Problems and Opportunities Facing Les Gourmands Specialty Chocolates - Essay Example

Order # 256343 REPORT/RECOMMENDATIONS: Problems and Opportunities Facing Les Gourmands – Specialty Chocolates Before going into suggestions and recommendations about each of the functional areas of your business, I want to make some general comments. While my own engineering company may seem far removed from the specialty chocolate business, I can see many’ similarities in terms of basic business principles. My own company also specializes in projects comparable to the high end of the wholesale and retail chocolate business. In other words, we apply to well-known users of outstanding professional engineering services such as ours; we try not to compete strictly on the basis of low price to do a project, but rather to offer the best value for the client’s money. Thus we follow a similar approach to your own company’s, and I can relate to many of the issues you raise. MARKETING: It seems clear to me that the approach you have been using to market your chocolates has not kept up with the times. I have reviewed several websites of high-end chocolate Providers as well as the Mintel report “Chocolate Confectionary – UK”, 2008. There seems to be general agreement that the chocolate business is becoming much more competitive at both the wholesale and retail levels, and that the old appeals do not work as well as they once did. Those old appeals were mostly tailored to giving chocolate as gifts, particularly for Valentine’s Day, Christmas, and personal birthdays. That market has shrunk substantially, and the worst shrinkage has impacted the expensive stores, resulting in comparable shrinkage in the market available to those stores’ suppliers. 2 One major reason for the reduced holiday and special occasion sales potential for top end chocolates is the major growth of internet and catalog sales. It is much more convenient for many buyers, particularly the wealthy who prefer to avoid shopping In person in malls or even specialty stores, to purchase their expensive chocolates over the internet. Both specialty firms like Godiva Chocolates and middlemen who handle high end products offer the convenience of buying, shipping, gift wrapping, and gift cards without the necessity for the customer to leave his or her dwelling. Prices over the internet are usually competitive with expensive stores, and the same often applies to catalog shopping as well. In addition, some suppliers even offer extra Inducements such as donating a portion of the sale to the buyer’s favorite charity. My first recommendation, therefore, is that Les Gourmands develop at once an internet sale website, using professional web designers and first studying the competition. Later your firm might want to consider issuing a holiday catalog or similar sales promotional device, but it is good to proceed with “all deliberate speed,” as the saying goes; do not rush into too many new approaches at once. In developing an internet sales approach, you will need a catchy and distinctive slogan for your chocolates, as well as perhaps some distinctive products to sell. Given the new focus on the health value of chocolates as a source of anti-oxidants comparable to red wine, you might consider a slogan such as: LES GOURMANDS CHOCOLATES – AS GREAT FOR YOUR HEALTH AS FOR YOUR PALATE. Perhaps that is a bit wordy, but It gives you an idea. Be careful, of course, not to infringe on any copyrighted slogans of any other chocolate companies. You may want to retain an advertising firm to assist with the entire new marketing approach you will want to 3 HUMAN RESOURCES: While you are understandably upset at the sudden departure of two of your senior chocolate makers to join a new competitor, actually their departure may be a blessing In disguise. You do not want unhappy staff who are unlikely to have the necessary enthusiasm for the changes which you need to make, both those under Marketing and additional suggestions which I will make below. Chocolate makers who developed their skills during the era when the product was primarily directed to those with children, or those wanting traditional gifts, may be ill suited to the new approaches required for real growth today. You should therefore immediately retain a top personnel recruitment firm with experience in the candy industry, particularly with regard to high end chocolates. It is likely that a respected international personnel firm would be the best choice, probably a firm based in a European Union country with contacts throughout the EU. The firm you choose should help you to write new job descriptions and do all the necessary pre-screening to save you the task of rejecting many applicants. You should be willing to consider attracting outstanding chocolate makers from competitors, but always remember that those who are willing to leave a former employer may leave you at their first opportunity. You alone should therefore do the final interviewing, but using some questions provided by the personnel recruiters dealing with loyalty. You may also want to institute a personnel testing system to provide additional information on job candidates. While you are looking into these key positions, it would also be good to review your entire personnel structure in relation to changes in the operational structure of the firm. You may well find that your present staff is less than ideal for a business which is now seeking aggressive growth, and you may need to make some other changes as well. 4 FINANCIAL ACTIONS: From what you have told me recently and in the past, it appears Les Gourmands’ sole source of financing has been you and your family. While that may have worked during the early stages of establishing the business, and while I know that you prefer full control over all aspects of the firm, you cannot realistically expect to grow without a major infusion of new financial capital. It is ironic that companies which have borrowed very little or not at all in the past have failed to establish credit relationships; while they often think that they have a perfect credit rating, they really have no credit capability at all. On the other hand, you and your family have established banking and other financial relationships which you can use to your advantage. Since you want to maintain full control of Les Gourmands, your best option would be to explore medium-term loans guaranteed by your personal assets as well as business assets if necessary. It is likely that your firm can secure a reasonable amount of short-term capital within a month, for which you might have to co-sign a note, and you should do so, repaying any short term loans promptly and in full, even early if possible. This will begin to establish business credit and let you move forward into the intermediate-term loans needed to expand the firm and carry out some of the recommendations below. OPERATIONAL ACTIONS: Your production facility is severely under-capacity and outmoded as well. This problem will not only hamper the firm’s future growth, but is increasingly interfering with present orders as well. Your costs are considerably higher than those of your competition, and increasingly production problems ranging from production delays to poor packaging are reducing the goodwill you have worked to hard to establish with key customers such as Pomfreys Department Store. Word travels fast in many industries, including yours, and the instant Les Gourmands comes across as a “troubled firm” you may never recover. 5 As soon as your firm’s credit worthiness is established by taking the steps listed above, you should begin to seek a long-term loan for a new production and office facility. There Is no way your current site will allow the necessary expansion, as indeed it is inadequate at present. I know that towns and cities in your area, and the national government, offer small business development loans on very favorable terms. You should retain an grant proposal writer experienced in such proposals; you may even be able to locate a retired executive with the ability to design an excellent proposal. If that route fails to provide the necessary capital, at some point you may have to consider bringing in outside equity ownership while still retaining full control of the firm. You may need to change your basic form of business organization to accommodate such ownership via converting to a public corporation. You should not see this as a defeat; rather, your business has outgrown the bounds of its present structure, as do many firms with the passage of time. There are special ownership forms you may wish to consider; retain a good corporate attorney and tax advisor to explore the possibilities. STRUCTURE AND CULTURE: As you can see, some of the operational actions above, such as finding a larger and more productive facility, naturally require structural changes also noted. However, there may well be other structural issues, some even involving the “culture” of your firm. For example, do you just want to produce and market high end chocolate products? While the market for those products has been expanding, thanks in part to population growth and health findings about chocolate, that expansion is unlikely to last indefinitely. We have an aging population, and chocolate is still most popular among children and young adults. People are also becoming more careful in how they spend their limited funds, and more and more new products are competing for limited consumer dollars. 6 Therefore, you may want to consider diversification, either into other types of candy, other food products, or even - into, say, the health products industry, which is a high growth area. Neither you nor I are sufficiently versed in these and other options to make the best choices. You should therefore consider a business consultant with the necessary expertise to advise you by presenting the advantages and disadvantages of various possibilities. You also need to consider the “culture” of your firm – emphasis on high quality products, pride in craftsmanship, image and goodwill, and so on. You need a good fit with those cultural factors in whatever future directions your firm may choose. CONCLUSION: When you consider all of the suggestions above, you will realize that you cannot do everything at once; rather, you have to prioritize your steps and actions. Some are immediate, some are short run, and others are long run considerations. I would urge you to move immediately to change and enhance your marketing approach by using an internet approach. It should take less than a month to get up-and-running on line if you use competent and creative web and IT people to get you established on line, to debug your programs and new website, and to troubleshoot any other problems. At the same time that you are moving in those directions, you can implement some human resource policies and staff changes to modernize and utilize the best people. The next phase of expanding your Les Gourmands would be to search seriously for a new production and office facility, perhaps converting an existing plant such as a former mill or factory to meet your needs. The possibilities of public or private funds to meet these needs are excellent if you use professional grant developers to seek them. Finally, you need a longer-term strategy starting with defining the firm’s goals, planning how to implement those goals, and projecting the pros and cons of various alternatives. 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