Patchi Company - Research Paper Example

?Executive Summary Patchi was established by a Lebanese entrepreneur in 1974. He had a vision to add more to the image of a chocolate. Hence, with the added element of emotions, the concept of Patchi was developed. The vision was to make it a globalized phenomenon and throughout this time, the company has been evolving strategies to achieve this goal. This paper looks upon the company Patchi, its operational activities and the strategies it has implemented. Moreover, focus upon the company’s SWOT analysis and its strategic position has been emphasized. The company is expanding rapidly and focusing upon a strategy of growth. Therefore, the Global Strategy and Competitiveness of the company is being highlighted in the paper. Introduction Patchi was a company that originated from the Middle East in Lebanon. Since then, it has expanded to around five continents and excelled in business. Patchi has created its unique name after being originated in 1974 and has 130 branches worldwide. Patchi is a brand name that has created its own goodwill by attaching the unique idea of chocolates to celebrations and love. This is quite similar to the way the De Beers created a market for diamonds by relating them to love. Yet, the idea has created a permanent place in the hearts of the people and hence, Patchi has attracted vivid brand loyalty. Patchi has outstood as a producer of premium and best quality chocolates. The idea has been exacerbated from not only the consumption of chocolates but to create an emotional attachment as well. Thus, Patchi deals not only in chocolates alone but also in gifts that range from a variety of occasions such as weddings, new born babies, graduations and other special occasions and celebrations. The outlets have the best quality chocolate that has been hand manufactured and adorned in a special manner so as to create a special aura. Thus, the market segmentation for Patchi is quite different from that of the regular chocolate segment. There are people throughout the world who consume chocolate merely because of their association with taste. But Patchi is a distinct name in the chocolate market and is usually associated with celebrations, presents and happiness. It is however, a fact that the chocolate is a non-durable consumer product that prevails in a very competitive market system. There are many buyers and sellers of chocolates and big names such as Cadbury, Nestle and Hershey’s stand as tough competition. Thus, this paper would focus upon the global business and competitive strategies adopted by Patchi so as to survive in the market. Industry Situation History Chocolate, which is enjoyed today by millions of people all over the world, is one of the oldest inventions of mankind. It is actually a natural product obtained from cocoa seeds that are processed and manufactured so as to meet the taste requirements of people today. The first cocoa plantations were done by the Mayan Dynasty that dates back to 600 A.D (Chapter 1). These beans were high priced and were used as articles of trade as well as to make a drink called “chocolatl.” This beverage was very famous at that time. It was made by crushing the cocoa seeds and adding honey or vanilla spices (Chapter 1) so as to enhance its taste. Christopher Columbus is also said to have taken some cocoa seeds with him merely because of his curiosity (Chapter 1). Thus, in 1520s this drink was introduced in Spain but with the added element of sugar in it (Chapter 1). The first chocolate factory was set up after the Industrial Revolution in Bristol in UK by Joseph Fry. Other factories that developed within a short period of time included, Rowntree, Cadbury and Hershey. Thus, the chocolate factory became a profitable business for the people at that time. The chocolate was enjoyed by the aristocracy as well as by the general public. Moreover, the Industrial Revolution meant more jobs for people and hence, the chocolate factories provided ample employment and better working conditions. Development It had then been realized that chocolate had a huge market and the potential for generating profits for the entrepreneurs. Thus, development in the field began. Initially, the demand for cocoa increased incredibly. America was the provider of cocoa but later Brazil also established the cocoa plantations in 1746. The trees were taken to Spain, France, Africa and other European countries that were highly encouraged to cocoa plantations due to its profitable nature. Thus, the cocoa plantations became a major agricultural output that yielded vast profits at that time due to the increased demand. The manufactured chocolate developed as well. The initial chocolate made by Fry was not much of a refined and processed sweet. In 1876, Daniel Peter from Switzerland made the first milk chocolate (Chapter 1). Condensed milk was introduced by Nestle Henri and the great supply of milk was utilized by drying milk obtained in the spring season (Chapter 1). However, the machinery used was not very apt at giving chocolate a smooth texture and some traits of bitterness still prevailed. Thus, in 1880, Rodolhe Lindt, invented a machine to improve the whole process (Chapter 1). However, later in the 20th century better techniques were formulated so as to dry the milk. This was later used in December near the Christmas time, when there was an excessive demand for the chocolates (Chapter 1). By adding sugar and dried milk, the shelf like was increased (Chapter 1). Later, better technologies and processing plants that specialize in mixing the chocolate and producing a smooth texture were set up in factories. With this mechanized system fancy packaging was also possible and hence, the chocolate production improved in quality and variety. Market Segmentation Chocolate’s demand continued to increase with time. With improved technology, better chocolate was being produced. Not only this, new inventions were made with chocolates by coating it onto different products such as biscuits, almonds and other nuts. There was a decline in the cocoa beans being transported during the World War but later the chocolate demand continued to increase. Chocolate consumption per person is approximately 8kg/annum per person in most of the Western European countries (Chapter 1). It is also said that the sales of sugar and chocolate confectionary together exceed that of tea, newspapers and bread together (Chapter 1). The major market players are Lindt, Cadbury, Hershey and Nestle. Issues Cocoa plantations exist in some of the poorest countries of the world. This is especially true of Western African countries. Ghana is an example where there is wide existence of cocoa plantations. Thus, due to the extremely poverty stricken conditions, child labor is highly prevalent. Thus, one of the industrial issues with chocolate remains that use of child labor in planting and harvesting the cocoa seeds. Company Situation History Patchi came into existence in 1974 in Lebanon and was established by Nizar Choucair. At that time, the demand for chocolate was on a rise. New techniques and procedures were being implemented in the industry to improve production as this was seen as a very profitable venture. At that time, a new concept of chocolates arose. The chocolates matched the Swiss style of chocolates with an added unique element. The idea of celebrations with chocolates was introduced and the accessories and packaging added an element of differentiation from the contemporary idea of chocolates at that time. Thus, with this the company yielded a high liking of the consumers and caught its market share. Development The journey of Patchi began. In 1977, Patchi expanded its operations and the first international store was launched in Jeddah. From 1980 to 1992, it continued to grow its operational activities in other Gulf and Middle Eastern Countries that included Kuwait and Saudi Arabia. Gradually, Patchi became a company thus, supplying and distributing chocolates and confectionaries to its network of branches all over the world. By 2003, the branches exceeded in number and started spreading to Asia as well. US, Egypt, Malaysia, India and the Middle East became the major markets. The business not only grew in terms of expansion but also in the number of products provided. Other than chocolates it became the ultimate gift shop. The chocolates made were hand-made by highly qualified professionals. Tableware, silver art pieces, flower arrangements and decorative items including basket arrangement for chocolates also became available for customers. Today, Patchi has 130 branches in more than 60 countries. It is spread in the five continents and has also reached the African markets. Patchi today has different production units that specialize in different products. These include: 1) Chocolates and confectionaries that are 100% natural and hand-made. They comprise of different fillings and ingredients. 2) Silverware under the brand name of Royal Silver. These involve intricate and delicate decorative items. 3) Artificial Flower Arrangements and hand-made decorations are made by a workshop. Gifts and souvenirs are prepared for different occasions ranging from birthday parties to new born babies and weddings. 4) Printing house that produces boxes and packaging for chocolates and presents. Issues Although, the company has expanded extensively over the past few years, it is still a private family owned company. Thus, the financing of the company is still restricted and hence, major decisions have to be made within the family keeping in mind the family preferences. Due to this structure of the firm the liabilities are still being borne by the owners that are the family members and thus, this is a burden. Therefore, the company has major financing issues and hence, further expansion seems difficult. Thus, it is planning stock listings in the Dubai and London stock markets so to get global financing and develop and expand it in chocolate shops as well as by initiating new projects such as cafes. Present Strategic Posture Current Vision “Beside the pleasure of savoring, Patchi chocolate opens up an entire world of feelings and festivities which takes you beyond reality” (Patchi). Thus, this vision statement presents an idea associated with the brand Patchi. The concept of chocolates was changed altogether from being a regular eatable item to the one that expressed emotions. The packaging and the outlay had been done in such a manner that a certain personal association could be created. Thus, the vision was to create a durable item in nature which was actually encompassed in a non-durable item. Current Mission According to the company profile of Patchi, it outstood as it created a distinctive stamp of nobility by being beautifully presented. The innovator of this project at 11 of age, had an exceptional idea of what he wanted to present in the form of chocolate. The mission remained to present a unique representation of chocolate with an added element of emotional attachment to the consumers. Moreover, expansion and creation of a unique and differentiated brand name were required as well. Goals The brand has well established itself with different recipes all dealing with chocolate. Different coatings and ingredients have been applied in the making of distinctive tasting chocolates. The goal of the company is to create cafes all over the world which are similar to the chain in USA called Starbucks. The cafes would offer a wide variety of products that would include snacks, drinks and other chocolate products. Thus, the interior and the concept of the cafes would be of high quality and unique. Sustainability and new innovations in new products are continually revised. Patchi plans to extend its operations in Russia and Japan- the Takashimaya department store in 12 Japanese cities and to have 165 stores globally by the end of next year. Objectives The main objective of the company is to expand its operations and to introduce new innovations in the field of chocolate. Thus, the whole idea is to provide chocolate lovers around the world with premium quality chocolates that are well packaged and are readily available near them. It also works in line with other brands of the world so as to gain global recognition. Current Strategies Corporate Strategy Corporate Strategy of a business is ultimately an essential characteristic for its development over the time period. The corporate strategy should be devised in a manner so as to get the maximum advantage in the wake of competitive environment around you. Patchi follows a very distinctive corporate strategy. Patchi chocolates are not very readily available at nearby shops or stores. However, Patchi has its own outlets that supply its products. Thus, it follows a growth strategy. That is it believes in expanding its outlets worldwide so as to increase its business operations in different countries. Moreover, the “marketing strategy” is somewhat related to that of “diamonds.” Rather than portraying chocolate as an eatable item, emotional attachment was laid on it. Thus, this strategy gained high influence in attracting customers. Business Strategy The business follows upon the monopoly market structure. It has an element of differentiation. Like regular chocolates, it is not very readily available at stores. Patchi has introduced the concept of retail outlets of chocolates and thus, diversifies itself in chocolate related products. Thus, new ingredients and recipes are made that are particularly related to chocolate. Thus, this helps in adding an element of uniqueness. Functional Strategy This can be broken down into two strategies: 1) Financial Strategy There has been a noticeable increase in profits and sales for the outlets of Patchi. Therefore, increasing profits and high sales complement each other, thereby, creating an efficient market. The city of Al Ain resulted in 100% profits due to a rise in population. 2) Marketing Strategy A distinct market strategy has been adopted. This makes the Patchi chocolate different from an ordinary chocolate by adding the aura of uniqueness. The company has a 10 million contract with hotels in Dubai where this particular brand is provided. Moreover, it is also available at high class stores and malls such as the Dubai Mall and the Bawady Mall. Thus, the availability in rare and influential places, add greatness to the brand. Current Corporate Structure The company is a private with shares not yet listed on the stock exchange. The control is hands of the family members. However, with the expansion of the company, some franchises have been sold to other people that are maintained. However, the structure is more like of a company that deals in five different areas which includes chocolates, silver ware, flowers, packaging and glass ware. Thus, the structure involves managers that take care of the whole business process. Moreover, departments such as operations, finance, market research, human resource and others exist as well. Thus, the corporate structure has been efficiently divided. Current Corporate Culture Since, the company is becoming global; it has the benefit of recruiting people from all over the world. Therefore, experts in their fields are employed in different sectors of the company. Thus, the culture is diversified based on equality and hence, Arabs, Europeans, Africans and Asians are all employed in the company. Thus, there are different cultures working within the environment of the company. SWOT Analysis Internal Environment Analysis Strengths The company is continuously expanding due its strong features. The corporate structure, culture and management are very efficient and has a great role to play in the success of the company. The team is very professional and loyal. The structure has been divided into different departments and employee rights have been fully maintained. The employees opinions are catered to in the decision making process. Thus, the management and the corporate structure are quite strong which compliments the success of Patchi. The working environment in very conducive and talented and highly trained professionals are part of the Patchi team. Patchi has earned a strong reputation over the years due to its distinctive features. The company has a strong financial background and hence, has laid upon several expansion projects. It has a worldwide demand for its differentiated chocolates and so, it is opening its outlets worldwide. With the globalization, the company has introduced its websites and caters to online orders and markets its products. However, the biggest strength remains the high quality chocolate. Weaknesses The company is indeed on its roads to success. Yet it has some weaknesses that must be catered to so as maintain a high position of the company. If the weaknesses of the company could be catered with tactful solutions, the revenues could increase incredibly. Patchi has indeed a distinctive image for all its retail stores. However, their outlook and nature remains the same worldwide. This is thus, a weakness and different countries have different cultures and customs and Patchi fails to adhere to them. Patchi is not considered to be an ordinary chocolate. It is regarded as a sign of luxury. Moreover, it would be true to say that it introduces products that complement extravaganza. Thus, this creates a snob image. In line with this, the prices of the chocolates are kept quite high. This would fail to create a demand in the European countries where low price goods are in demand. Due to these reasons, the distribution remains low of the goods. Conclusion of Internal environment Analysis The Internal Environment Analysis depict that the company is expanding rapidly due to the great demand of its products. It is capturing the market through the introduction of new markets. The quality of the products is being maintained and thus, with the highly efficient workers, the business is being successful. In comparison, it needs to deal with some of its weaknesses. These include the problems of high prices and the “snob” attachment to the products. Distribution line has to be improved as well. Moreover, lesser developed countries need to be focused as well. External Environment Analysis There could be political, economic, social and technological opportunities and threats for Patchi. Opportunities The government policy in case of GCC countries is flexible for the expansion of Patchi. However, entering the European markets is a complex task. This is due to the prevalence of the European Union and the import laws pertaining to the import of chocolate from Middle East. Increase the number of malls and hotels in UAE especially in Dubai will give Patchi big opportunity to expand in UAE, Also there are new consumer group in Europe with new market of chocolate industry. Increase tourism in UAE especially in Dubai which will increase their customers as well. Development in the technology of chocolate making machines and the computer that Patchi uses to run their cash registers will enable them to work more quickly and efficiently. Threats Expanding to European markets is a complex task in wake of the EU and the import laws pertaining to the imports of chocolates. Moreover, different political conditions in different countries have to be taken into account. Economic crisis result in increased in the demand of lower price also increase in inflation and unemployment raise the demand for lower prices products which is a big threat to the company since their products is high in prices, also many companies are pricing their product cheaper to impress customers. As compared to the gulf countries the population growth in European countries is low. In today’s world, technology is changing and advancing day by day. Thus, Patchi is continually, in a need to improvise its technology by implanting new machines and procedures. Conclusion of External environment Analysis Changes in economic conditions and different political environments are a great threat to Patchi. The key external environment factors revealed that UAE and other Gulf Countries especially Dubai has great opportunities for the company. This is due to the increased number of malls and the increase in tourism. Thus, these have to be balanced out properly so as to achieve the maximum outcome. Recommendations The company is yielding high profits and is following a corporate strategy of growth. This is indeed a very beneficial strategy. However, it has succeeded virtually in creating an emotional perspective for the buyers. Moreover, it is working efficiently upon its mission and objectives that are to make it readily available to people. Although, the business and functional strategy are efficiently active but there is a certain room for improvement which can definitely increase the revenue of the company. The expansion into EU countries could be costly in wake of the trade laws of the trade bloc. The company should get out of the snob image and be readily available to customers. This means that the segmented market should be broadened up and more people should be able to buy the chocolates. Moreover, perks on occasions such as Christmas should be given to the customers in the form of lower prices and being readily available. That is the ordinary person should be able to buy the chocolates at some instances. Although, the market for Patchi is growing, the economic crisis has become a halt. It has increased inflation and decreased demand for the products that are high priced. Therefore, Patchi needs to revise its prices. Moreover, extensive advertising is required so that the consumer becomes more aware of the company, products and the changes made during a course of time. Strategy Implementation This is a process that involves 6 steps: 1) Action Planning 2) Organization Structure 3)   Human Resources 4)   The Annual Business Plan 5) Monitoring and Control 6)   Linkage In case of Patchi, it seems that the strategy implementation is quite strong. The Action Plan is well defined in terms of the mission, vision and the goals and objectives of the company. Moreover, the divisible organizational structure has been well formulated and arranged. The Business plans seem to be efficient in wake of the expansion taking place in the company. Moreover, the profits of the company are undoubtedly a result of the efficient monitoring and controlling. These all are not possible without the lack of linkage which is apparently very strong in this case. Strategy Evaluation and Control Standards The strategy of the company should be devised in a manner so as to achieve its mission, vision, goals and objectives. The past history of Patchi represents a strong background and the vision of a differentiated product. This has been taken into account in formulating the strategies of the country. The strategies have been improvement through ad hoc refinement, experimentation and by adopting and revising new plans. Thus, controls have efficient enough so that these strategies have become vividly successful. Conclusion Patchi is one of the companies that is dealing in non-durable items and expanding very rapidly. It is quite ironic that Patchi does not have the same image as a Hershey’s Bar or a Cadbury chocolate has. Patchi has a whole different set of sentiments related to it and a very different image of the chocolate. Rather than a mere item of consumption it is considered a valuable item. Thus, the main aim of creating a durable item encompassed in a non-durable product has been achieved by the makers of Patchi. The corporate strategy of growth is considered of high value. Within these years, the company has expanded in 5 continents and has a network of more than 100 branches all over the world. Thus, the strategy is being implemented quite efficiently. However, in the world of globalization, there is a huge competition. Despite the uniqueness of Patchi, it has been posed to great threats from the world. These range from a variety of products to lower prices. Due to the global recession marring the world, inflation has been high all over the world. Thus, the expansion of Patchi into European markets seems to be vulnerable due to the demand for low priced products as well as the existence of EU. Contrarily, the demand in GCC countries especially Dubai is extremely increasing due to the emergence of malls and hotels. Moreover, Dubai has become the hub of tourism over the few years. However, Patchi has a luxurious or a snob image associated to it. Yet this is its unique feature. With the efficient corporate management and structure Patchi’s growth and expansion is eminent. Bibliography (n.d.). Retrieved May 8, 2011, from Patchi: http://www.patchi.com/#company_profile/chairmans_letter Chapter 1. (n.d.). Retrieved May 8, 2011, from http://www.rsc.org/ebooks/archive/free/BK9780854046003/BK9780854046003-00001.pdf Patchi. (n.d.). Retrieved May 8, 2011, from Industrial Co.: http://www.patchi-industrial.com/ Patchi Opens new outlet in Sahara Mall. (n.d.). Retrieved May 8, 2011, from http://www.ameinfo.com/68022.html Read More