scope. It has economies of scale in chocolate production as it can import ingredients from different region of the world at low cost. It has economies of scope as it produces different types of products mentioned above at a lower cost. Therefore, it can be said that this company has cost leadership in the market (Leong et al. 2015).

Godiva has Competitive risk in the global market. However, the threat is not high. Due to having cost leadership of Godiva, new entry in the market is not easy. Lindt & Sprungli is emerging Swiss chocolate company, which wants to overtake Godiva in future. During 2015, it has been able to make a global presence by opening 50 shops. This company is trying to expand its business share through merger and acquisition policy. Lindt & Sprungli has increasing sales growth over the years. The only drawback of the company is its high cost structure. The increasing cost of production is due to having high price of raw material. This company has improved in 2015 despite having global economic slowdown (ft.com, 2016). Therefore, Godiva is likely to get tough competition from Lindt & Sprungli.

Product distinctiveness of Godiva lies in the product packaging. Godiva automatically offers classic boxes with chocolates. Its close competitors like Royce and Laurent Bernard offer such packaging however, not as the standard of Godiva. The design of the chocolate are innovated at the time of different occasions. Product differentiation is another competitive strategy of the company (Huynh and Olsson 2015). Along with varieties of chocolate, the company offers coffee product in different retail outlet of Godiva.

Godiva uses skim pricing as a business strategy. Skim pricing is used by a company to set the product at a high level initially and reduces the price subsequently. This strategy is chosen by the company to earn high profit margin foregoing large sales volume. This skim strategy is taken to focus on differentiated products.

Business strategy

According to Raymond Miles and Charles Snow, the business level strategy can be categorised into four types such as prospector, defender, reactor and analyzer. The company has followed prospector strategy in business operation. It took strategy of continuous innovation in the product development and business expansion in new markets since its foundation. It has taken numerous risks and challenges in business operation in order to progress in the growth process. From a prospector, the company has developed as an analyzer. It has maintained market share and has created the prospect of innovation. Overtime, the company has maintained customer base in all the market, where it has strong presence.

Comparison with corporate strategy

In reality, corporate strategy complements the business level strategy. Business expansion through merger and acquisition, addition investment, partnership are parts of corporate strategy. These strategies are required to support business strategy such as product diversification, pricing strategy, market segmentation. Corporate objective would be successful if the business strategies are implemented properly (Leong et al. 2015).

Analysis of business strategy linking with SWOT analysis

Main strengths of Godiva are package design, broad distribution channel and promotion strategy, which are part of its business strategy. As the company provides premium product at a premium price, this provides little connection with the local market. There is instance that the company has failed in case of product diversification. Sale of Godiva ice cream during 1999-2007 was dropped after launch due to having problem with the partnership firm. The company has opportunity to expand business in the developing companies. Economic downturn, rising competition are threats to the company, which have impact on the sales and required business strategy of the company (Cho, Fiore and Russell 2015).

Linking with stages of the industry lifecycle

This company has experience about different level of business strategies. After the start of the business, it has a long period of growth phase. Economic downturn in USA and across the world is resulted in low profit margin during that period. Due to having competitive disadvantages, the company faced decline stage.

Available strategy option

Under the skim pricing, the company lowers the price of the product at the later stage. It may happen that some new customers, who take decision-seeing price, may choose alternative option compared to Godiva. Bundling strategy can be utilized in marketing plan. Price bundling allows the firm to offer various products within a same package at a discounted price. This strategy can be useful technique in market segmentation and product diversification.

Recommendation

Godiva has risk of rising rivalry in the USA market. Therefore, the mission and vision would be strategic in the present context. Despite having strong brand value, Godiva has less market share compared to its rivals. More synergies with similar group may enhance business condition. For the success of business, asset and resource management is essential. The company can create another brand name to explore business in developing countries. Due to high quality, many customers think those low-income groups are excluded in the market of Godiva. Therefore, low product price can help to access greater market.

It is recommended for the company that it needs to play the role of analyzer rather than a prospector. It is required to hold the customer base in order to expand the business further. Old customers are important part of market promotion of new product. Continuous update of existing products is necessary for sustainability. According to analyzer strategy, it needs to take strategy according to changing market environment.

Conclusion

It can be thus concluded that the bargaining powers of suppliers are relatively low as Godiva is an important customer to the supplier group. Though the economic downturn affected the expansion plan of Godiva, the sales of the company remained quite steady. It has also been concluded that Godiva uses skim pricing as a business strategy. Skim pricing is used by a company to set the product at a high level initially and reduces the price subsequently. Yildiz Holdings from US-based Campbell’s Soup Company acquired Godiva during 2008. It has also been concluded that Godiva mainly collaborates with the Ritz-Carlton and Beijing premium chocolate brand. This relation will prove effective, as with this collaboration, Godiva had also launched afternoon tea with a unique chocolate experience. The design of the chocolate are innovated at the time of different occasions. Product differentiation is another competitive strategy of Godiva.

 

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My Assignment Help. Strategic Marketing : Evaluations Of Co-Brands [Internet]. My Assignment Help. 2017 [cited 26 January 2020]. Available from: https://myassignmenthelp.com/free-samples/strategic-marketing-evaluations-of-co-brands.


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