Thorntons plc: Corporate & Business Strategy - Case Study Example

Module Code: ST3S03 Module Title: Business Strategy Thorntons plc: Corporate & Business Strategy Tutor’s Name: Enrollment Number: Date of Submission: This assignment constitutes the analysis of business strategy at Thornston PLC which is the largest manufacturer and retailer of specialist chocolates in UK. The company is involved in making different types of chocolates, in various types of packaging. The analyses undertaken for this assignment are based on the strategy identified as undertaken by the company along with the key drivers that lead to the same; value addition is done in a unique manner, which is a differentiating edge for the company. During analyses, sustainability has been kept as a prime factor for the underlying study. About the Company The company was established in the late 1990s, and by far, claims to have served millions of customers, spreading the word from one customers heart to that of the other. Their target market includes any and everyone who wants to send a message of love and affection. The product line includes, but is not restricted to, chocolates, toffees, and flowers; it also includes champagne, hampers, and so on. The headquarters of the firm is located in Derbyshire, and has about 200 employees. The company bears a good market value associated with its name, and demands are pretty much there through out the year. The company has a strong brand image in the minds of customers, and enjoys a stable brand equity which erects barriers to entry for the new entrants. Brand Positioning of Thornton ‘A unique, reliable brand that delivers the message direct from the heart’ is what the customers perceive this brand to be. The major aim of the company to sustain this position is by means of constant improvements in the quality of products and services that it provides to its customers. The gracefully created masterpieces of Thornton are what truly differentiate it from its competitors, and this differentiation makes the brand stand out and lovable for the customers. The true aim of the brand in other words is to deliver a personalized message from hearts to hearts. Transformation at Thornton There took place a transformation at Thornton where it took command of its own supply chain; Thornton being a retailer, entered into the industry with its own manufacturing facilities. This was a demonstration of the corporate strategy implementation as a part of the long term impact of the vision of the company. Thornton not just sells its products itself but also sells to other retail outlets as well. Competitive Positioning Competitive Positioning needs to be unique and sustainable; the uniqueness provides the differentiation advantage to the product or service in the competitive world today while sustainability ensure that the customer gets a consistent output from the product over a longer period of time rather than inconsistent performance. Thornton transformed its positioning by developing its distribution channels and using the multiple channel strategy to ensure that the product, the company, and the brand reach places where the company itself cannot take it through its own retail outlets. Competitiveness of a firm should also be strong enough to survive the market forces especially the competition and the ever changing industry dynamics. Thornton did so by allowing other retailers to sell their product line for example Marks & Spencer. Alongside these, the convenience stores, super markets, grocery stores, and so on were also targeted to ensure that the masses are reached in the least possible cost combination. SWOT Analysis Analyses of internal forces (strength and weaknesses) and the external forces (opportunities and threats) give a clear picture of where a company stands a given particular instance. Thornton caters to a niche in the market. Its SWOT is given as below: Internal Forces Strengths - Innovation and creativity of ideas especially in product and packaging design, shapes, etc. E.g. Barbie chocolate. - Uniqueness of ideas. - Variety in product line - Control over supply chain i.e. multiple roles in the supply chain. - Strong corporate vision Weaknesses - Cost and expenses – uncontrollable variables External Forces Opportunities - Changing trends and lifestyles (favorable) - Creation of youth hangout spots (cafes) - Always increasing market size – providing opportunity to grow and sustain Threats - Convenience stores purchases pose a threat to the franchising and direct retailing concept of Thornton. - Ease of availability may reduce the niche and may bring the brand to the broad customer category – though catering masses but taking away that brand persona. Porter Five Forces Analysis Porter’s Five Forces model is an important tool for analyzing the industry structure and understanding the competition that exists within the industry. Following is the application of the Porter Five Forces Model to the case of Thornton: Threat of New Entrant High - No barriers to entry - Lesser fixed cost/investments needed Threat of Substitute High - Firms in similar businesses can always look into this segment as a profitable venture and may decide to diversify along with courier services, confectionary manufacturers, and other retailers may also diversify their existing set of services, proving out to be a substitute for Thornton. Bargaining Power of Customer Low - Differentiation requires a premium and where customers go for differentiation, they lose the bargaining power. Bargaining Power of Supplier Low - Since the supplies needed are fairly standardized in nature, therefore, there is lesser bargaining power of the suppliers. Internal Rivalry Low - Many but disciplined rivals – no fierce competition as such The industry is fairly attractive despite of high substitution and new entrant threats; it is mainly because the industry moves with the power of a vendor to provide differentiated products or services to its customers. If a particular vendor, say for instance Thornton is able to provide that cutting edge to the customers then it would become increasingly difficult for the competitors to take away that market share from it. However, the dangerous side is the non-proprietary nature of knowledge or intellectual property that would ultimately lead into the competition copying the distinctive edge of the initiator. Yet, the first mover advantage shall remain in tact and the firm would always be renowned as the innovator in the market, leading it into charging even premium pricing which the customers would be happily willing to pay for this service. Alongside, it is also always helpful to keep the customers notifying of the record it has in terms of bringing in innovation and creativity to its work by diversifying, and so on. Thornton has followed the principles of re-investment by developing its value chain and thus, having this cost efficient impact on its operations, enabling it to increase its margins by having its own manufacturing facilities. Key Change Drivers Referring to the research done for the course of this assignment, following have been identified as the key drivers external to the organization that are affecting Thornton and inducing the need to have regular changes in the policies, procedures, tactics, and strategy for success in its respective industry: Government Policies & Regulations: Government policies are one of those external variables that can be the most unpredictable ones at a number of times, directly affecting the strategic position of an organization in terms of placement, pricing, packaging, or any other format. These changes cannot be overlooked and the strategic think-tank needs to have a good watch on them in addition ensuring that the backup contingency plans are always there to support any action from the government. Globalization Impact: Globalization has been on the news hubs as a buzz word since sometime and its impact has been well received by industries across the globe, with the realization that if not taken care of, this issue has the skills to drive any firm out of business. Subsequently, the concept of supply chain relations and increasing competency is now in the mind frame of the strategic goal setters. Globalization, by definition means intense competition from across the world, and increased choices for the customer to ensure that any vendor or manufacturer cannot monopolize the market conditions, thus, pressurizing the customer to pay extra or accept a poor quality product. This posses a huge threat for Thornton because there are global players with tremendous economies that can pose major threat as a result of globalization. Sustaining an advantage for long is therefore, a major issue. In the research, it was discovered that to counter this impact, the manufacturing plant was initiated but now, copying the products has become another vital issue to be taken care of in the global environment. Changing Technological Influences: Technological advancements these days are driving the customer preferences as technology, one way or the other, provides a certain edge to one vendor over the other, and allows the one using technology to provide more and better services to the customer over a period of time. Therefore, adaptation of technology is crucial in this competitive world today. For the company under consideration, the cost of technology is gaining momentum and has become virtually uncontrollable. This has not just led to declining margins but has also posed a long term threat to the viability of pricing, forcing the finance gurus to increase the prices. This price change needs to be very efficiently measured as any extra premium pricing might take away the customer base of the company towards the competitors. Ever-changing Market Dynamics: The intense competition existing in the industries across the globe has shifted the markets towards dynamicity than being static in the earlier days. It is thus becoming crucial and difficult for organizations to coop up with such changes and sustain any competitive advantage for a longer spam of time. The changes in the environment of the industry under study have happened moreover due to the changes in lifestyle where preferences have changed from going to specialty stores to convenience stores, making them at times, compromise over the product or their preferred brand over the convenience attained from going to a near by store. Cashing upon this opportunity, Thornton reacted well by spreading its distribution channels particularly towards the supermarkets and convenience stores, and expanding its distribution channels, additionally making them more active and the product visible to all ends. This certainly has proved advantageous for the company, as visible from rising sales in the annual report over the years. However, this has also led to increase in costs. Costs can be controlled by using technology, which if adapted with the right momentum, can yield good returns and economies of scale and scope. The Dynamic Mode of Supply Chain Relations: The supply chain relations have also been impacted due to the above mentioned changes in life style of the population. At the same time, Thornton took a wise corporate strategic decision by undertaking backward integration and having a manufacturing facility, which in turn provided it assurance of quality and product performance, thus creating brand equity for the organization, and allowing the brand name to be fully capitalized on. This has ensured the company is under no pressure whatsoever from any external supply chain partners. Value Addition at Thornton Value Addition or EAV (Economic Added Value) is the key to attaining sustainable competitive advantage for an organization. The process attempted at the organization under study for value addition is to give a personalize touch to the products and services it provides to its customers by all possible means. In the similar regard, the backward integration has played a major role in giving the customers a satisfaction through this branding concept. One of the prime examples of the personalized touch is the alphabets that are provided to the customers for sending a message to their loved ones. A wide range of best sellers are also available along with occasional sweets, and every green sweet (that are wanted all the time in a year). The Barbie chocolate was another prime example of the unique ideas and innovation practiced at the organization. There are many more services that are provided by this organization, the details of which can be obtained from a particular section of their website known as Thornton direct. This is the concept of value addition at Thornton. But the real success of an organization is where the customers feel about a value added service being a value addition to the existing product or service that he gets from the organization. Thornton has been remarkable in this form that it has made the customers realize and perceive the value added services to be actual value addition. Thornton has also entered into e-commerce based business where orders can be placed by customers through its website for the delivery to their loved ones. This has again given them a competitive edge against their competitors; however, this cannot be identified as a sustainable advantage as the nature of e-commerce business is not proprietary in nature. Yet, it has caught the consumer eye as it has gotten the first mover advantage in this regard and context; thus to be known as the market leader in terms of production and technology innovation and bringing in new concepts to give ease and pleasure of purchasing to its customers. This is also well in lieu with the changing lifestyle of individuals where internet shopping is become very common, credit card purchases being on the rise, and people preferring online purchasing over the conventional purchases mechanisms. Yet the market for the later is no dead. Subsequently, the organization is following a click-and-mortar model for its business, whereby there are shops where the products are available and there is a website from where the purchases/transactions can be done. Sustainability of the Strategic Position Sustainability of the strategic position can be defined as the ability of a business to keep in tact its existing strategic position in the industry, and at the same time allowing the numbers to grow in terms of sales volumes, and ultimately profits. The analyses reveal that Thornton needs to come up with more sustainable strategies to ensure its place in the market/industry. There is no point of doubt that the organization has done remarkably well in innovativeness and creativity through the application of customization to the processes, automation, e-commerce, and so on; however, the acceptable fact is that none of these advantages are competitive in the long run. Competitive advantage can be defined as an advantage which if an organization acquires, it can have this competency give it an advantage over a longer period of time over its competitors and the competitors cannot do much about encountering it. The advantages and the strategic positioning that it has is not something that can keep it differentiated from its competitors for long. Any new entrant in the market can have strategic alliance with a courier service for effectively delivery or have an e-commerce based website made and be a strong competitor for Thornton. Thornton needs to have some differentiation through which it can attract and retain the customers towards itself rather than any temporary but sustainable advantage. Something worth doing here might be global services of the existing product line or product line extension like having business customers having their souvenirs distributed with charm and efficiency through Thornton. Thornton can also target the business customers with executive gift items customized for companies. Conclusion Conclusively, the analyses reveal that the corporate think tank at Thornton has done a fascinating job so far by means of attaining a really good position in the market over its competitors; it has gained brand equity and customer preference, and has also created a tight binding between itself and the customers ensuring that the customers keep Thornton their first choice. The fact that it has gotten backward integration and that it has brought the concept of e-commerce in this industry is again a fabulous achievement, and thus it has gained momentum as an innovator of not just products but also technology for its customers. However, the analyses also reveal that the organization has failed to gain a long-term-sustainable-competitive-advantage over its competitors i.e. it lacks to have some differentiation that would make it stand out from the competitors; all the differentiation strategies that it is coming up with are fairly short lived, thus, tactical in nature. Subsequently, a recommendation can be put forth as a point of research for the firm to look for a competing edge that can differentiate it from the competitors for long life of its existence. Bibliography Aaker D A. (2004) Resisting temptations to change a brand position/execution: the power of consistency over time. The Journal of Brand Management (UK), Vol 3 Issue 4 Pages 251-259 Gerry Johnson, Keven Scholes, and Richard Whittington. Exploring Corporate strategy – Text and Cases. Graham Hooley, Gordon Greenley (2005). The resource underpinnings of competitive Positions JOURNAL OF STRATEGIC MARKETING 13. Aston Business School, Aston University, B4 7ET, UK. Pp.93–116 Teece, D.J. (1996), "Firm organization, industrial structure, and technological innovation", Journal of Economic Behavior and Organization, Vol. 31 No.2, pp.193-225. Quick MBA Available from [Accessed 26 January 2008] Thorntons plc Annual Report (2005) Available from [Accessed 26 January 2008] Read More