Principles of Marketing Management- Current Situational Analysis of Thorntons Plc - Report Example

PRINCIPLES OF MARKETING MANAGEMENT- CURRENT SITUATIONAL ANALYSIS OF THORNTONS PLC of Abstract Thorntons plc is the leading manufacturer as well as retailer of all brands of chocolates in the UK. In order for the company to increase its sales over this Christmas season, it needs to adopt an appropriate strategic plan that will allow it to have a competitive advantage over its competitors (Whitehead, 2007, p.95). In this paper a proper situational analysis of the company is going to be carried out, so as to determine the decisions that need to be made. A situational analysis gives the exact position of the company, which will consequently aid in the drawing of the strategic plan. This can be done through viewing of available literature on the industry and studying both the internal and external environment of the industry. In addition, a SWOT analysis matrix has to be carried out in the effort to identify opportunities and threats that are company is likely to be exposed to. Table of Contents Table of Contents 2 Introduction 3 Situational Analysis 3 External Marketing Audits- Macro-Environment analysis 3 Micro-environment analysis 5 Internal Market audits 8 Operating Results 8 Strategic Issue analysis 8 Marketing mix effective 9 SWOT matrix (Lackwell, 2001, p. 203) 9 Appendices 11 Bibliography 11 Euromonitor International, 2012, Where There’s a Will: Innovations that Encourage Consumers to Spend during Economic Downturn, Retrieved on July 30 2012 from: http://blog.euromonitor.com/2012/07/where-theres-a-will-innovations-that-encourage-consumers-to-spend-during-economic-downturn.html 12 Hull City Council, 2012, About Hull City Council, Retrieved on July 31, 2012 from: http://www.hullcc.gov.uk/portal/page?_pageid=221,52536&_dad=portal&_schema=Portal. 12 12 Introduction Thornton Company was established in 1911 as a company which produces chocolate and the company has been growing significantly over the years in the production of both inlaid boxed, and boxed chocolates (Baker, 2011, p. 6). However, the company was hit by a back drop of profits in the 1990s, forcing the company to change its structures. The company adopted a new strategy in the year 2011 with the appointment of Hartbeing J. as the new CEO. The strategy aimed at providing a less risky company which will be able to maintain its sale throughout the various seasons of the year. Apart from the production of chocolates the company also produces promotional gifts chocolate scented-T-shirts in order to attract/reach greater markets. Even though, Thornton has to come up with ways of overcoming competition from other firms that manufacture almost similar products (Whitehead, 2007, p.95). Situational Analysis External Marketing Audits- Macro-Environment analysis The macro-environment studies the suitability or unsuitability of the overall environment within which the company is located. The environment ranges from Political, technological, economical as well as the socio-cultural forces that face the chocolate production industry. 1. Political Ten states only fully engage in the production of chocolates reducing significantly competition within the industry. Unfortunately, the instability of the political environment especially in Africa and South America makes it very difficult for the company to expand successfully its distributions. The UK government also prohibits TV adverts for the younger generation narrowing Thorntons’ capability of reaching a higher market (Mail Online, 2012). Furthermore, higher taxes imposed on the products by the government, reduces the incomes gained on the products. However, the European Union terms of trade favors the company’s business. 2. Technological With the advancement of technology, production, marketing and advertising has become relatively easier. For instance, the social media has boosted the advertising as well as the selling processes. Machines on the other hand, have simplified the production process and lessened waste. New transport and storage facilities have improved the distribution and quality of chocolates respectively (Whitehead, 2007, p.97). 3. Economical Economically the company is not favored as many of the economic conditions tend to hinder the growth of the company. First, the energy costs are rising which affect the production costs making prices of the products to be high. Moreover, the company is facing a lot of competition as a result of the new entrants into the industry (Baker, 2011, p. 6). There is also the accelerated life cycle of the product as well as the production, putting the company to operate under great pressure. Furthermore, the seasonal nature of the market makes sale to be sometimes very difficult. Although, we cannot rule out that the easy trade within the EU and the company’s brand recognition makes the company to have a competitive advantage. 4. Socio-cultural Chocolate has been exposed to criticism due to the healthy issues attached to it making a substantial number of people to shy away from buying it (Brabbs, 2001, p.65). Moreover, trends have developed where people want to taste the different chocolate variations. Substitutes like Jelly Babys are also offering stiff competition to the company. Likewise, chocolate tastes differ greatly among cultures making it difficult for the company to appropriately identify its markets. Furthermore, current studies have exposed to people the actual ingredients of the chocolates, hindering those who are health conscience to reduce their consumption. On the other hand, the strong brand recognition of the company makes it to be consumers’ choice. Finally, with the current social consciousness, fair trade has been established between the third world and Thorntons (Whitehead, 2007, p.99). Micro-environment analysis 1. Market Chocolates are not taken as peoples’ daily foods but rather are mostly purchased as appreciations during particular times of the year such as valentines’ eve, birthdays and Christmas festivals. Blackwell (2002, p. 56) explains that this means that the company must look for strategies of attracting a greater number of buyers during these seasons. Hence, the company has concentrated on the production of varieties of chocolates in order to catch a high market. It focuses particularly on first-class markets like the luxurious blocks of chocolates. They ensure availability of their products to the market through their retail shops located almost in every town. Currently, the company enjoys about 34% 0f the market share which is comparatively good. 2. Customers The company has a wide range of customers ranging from young to old and men to women. At least everyone takes chocolate unless that individual has been exposed to health issues. However, the market is skewed to the female side since women are the main customers of this product. Consequently, the company has to know how to market their products for all its customers. Customers have to be made aware of the new brands, packaging and sizes available in the market (Brabbs, 2001, p.67). In addition, they have to be maintained and attracted through promotions and provision of high quality products. Products also have to be made available to these customers at all times to ensure reliability. 3. Competitors Thorntons competes with a wide range of producers and retailers who are also doing well in the industry (Jennings, 2001, p. 176). Its main competitor include Green and Black, Krafe foods, Mars, Menji, Nestel and Ferreo Group, who produce almost similar products. In this industry, Thorntons claim only up to 8% market share but fortunately due to its product differentiation through innovation, it is still doing well. Moreover, the company employs very high expertise in its production and distribution helping it to distance itself from the market competition offered by companies like Cadbury and Grocery. In spite of these efforts, Thorntons faces stiff competition due to the market prices of rivalry companies (Hull City Council, 2012). Nevertheless, Thorntons also faces completion from other food companies though indirectly. 4. Suppliers Thorntons mainly concentrates on in-house supply although it has also outside suppliers due to the specialized nature of its commodities and services. The company has rented strategic sites for the purpose of supply, and this is greatly influenced by the strong nature of the company’s brand. Its good publicity also assists the company in gaining effective retail locations (Peel, 2008, p.106). Thorntons is supplied with liquid chocolate by an expert company through a discounted price due to the large amounts purchased. In fact, the company maintains high confidentiality of its recipes even to their suppliers, in order to avoid the creation of new competitors. 5. Distributions According to Jennings (2001, p. 178), by 2010, the company had about 378 store/cafes and almost 222 franchises. The main distributors of Thorntons’ products are supermarkets where almost 90% of the products are being made available to customers. Due to the sensitive nature of chocolates, people like buying them from supermarkets where they are assured of quality. Furthermore, the packaging and wide varieties offered in supermarkets, attracts customers mainly in times of festivals. Here they are also assured of reliability because supermarkets stock a large amount of the products (Kleinman, 2003, p.108). However, other retail shops also distribute these products, though in small quantities and varieties. 6. Publics Companies have to have a good reputation so as to gain people’s confidence for them to continue growing (Peel, 2008, p.110). Thorntons have proven to pass this test as their brand recognition places in a good position within the industry. They provide products that meet customers’ needs through good quality and packaging. Moreover, in any country there are structures that ensure products manufactured by any company are good for human consumption. Thornton has managed to meet all the standards set by these structures economically and legally (Urry, 2000, p.303). However, a report which was published by the World Health Organization (WHO) stated that excessive intake of chocolates may not go well with ones’ health. Internal Market audits This section focuses on the internal activities of the company and how they tend to affect the company at large. The competitive advantage is investigated in this section and how it is build up. Operating Results Thorntons employs highly qualified expertise in its production hence the high quality of its products (Kleinman, 2003, p.110). This expertise knowledge keeps the company continually exploring new ideas in its field of production. New products are being produced as well as new chocolate flavors being introduced. In 2008, the company announced the creation of an innovative product, changes to its in-store environment as a move to keep its big customers. They produced an ice cream product in 2008, which increased the company’s varieties (Jennings, 2001, p. 187). However, the recent rise in the manufacturing products such as milk and sugar has forced the company to raise its product prices. The seasonal nature of its market, has also kept the company always on toes to ensure maximum sales during these seasons. Strategic Issue analysis Bilefsky (2001, p. 20) asserts that Thorntons is currently striving to gain greater markets due to the competitive nature of the market. Although the company has undergone numerous reviews in its strategy, it still embraces the vertical integration strategy. This strategy is achieved as a result of their manufacturing control and retailing ownership. The vertical understanding of events indicates the implications of each activity which ensures a conscious implementation process. The main strategy which is continuously being pursued by the company is the production of new and desired products, for instance, the production of the premium chocolate products (Peel, 2008, p.112). The management is also very concerned about the food safety issues making them to publish their ethical practices audits regularly. Marketing mix effective Thorntons are very customer sensitive and always aim at satisfying customer needs. They carry out an extensive market analysis and produce their goods according to customer needs (Euromonitor International, 2012). They produce very high quality products which are consumer friendly and affordable. Upon development of new products, customers are notified immediately. This is done through televisions, radios, newspapers and most especially the social media. Due to its strong brand appreciation by the customers, they are able to develop new varieties of goods as they are assured of their customers’ loyalty. The company intends to offer greater relevance to its brand by giving it a higher premium feel and look (Urry, 2000, p.304). This will ensure that the best customers within the company are retained and others attracted. SWOT matrix (Lackwell, 2001, p. 203) Strengths Weaknesses Firstly, the company has strong brand recognition. It employs very specialized knowledge in its production and distribution It produces variety of products in the chocolate industry. Offers products of premium quality. Has a unique production formula. Its retail shops are strategically positioned within the city many being located in Sheffield. Thorntons has not come up with appropriate strategies of marketing itself to reach all categories of its customers. The company has restricted its operations, thus its inexistence in countries like China. Also it has not extensively explored a variety of packaging techniques. Opportunities Threats The company can explore the production of other food products but with similar ingredients, Expansion of markets to other countries to reach wider markets. Explore the creation of new celebrations such as mother’s day which will increase sales. The company faces competition from its competitors and new entrants. Substitutes to chocolates are seemingly increasing, Increasing production prices. The emergence of the sugar based diseases that may reduce sales. Summary Thorntons specializes in the production of a variety of chocolates of very high quality. The nature of these products is that they are mainly purchased as gifts, hence its seasonal market nature. In the identification of a strategic direction, the company needs to identify its core capabilities in both the manufacturing section and the retailing field. Thorntons already has the strength of providing special branded boxed chocolates, which are in varied forms, employment of expertise in production and having a considerable customer value (Bilefsky, 2001, p. 25). All it requires is to add more excellence into the manufacturing process at the same time expanding its distribution. Moreover, they should also develop strategies to attract greater markets during the peak seasons maybe through sampling and promotions. Appendices Bibliography Baker, R 2011, Confectionery: Marketing chief goes as Thorntons starts overhaul, Marketing Week, pp. 6-6. Blackwell, D 2002, Thorntons Buoyed by Branding Push, London (UK), United Kingdom, London (UK). Brabbs, C. 2001, Thorntons Unwraps its Brand Rescue Strategy, London, United Kingdom, London. Euromonitor International, 2012, Where There’s a Will: Innovations that Encourage Consumers to Spend during Economic Downturn, Retrieved on July 30 2012 from: http://blog.euromonitor.com/2012/07/where-theres-a-will-innovations-that-encourage-consumers-to-spend-during-economic-downturn.html Hull City Council, 2012, About Hull City Council, Retrieved on July 31, 2012 from: http://www.hullcc.gov.uk/portal/page?_pageid=221,52536&_dad=portal&_schema=Portal. Jennings, D. 2001, Thorntons: the vertically integrated retailer, questioning the strategy, International Journal of Retail & Distribution Management, vol. 29, no. 4, pp. 176-187. Kleinman, M. 2003, Thorntons puts staff into brand school, London, United Kingdom, London. Lackwell, D. 2001, Thorntons in big expansion programme, London (UK), United Kingdom, London (UK). Mail Online, 2012, Food and Drink, Retrieved on July 30 2012 from: http://www.dailymail.co.uk/femail/food/index.html Peel, M. 2008, People on the Move Thorntons Tempts Allen to Join, London (UK), United Kingdom, London (UK). Urry, M. 2000, Thorntons Reiterates Warning News Digest, London (UK), United Kingdom, London (UK). Whitehead, J. 2007, Thorntons Reworks Kids Line, London, United Kingdom, London. Read More