The Management Skills to Extract Relevant Details When Conducting Strategic Analysis ?
The meeting with CEO of Cocoa Delights’ has provided some valuable insights about the present state of affairs in light of which the marketing initiatives of the organisation, both present and future, have been analysed and evaluated. Upon analysis, few suggestions have been provided.
Present state of the organisation and situation analysis
Cocoa Delights’ is in the business of manufacturing and marketing gourmet dark chocolates having a chain of 15 stores in the city of Melbourne, Australia, and specialises in manufacturing products from handmade dark chocolate.
Mission, Purpose, Vision and Values
Vision: Manufacture and market gourmet dark chocolates through a chain of 15 stores Melbourne and specialise in handmade dark chocolate products.
Mission: To become the national retail brand satisfying customers with an array of unique, superior quality dark chocolates through expansion of retail chain across the country along with providing excellent customer service.
Values: The mission is guided by following major values
- Maintain exceptionally high quality of products
- Emphasis on superior quality of customer service
- Enhance customer satisfaction through quality and uniqueness of products
- Strong on research, development, innovation and creativity for bringing in unique products
- Committed towards employee growth and development through encouragement of self-directed teams, promoting leadership, and providing a safe work environment.
- Promotion of stakeholders’ values through adherence to professional and ethical standards of conduct.
Purpose: Maximise stakeholders’ value by becoming a nation-wide reputed retail brand in the chocolate manufacturing industry along with offering significant value to the customers by encouraging maintainable environmental practices.
Strategic Direction and Objective
- Become a national brand
- Expand and strengthen retail foothold
- Gain excellence in customer service
The objective of the Company is
- To become a national retail brand, from a regional brand, presenting a range of exceptional, superior quality dark chocolate for its customers over the next 5 years.
- To expand its retail chain by increasing the number of retail stores in Melbourne to 22 and establishing 100 stores across Australia by 2016.
- To provide incomparable customer service from the highly skilled and dedicated staff.
- Higher revenue generation and expansion of profit margin to enhance stakeholders’ value
It is necessary to understand both internal and external environment of the Company before evaluating its marketing strategies.
Imposition of taxes are decided by the contemporary government. The relative stability of the Government imparts stability to the business environment. Imposition of import duty on chocolates imposes cost on all those industry players who have their manufacturing plants located outside Australia. Presently rate is 5% (Pitney Bowes, 2017). GST is levied at 10% (Sivasailam, 2010). Chocolate and confectionery manufacturers continue to draw advantages from the politicization efforts and public relations initiatives undertaken by apex industry organisations such as Confectionery Manufacturers of Australasia (CMA) (Sivasailam, 2010).
Economic factors which normally influence businesses include level of employment, confidence of the consumers, prevalent of interest and the existing levels of inflation (Sadhye, 2014). Economic recession, declining disposable incomes of the masses, volatility in commodity prices and rising import competition all have the potential to adversely impact the industry which had remain resilient to these challenges (Sivasailam, 2010).
Increasing instances of obesity, diabetes especially among children and young adults (PESTLEANALYSIS CONTRIBUTOR, 2014) had impacted demand for chocolates adversely all-round the globe and Australia has been no exception
Technological factors consisting of technical aspects such as Research & Developmental activities, automation of production methodologies, new production methodologies, knowledge incentives and the rate of change in technology (Sadhye, 2014). The industry has benefitted from rationalisation and improved technology in terms of higher productivity (Sivasailam, 2010).
Perception of the Australian regulatory requirements are the key to successfully running any business within the country. These guidelines are designed in a manner that guarantees fair competition, adequate fortification for the related parties, and veracity of the market. Business laws in Australia are simple and flexible thereby making the exercise of starting a business in the country simple and easy for all (Sadhye, 2014). Prohibitions related to shipping, food safety standards and norms, limitations regarding packaging of products or special packaging norms are likely to apply to articles that have to be kept in a temperature controlled location and hence affect the industry (Pitney Bowes, 2017).
Regulations related to dumping and disposal of waste products have a bearing on the manufacturing techniques that are adopted by the industry. Growing environmental concerns have also been the reason behind innovation in packaging material.
Bargaining power of buyers:
The bargaining power of buyers is pretty strong owing to the availability of wide array of products from regional, national and international players leading to low levels of consumer loyalty
Bargaining power of sellers:
Significantly low due to presence of large number of players both local and international and low brand loyalty of customers due to insignificant switching costs (koujok, 2013).
Threat of new entry:
Moderate due to high initial capital requirement, strong governmental regulations pertaining to the food industry, requirement of special expertise and knowledge for offering wide range of products (koujok, 2013).
Threat of Substitutes:
Growing due to increasing health consciousness among the consumers preferring healthier alternatives such as fruits (IBISWorld, 2016).
Rivalry among existing players:
High due to price wards, advertising campaigns, quality and range of products and high costs of storage (koujok, 2013).
Legal & Ethical Requirements
The discussion with the CEO revealed that the government intends to have the country of manufacture visibly mentioned on imported products. A practice that has been long followed by Cocoa Delights as is proudly presents itself as all Australian made contrary to the practices followed by some of its competitors who continue selling their chocolate products which have been imported from countries that have poor reputation as far as quality and employment ethics are concerned.
The Company is legally and ethically bound to provide and health and safe working environment to its employees, provide superior quality of products following food safety and security regulations and maintain high quality of inputs and high quality and hygienic manufacturing conditions.
Impact of the organisational strategic direction on current marketing activities
The Company will concentrate on gaining national presence through expansion of its retail chain by scaling up of the number of Cocoa Delights’ stores across the country starting with Melbourne and it is undertaking nation-wide advertisement campaign for which it will employ larger advertising agencies that have a wide national reach. Cocoa Delights’ is an already established brand in Melbourne. It will be foraying into capital cities across the nation and for that an aggressive campaign and strong PR initiatives are absolutely imperative.
The Company is aware of the socio-economic environment and it is making all efforts at strengthening its advertising campaign and PR initiatives to establish itself as a popular brand in gourmet chocolate. It has spent heavily on radio advertising, magazine and direct advertising campaigns. The broadband rollout would be a part of Cocoa Delights’ internet marketing strategy.
A SWOT analysis is used quite frequently as a strategic means to permit an exhibition of the organisational resources and competences, which have the possibility of further development for enhancing the company’s competitive advantage. A SWOT analysis consequently reinforces the development of forthcoming strategic opportunities (Metzger, 2014).
1. Strong regional presence
2. High customer loyalty
3. Creativity and innovation in product offering
4. Committed to sustainable environmental practices
5. Completely indigenously manufactured with no imported inputs
6. Sourcing finest cocoa beans at highly competitive prices provides input cost advantages and generates superior customer value
1. Predominantly regional brand
2. Stores having high electricity usage which is not encouraged by the new government regulations
1. Australian chocolate and confectionery industry is expected to grow by 2.2% in 2011-12 and continue to grow steadily over the next 5 years (Culliney, 2012).
2. Increasing popularity and consumption of premium quality of dark chocolates due to apparent health benefits (Euromonitor International, 2016).
3. New Government regulation mandating clear mentioning of the country of manufacture on imported products.
4. Higher spending capacity of new and younger generation can have a positive effect on demand for an array of products (K?z?l, et al., 2013)
1. Rising consumers’ apprehensions about the quantity of fat and sugar in diets have resulted in debilitated demand for chocolates (IBISWorld, 2016)
2. Environment sustainability emphasised by government has heightened need for environment friendly manufacturing practices, bio-degradable packaging, responsible waste management etc increasing costs and difficulties
3. Buyer’s power is high owing to availability of large number of regional, national and international brands leading to low customer loyalty.
4. Rising price of inputs fuelled by volatile commodity prices (Culliney, 2012) which adversely impacts the company’s ability to withstand costs especially with respect to greater commitment to environmental and social responsibilities such as CSR initiatives, in addition to maintaining profit targets.
Performance against established objectives
The Company has been able to meet its store growth and sales growth targets. However, the gross profit margins are yet to reach the target and presently remain at 46% which is quite low compared to the upper limit for gourmet chocolate and hot beverages, which the Company envisages would be at a typical gross profit of 63%.
The Company has also been successful in establishing its brand as 58% of people covered by the target market can easily are aware of and familiar with the Cocoa Delights brand and the products represented by it.
Critical success factors
The major contributors to success would be
- Sales Expansion
- Loyal and strong customer base
- Cost Effectiveness of advertising and PR initiatives
The radio advertising although successful at expanding sales entailed huge costs as the project was unplanned. Such unplanned expenses can create pressure on the profit margins. It is necessary to make provision of certain unplanned expenses so that at least part of it can be covered though prior allocation of fund which will ensure the Company does not have to incur loans to cover these costs which will generate additional interest burden thereby pulling down the profit.
The Company should try and roll out its internet based advertising campaign as early as possible since it will have widest nationwide reach. The Company should actively pursue digital marketing to achieve its objective of nation-wide promotion campaign. It is also advisable to plan in advance. Unplanned expenses of small amount can happen occasionally. But large unplanned expenses could result in cashflow problem for the company. The Company should try to develop products in the low-priced mass consumption segment as unemployment is on the rise indicating a declining purchasing power. Premium segment might suffer.
To conclude, it can be said that Cocoa Delights’ existing marketing initiatives have been in line with the Company’s declared objectives but it has not been able to meet all its targets. Judicious planning and aggressive PR and advertising initiatives especially through digital marketing using the internet will yield the desired result mush faster than other routes.
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