Factors Affecting Real Chocolate Company's Business - Case Study Example

Real Chocolate Company Contents: Page. Introduction ...………………………………………………………………. 05-05 P.1 External analysis using PESTEL’s Framework …………………….….. 05-06 P.2 Internal analysis – Capabilities ………………………..................……… 06-07 P.3 Current Problem Diagnosis ……………………………………….…….. 07-08 P.4 Generation of Strategic Options …...……………………………..……. 08-09 P.5 Evaluation of the Strategic Options ………………………………..….. 09-10 P.6 Description of Strategy & Options and Specific Resources……….…… 10-11 - P.6.1. Description of Selected Strategy & Options ……………….…... 10-11 - P.6.2. Specific Resources Required For Implementation …………….... 11-11 P.7 Action Plan for Implementation ………………………………………… 11-13 P.8 Conclusion ……………………………………………………..………… 13-13 References …………………………………………………..……………….. 14-14 Appendix – 1 …………………………………………………..………...…… 15-17 1.1 Threats ………………………………………….……………. 15-16 1.2 Opportunities …………………………………..……………... 16-17 Appendix – 2 ……………………………………………….………………… 17-20 2.1 Strengths (Capabilities) ……………………………………… 17-19 2.2 Weaknesses (Problems) ……………………………………… 19-20 2.3 Critical Success Factors (CSFs) ……………………………... 20-20 Appendix - 3 ……………………………………………….……………….. 21-22 3.1 Resources ……………………………….……………..…….. 21-22 3.2 Key Competencies …………………….…………………….. 22-22 3.3 VRIO Matrix ……………….……………………………….. 22-22 Appendix – 4 ……………………………………………………………….. 23-24 4.1 Porter’s Five Forces ………………………………………… 23-23 4.2 Porter’s Model for Real Chocolate Company ……………… 24-24 Appendix – 5 ……………………………………………………………….. 25-25 TOWS Analysis & Framework ……………………………………. 25-25 Preface This is a case study of Real Chocolate Company for analysis of it’s external & internal environment, various factors affecting it’s business & solutions. The case study has used some standard models & framework to evaluate & analysis of it’s strategic position in the market through preparation of detail framework of it’s strengths, weaknesses, opportunities & threats, the tool used for it was TOWS matrix & PESTEL’s framework, further the capabilities & resources were analyzed using models such as Porter’s Five Forces & VRIO. This paper is useful for Real Chocolate company to evaluate it’s present market value & conditions and also to plan for next action to be taken for elimination of weaknesses. Introduction The Real Chocolate Company’s current strategic position, products or services, markets, key stakeholders & strategic purpose (mission & vision /strategic intent): Real Chocolate Company, a company involved in chocolates & confectionery product manufacturing & distribution lead by Sarah Smith of Kingston, Colorado as it’s CEO. Company has reported $1.3 billion sales profit for the fiscal year 2005 in one of the most dynamically growing segment of gourmet chocolate products contributing 10% in total chocolate business profit, estimating a subsequent growth rate of 6.4 percent in sales to $1.8 billions in fiscal year 2010. The increase in revenue by 12% & 9% through company’s owned stores & franchisee till the next fiscal year 2007, B.Masters, Chief Accountant estimates. Company offers around 300 different varieties of chocolates & confectionery products apart from the additional seasonal varieties of around 100 types. Their key stakeholders are working on new ideas to offer best quality products & services by opting proven strategic approaches for quality assurance (on company’s product as well as environment perspective) & models to proceed with systematic plans supported with analytical solutions for future growth with special considerations to ensure the usage of natural & healthy ingredients. P.1 External Analysis: Major threats and opportunities confronting The Real Chocolate Company constituting its external business environment are evaluated through PESTAL framework (Appendix – 1). The framework exposes the main threats & opportunities in various categories classified in economic, market & competition, political, product & technology, demographic & social business environments. The review indicates that Real Chocolate Company has many competitors as new joiners & the existing competent leaders in the confectionery market are resulting in increase of threats, moreover it also has some threats on political grounds from NCA regarding compliance of laws & acts on labelling, consumer protection & education acts. Company could face the problems due to uncertainty in commodity market fluctuations in their prices. There are several opportunities available & are discussed in Appendix – 1 under the Section 1.2, to take the advantage of. It emphasises on the opportunities available under various categories identified. The company has already attained a strength in products & technology to produce health conscious products & the main focus of customers in USA is towards opting for such products because of increase in obesity problems, it is been found in the survey that customer will buy more products if deals are genuine. Also, the NCA got success in increasing the sugar imports that indicates the adequacy in sugar volume in local commodity market, will help in reducing the manufacturing cost of chocolates. The social business strategies like onsite preparation techniques & the most part of contribution in success is company’s trade mark & reputation gained over subsequent years, that is difficult for it’s competitors to suppress company’s supplier power. Setting up new business ventures in Asian regions is a good opportunity as of Asians are largest consumers of confectioneries, survey evaluates a high population of Asian consumers does not belong to rich class, that indicates the opportunity to increase the sales in Asian regions & also gives an assurance that there are bulk opportunity for the product exposure & selling. P.2: Internal Analysis – Capabilities. This section identifies the main internal capabilities & weaknesses of The Real Chocolate Company by application of VRIO model (Appendix - 3). The resources could be classified in a broad array as Products, Organizational (Management), Technological, Financial, where organizational or management category could be further classified in to resource management, operations & supply chain management, Infrastructure manage-ment and technology management (subset of technological category). Appendix- 1 details the strengths in Sec. 2.1 & weaknesses in Sec. 2.2 of Real Chocolate Company. The strengths identified under product category are company’s recently introduced new product line of sugar free products that could be a potential reason of the sales through health conscious consumers, diabetic patients & health care units as harmless products. The value of the company has been increased due addition of intangible resources like recognized experts of packaging for new retail store designs, highly efficient management teams for supply chain, resource & infrastructure management & development. Increased the sales exposure to public malls through 65 outlets out of 110 high customer density malls across the USA, also increased the sales network & product exposure through internet marketing & wholesale outlets strategy, value added services like mail order for customer convenience & satisfaction. Opting for the technology resources as automated processes to keep the balance between quality, production & distribution time. Alternative solution to deal with sudden supplier loss situation. It also has own series of trucks for ease & reduction in time in transportation & delivery. Offering capability of around 300 different products apart from a range of 100 seasonal products. Has already installed a tangible resource of MRP II system for work flow automation has increased it’s value to great extent. Successful in attaining the financial goals for subsequent years consistently. The critical success factors identified are reputation, depth of market penetration, marketing strategies. Company has good grading in all of the above factors, further CSF are detailed in Appendix – 2. P.3: Current ‘Problem’ Diagnosis: There are three main weakness of the company those are identified after case study of Real Chocolate company i.e., imitation, rarity & no secured alternative business out of which imitation & rarity are themselves key factors in evaluating competitive advantage according to VRIO model, this section has also considered some concepts from Porter’s five forces model (Appendix - 4). These two factors are in low rating that indicates the risk of substitution & buyer’s power enhancement. As the business is common & can be easily learnt & understood by new joiners it is probable that most will try to imitate the already existing domain leaders like Real Chocolate company for quick start their own businesses & stand over as competitors of the company. Rarity is also one of the severe problems that company may face or facing at present as every body is offering almost same product line with similar advantages so, the main competition would be price of products that will be a main decision maker of supplier’s power & buyer’s power. There are more weaknesses but are not that much prominent as company already has started to solve those problems & in the process to win over these weakness. P.4: Generation of Strategic Options: Strategic options that might potentially address the problems identified in Part 3: Systematic investment in distributed risk based asset allocation or portfolio spread in wide range of commodities, especially in various non-renewable natural resources those are critical dependencies of life & various business operations gives a good potential to book profits in recession periods too & automatically maintained price values by political authorities of nation in commodity budgets as per the appreciation / depreciation of currency value. Building a research team for analyzing the profits & losses in any new deals as well as to capture market emotions including chocolate related commodity & raw material prices that drives the chocolate production cost, by careful movement. Important to the large organizations, small inflation in prices may impact larger number of population in the company, so growth should be in equal proportion to the susceptibility of organization for a risk. Preparation of risk register in all hierarchical operations & matrix may reduce the complexity of the problem solving. Preparation, definition & maintenance of KPIs for all hierarchies are a good initiative to drive process implementation & its maintenance. Opting & implementation of standard operational management approaches like six sigma, lean approaches (Full Implementation or RIE (Rapid Improvement event) as per the goals of company. Take assistance of food technologists & experts to research on adding more health conscious features in the existing products before approaching for completely new one, R&D practices & small lab fortified with necessary resources for experiments on techniques to apply & that would work with field researchers who will collect the product samples & information about competitor’s products. Trial on a completely new thing would be good that will lead the company as the first to bring such kind of idea will make a benchmark for customers as pioneer of particular technology or technique, result in increase in company value. Further to evaluate the overall threats, opportunities, strengths & weaknesses TOWS matrix is a good & efficient way to analyze above factors, (Appendix - 5) P.5: Evaluation of Strategic Options: This section proposes an evaluation strategy for the company & it’s explanation. The strategic evaluation of internal environment, Porter’s five forces model (Appendix - 4) is a suitable option for real chocolate company’s strategic position in the market, in clearly definable, well understood & easily editable matrix to simulate critical factors involved in deciding firm’s power of sustainability. The model analyzes five factors i.e., Supplier’s Power, Buyer’s Power, Competitive Rivalry, Threats of New Entrants & threat of substitution. The rating is given as per the number of plus, minus & neutral levels that could be decided on the level of defined competency or strengths & severity of threats & weaknesses relevant to Real Chocolate Company’s case. The porter’s five force model has been prepared for the company as displayed in Appendix – 4, with severity levels & colours. Red indicates the negative (--), yellow indicates the medium (o), orange indicates the lower medium (-), orange light green indicates a plus or weak positive (+) & dark green indicates a strong positive strength (++). The model indicates that the company has some threats of new entrants as could be seen as orange colour with a ‘-‘ sign and also, the buyer’s power is low as seen in the model with orange colour & ‘-’ sign associated with it. The threat of substitution offered by competitors is medium as indicated through a yellow colour with ‘o’ sign in the model diagram, Competitive rivalry is in favour of Real Chocolate Company as indicated through a light green colour with ‘+’ sign that indicates a good capability of the company to offer competition to it’s competitors & good sustainability. The supplier’s power is very strong as it relies of old relations & very few raw material suppliers for it’s production for proven time to market indicated through a dark green colour with ‘++’ sign (a strong plus). P.6: Description of selected strategy & option and identification of the specific resources need for its implementation. P.6.1. Description of Selected Strategy & Options. The description of the selected strategy for evaluation of internal environment & critical factors contributing in it are discussed in Appendix – 4 (Poster’s Five Forces Model) in detail. Here one more very efficient tool could be used for evaluation of company’s resource value, rarity, limitability & organization, i.e., VRIO. The key resources & Key competencies are needed to be evaluated for implementation of this strategic evaluation technique. The key resources of the company could be classified in various categories as Physical, Reputation, Technological, Intellect & Human and Organizational (Appendix – 3, (sec 3.1)) & sec. 3.2 details the key competencies of the company. The evaluation is done on application of VRIO model to prepare a matrix with VRIO (Value, Rarity, Imitable & Organization) as the vertical components compared against the horizontal components i.e., resources mentioned above. The technique involved in evaluation is to grade each vertical component on the scale of 5 with respect to the key competencies & resource accounted. Where, VRIO total is representing the score of each horizontal; component (Resource) after grading out of 20 (i.e., 4 vertical components multiplied by maximum value i.e., 5) & VRIO percentage is representing it’s percentage. Whereas, Resource Total indicates the net scores of each vertical component (i.e., Value, Rarity, Imitability, Organization). After the evaluation it has been found that the market value of the company is 83.34%, that is very good rating and it’s difficult for some body to buy it, the organization of the company resources & system is also very strong to break or create riots in, as it’s value is 73.3%, It’s imitabilty is not very good it could be considered as medium probable as the value indicates this factor is 53.3%, Rarity of the company is also not bad, it is 60% that signifies the combination of the resources that company have is rate enough to suppress the reason for substitution or enhancement of buyer’s power. The total resource score in the market is 65%, it is again a good score to consider it as a stable & sustainable company. P.6.2 Specific resources required for the implementation are: A qualified stakeholder experienced & knowledgeable in economic or project management to prepare collects the data from the company time to time to fill in the spread sheet to analyze implementation process. A well defined operational management strategy to operate on MRP II system of automation of work flows, Starting point will be to create KPIs (Key Performance Indicators) for each & every stakeholder to make their roles & responsibilities clear. Separate business unit like accounts, finance, technology, packaging, sales & distribution…etc. departments should have relevant KPIs as per the nature of the works involved, those are to be maintained & updated, timely reporting to higher hierarchies to keep the status of project up to date for reducing the uncertainties in scope of the project & loss of customers. Implementation of Lean approach based strategies for process automation has long term perspective and is generally successful if it is taken seriously. The subject is very vast & could not be accommodated in few words. P.7: Action Plan for Implementation: This section provides a description of the proposed actions & parties involved. Every business is dependent on the firm’s sustainability of ‘Risk’, so, it is very important for real chocolate company to take serious actions to analyze the risks in the market; following flow could be of good use to proceed with: 1. Key operational activities of Real Chocolate Company, step-by-step, input-to-output actions/processes accounting. 2. Identification of one critical stakeholder/crew for each operational activity. 3. Identification of a consultation/communication technique/strategy to engage the stakeholder in risk identification process. 4. Selection of risk identification technique, various kind of risk categories relevant to real chocolate company operations & business, adoption of a risk analysis tool. 5. Preparation of Risk register including the columns (Risk, Category & its description), than preparation of risk matrix to rate the level of risk associated through a spread sheet or through bar graphs. 6. Again, associating the consequences & the level of likelihood (scalar value) of every risk in real time with the level of risk account in previous step, finally, interrelating all of the components to determine which risk is most critical & needs action, prioritize them accordingly. Constantly updating the values through timely consultation & communication with key stakeholders to document the status & update the risk component values in the register. Installation of this system in the regular work flow, from top to bottom hierarchies to automate the reporting & status updating to avoid any ambiguity in determination of scope of process or project undergoing. Two popular approaches named as Full Implementation Approach & RIE (Rapid Improvement Event) are used in modern industries both are having their own advantages & disadvantages. As Real chocolate Company is having many employees, franchisees & on-site stores, so it’s very difficult for the company to keep the track on all the resources & operations properly, that indicates the need of full implementation approach that is based on long term goals. P.8: Conclusion: The strategic future of the Real Chocolate Company is positive as seen in the porter’s model above. It has very good supplier power & ability to substitute other company, because of wide rage of product offerings that acquires the lead position in the market, it is now well equipped with modern automated systems for technical & process related works that indicates it’s capability of short turn around time, reduction in the product manufacturing cycle time that enable it to meet the time to market demands & keeps it safe from the risk of loss of customer value. Maintains the quality of home & ensures it seriously for customer satisfaction & reliability. It has strong emotional binding with the customers that gives a big advantage over other competitors in the market even if they develop the same product line. But, also, there are lots of risks those are to be taken care of like threats from other competitors in the same or similar product lines, emphasizing on the weaknesses & taking them as opportunity. to improve with the vision of attaining all pluses from every point of view & in external & internal analysis’s. The imitation may be a serious threat from new entrants, but on the other hand it has developed a bundle of resources & capabilities that reduces the chances of imitation even if there is no technology product security. Financial status of the Real Chocolate company is growing on continuous rate of around 6.4 % annually that indicates the increasing popularity, its efforts in spreading sales network & minimization of expenses through franchisees & on-site preparation techniques that is proven to be a hit in customers as it conveys the sense of home made, natural no chemical mixed healthy product. The over all strategic future of Real Chocolate Company is seems to be very good, if it goes on providing quality services like present. References: Criteria & Case Study Document (Given). Concepts of - Porter’s model of five forces. Concepts of - TOWS analysis & matrix evaluation. Concepts of - VRIO model & framework. Appendix – 1 1.1 Threats: 1. Market & Competition: Other new joiners & competitors have been working hard to introduce people to different ranges of dark chocolate, from 45 percent to 75 percent cacao. Threat of New Entrant, increase in competitive rivalry, threat of substitution and increase in buyer’s power. More national retailers are offering candy, gum, and mints at cash registers. Sales through these non-traditional outlets have doubled over the last several years. Increasing threat of new entrants, threat of substitution & increase in buyer’s power. Artisan chocolates from small manufacturers are creating a niche market. These makers are experimenting with exotic flavours and ingredient mixes. Threat of substitution & increase of buyer’s power. Close competitors of Real Chocolate Company are Godiva Chocolatier, with annual sales of $825 million; Russell Stover, with annual sales of $450 million; and See's Candies, with annual sales of $325 million. Threat of substitution, increase in buyer’s power, increase in competitive rivalry. 2. Products & Technology: New products from Hershey's, Nestle, and Botticelli include the Extra Dark line, threatening Real Chocolate Company for the absence of such product. Increase in threat of substitution & buyer’s power by provision of other alternatives & variety. Botticelli threatening by introducing choco omeg product line that is going to offer health benefits in terms of cardio-vascular diseases, calcium rich products for bones & teeth protective products, Memory sharpening products including choline & Omega-3s. Increase in threat of substitution & buyer’s power by opting for alternate products & manufacturer. 3. Political: Product labels must comply with the Nutrition Labelling and Education Act of 1990 and the Food Allergen Labelling and Consumer Protection Act of 2004. During 2005, the NCA was actively involved in supporting or fighting numerous legislative proposals. Reduction in supplier’s power. 4. Economic: Prices of chocolates and nuts can vary significantly in the commodity market due to monetary fluctuations and economic, political, and weather conditions in the countries where products are grown. May affect company’s supplier power. 1.2 Opportunities: 1. Product & Technology: It is expected that, there will be growth and new introductions in the organic and natural chocolates. Consumers have indicated that they would purchase more if they get fair trade items, if available. This is an opportunity to increase company’s supplier power. Obesity is becoming a major concern in the USA, gives a good reason for peoples to consume chocolates with health benefits. 2. Demographic: Asians are the prime consumers of gourmet/premium chocolates. Opening up the new market location options. 3. Economic: Premium chocolate consumers are not correlated to high income groups, which mean good future of the business as it is not much dependent on particular income group or class opens up wide range of customer gain. Expansion of distribution through food, drug, and mass market channels resulting in raise in growth rate in gourmet chocolate segment, indicates good opportunities. of business growth in future. 4. Political: NCA supported the Central American Free Trade Agreement (CAFTA) that provided for an increase in sugar imports to the United States. 5. Social: Real Chocolate Company was identified as one of America's 100 fastest-growing small public companies. Trademark of the company is the large portions of chocolate, comes under intangible resources & could not be imitated, keeping the reliability of product among customers high. Mistake became blessing, oversized pieces were a hit with customers and has become a Rocky Mountain benchmark, adds up in trust of company among customers, making an impression that company doesn’t compromises in quality & quantity of product for customer satisfaction. Concept of in-store preparation conveys freshness and homemade quality satisfaction to the customer, also reduces transportation cost & risks of loss of deliverables in accidents, deformation or mixing up in each other on the way to stores. Appendix – 2 2.1 Strengths (Capabilities): 1. Product: Recently introduced is a line of sugar-free and no-sugar-added sweets, an attraction to health conscious customers & may gain popularity in high blood sugar patients & hospitals/health care units too as an opportunity to enjoy sweets. Company offers a choice of 300 chocolates and a range of other confectionary products and additional 100 seasonal products. Increasing company’s supplier power, competitive rivalry against competitors, reduces threat of substitution due to wide range of product variety. 2. Resource Management: Managers hired a nationally recognized packaging design firm to completely design the packaging that is featured in the retail stores, design is more modern and designed specifically for the high-traffic mall locations source of good attraction for customers also, development of tangible resource through intangible resource (source of skill) & intangible resources are difficult to imitate, power of competitive rivalry for other competitors has increased. At least one alternative source is maintained for all essential ingredients so that the loss of a supplier would not have a substantial effect on the operations. 3. Infrastructure Management: Increased value due to increase in the tangible resources through physical distribution network in 65 malls out of total 110 malls in, difficult to take over due to high cost assets (asset value increased). Company’s supplier power increased, company’s capability to offer competitive rivalry increased. 4. Supply Chain Management: Various modes of selling product, i.e., through wholesaling, fundraising, corporate sales, mail order, and the Internet, gives very wide area of business network & product exposure to larger population that increases the probability of sales. Supplier power increased. Automated factory equipments implemented a comprehensive MRP II system that includes forecasting, planning, scheduling, and reporting and installed all enhanced point-of-sale system in all company-owned stores and 162 of the franchised stores. Company asset value (tangible resource value) is increased; company’s supplier power is increased. Eight company-owned trucks for easy, quick, on the time & low cost transportation of products, adds up in tangible resources, further increases the value of company. 5. Technology: Both manual and automated processes are utilised, enables assurance of quality & reduces the chances of mistakes on the other hand reduces product manufacturing cycle time. Supplier power increased, competitive rivalry for other competitors increased, created threat to new entrants reduces competition, bundle of resources & capabilities mixed in manual & automated process made it difficult to imitate, so threat of substitution is decreased. 6. Financial: Rise in revenues over 12 percent to a record $31.6 million, while total system wide sales of franchised and company-owned stores increased 9 percent to $108.9 million, compared with $99.7 million. Indicates the increase in company’s asset value (tangible resource value). 2.2 Weaknesses (Problems): 1. Chocolate and candy products that are not made on-site could be purchased from elsewhere in order for personal benefits of concerned stakeholder taking advantage of no proven tracking system of customers arrived & made purchase & what product was deficient in quantity. Threat of substitution, reduction in company’s supplier power, increase in threat of new entrants. 2. No alternate business for security, whole investment is in single business increases risk, may affect badly in low market periods or recession periods in confectionery market or in case of market withdrawal situation due to high competition, many threats of substitution or increment in buyer’s power more than supplier’s power. 3. Investments & spreading business without bound dynamically through investments in new locations & ventures may increase the production/investments over the returns or demand may be less as compared to the business returns, company has to maintain human & system resources even when they are not operating & generating revenue, result in depreciation of brand name (an intangible asset), layoffs, loss of suppliers,…etc. 4. Apart from the technological development, process alignment & implementation of quality processes are also to be taken into consideration to automate the operational processes, else, may result in in-deterministic problems. Like “how” & “why” it happened & what are the “solutions”, solutions could be made only if the problem is known/defined. 5. Imitation of product is easy & company do not have any registered patent to reserve any intellectual property on company’s name, so processes, functions, techniques & procedures could be easily replicated & invites new entrant in the confectionery market, which will increase competition. Invites the threat of substitution & threat of new entrants. 6. Rarity is less, there are many competitors operating in similar area of business & adding market competition & challenge in almost same products. 2.3 Critical Success Factors (CSF) Marketing Strategy: the marketing strategy of Real Chocolate Company is very good factor contributing in success of the company, it includes the on-site preparation strategy, wide spread sales distribution network, attractive retail outlets in major customer dense malls & places, Online marketing exposes the product line to whole world result in increase in sales, opts for multiple modes including Mail delivery, Retail store sales, Franchisee sales, Wholesale…etc. The strategy is aggressive & based on expansion from all ends. Good collaboration & system of tracking field personals & sales men. Depth of Market Penetration: The VRIO Matrix & it’s analysis gives the indication of it’s depth of market penetration (Appendix – 3, sec. 3.3) Reputation: It is one of the key resource, the details of it could be found in Appendix – 3 (sec. 3.1, ‘Resources’). Appendix – 3 VRIO Model (Value, Rarity, Imitation, Organization) of Real Chocolate company. The analysis of VRIO could be evaluated through accounting the resources & capabilities of the Real Chocolate Company. 3.1 Resources: Physical: Company has 8 owned trucks for transportation, 65 retail outlets in 110 high density public malls, the physical sales distribution network is spread over a very wide/competitive region & area in USA, Modern outlook & attractive professionally designed retail outlets, manufacturing unit is situated in town area with low cost of living & cheap resources. Reputation: Company’s trademark has earned a high value of among customers over a long period of time & made a benchmark for it’s customers for their confectionery demands. Has already proven its trust worth among customers with its quality products & excellent services onsite as well as in offshore retailing. Organizational: It has developed a strong competent staff & management to support it’s ongoing development & coping up with market demands through hiring professional managers. Is well equipped with modern organizational management systems to enable smart solutions to address & solve the problems in systematic manner. Technological: It works on automated techniques for quick turn around time when needed apart from manual techniques. Ha implemented MRP II system for easy tracking projects, automation of whole work flow, reporting & forecasting the market & business threats or deficiencies. Lacks in R&D units for new & rare product research & development. Intellectual & Human: It lacks in market analysis strategies, has strong employee constitution & collaboration strength to enable its onsite & offshore activities, and has already made a social network to keep the customers locked since many years delivering quality services mainly because of its employee strengths & industry atmosphere lead by social management values, instead of machine level inflexible visions. Financial: Has constantly reported a growth rate of around 6.4 percent in subsequent years, 12 percent revenue through company’s own stores & 9 percent through it’s franchisee network sales in recent fiscal year 2005. US$1.3 billion sales profit & estimating it to grow $US1.8 billion till year 2010. 3.2 Key Competencies are mentioned in Appendix – 2 (sec. 2.1, Strengths (Capabilities)) 3.3 VRIO Matrix R(y)/VRIO (x) Value Rarity Imitability Organization Total (Out of 20) Resource %age Physical 4 1 3 3 11 55 Reputation 5 4 1 5 15 75 Organizational 4 4 3 4 15 75 Technological 3 2 4 3 14 70 Financial 5 4 1 3 13 65 Intellect & Human 4 3 4 4 15 75 Total VRIO (out of 30) 25 18 16 22 78 (Out of 120) -- VRIO %age 83.34 60 53.3 73.3 65 -- Appendix – 4 4.1. Porter's Five Forces Analysis is an important tool for assessing the potential for profitability in an industry. With a little adaptation, it is also useful as a way of assessing the balance of power in more general situations. Figure 2 shows the application of porter’s model for Real Chocolate Company. Supplier Power: Fig. 2, shows the related supplier’s power that includes the number of suppliers, Uniqueness of supplies, strength of real chocolate company as supplier of confectionary products, varieties of products to offer, ability to substitute which are important points to be considered in rating the supplier’s power. Buyer Power: Fig. 2, buyer power section shows the ability of buyers to find alternative supplier of confectioneries & ability of Real chocolate company’s power to lock the customers, the differences in competitor’s services, quality & ways of business affecting real chocolate company’s business, Customer’s reliability & ability of real chocolate company to substitute other supplier. Competitive Rivalry: Fig.2, Section Competitive rivalry in figure 2 indicates the level of strength of real chocolate company to offer competition to it’s competitors, that accounts for quality of the services, company’s brand name for customer’s reliability & trust, 300 varieties of different products to offer competition, wide spread sale distribution network to dominate competition & various modes of sales to claim the flag of real chocolate company to lock larger population of customers. Threat of Substitution: Fig 2, Threat of Substitution section in Figure 2, indicates the resistance power of the real chocolate company in acquisition of the company by it’s competitors. Number of threats, product level alternate solutions, strong reason of brand name reliability of old supplier (Real chocolate company), ability of real chocolate company to substitute other company. Threat of New Entry: Fig. 2, Threats of New Entrants section in figure 2, indicates the level of ease the new entrants could enter the confectionery market, the resources & hurdles in the oath of starting as competitor of real chocolate company, technology protection & fast way of growth by imitation of existing leader’s techniques & procedures. Read More