Business Strategy of the Real Chocolate Company - Essay Example

TABLE OF CONTENTS Page No. Abstract......................................................................................................................................2 1. Introduction............................................................................................................................3 2. Analysis...................................................................................................................................4 2.1. External environmental analysis..................................................................................4 2. 2. SWOT Analysis.............................................................................................................4 Figure 1: RCC Inc. SWOT Environment...........................................................................5 2.3. Corporate strategy..........................................................................................................6 2.4. Business strategy.............................................................................................................7 2.5. The companys structure and control systems and leadership style...........................7 2. 6. Organizational Culture/Behaviour................................................................................9 3. Conclusions..............................................................................................................................11 4. Recommendations....................................................................................................................12 References.....................................................................................................................................13 Bibliography.................................................................................................................................14 Individual case study: Real Chocolate Company Inc. Abstract The Real Chocolate Company Inc. is a US based chocolate manufacturer that manufactures and sells a wide array of chocolates, including gourmet chocolates. Its business strategy encompasses a series of other segmental operations that themselves can be regarded as sub-strategies within the holistic process of overall business strategy. For instance operational or production strategy and marketing strategy are all part of the business strategy of the company. RCC Inc. has adopted a functionality-based approach to business strategy and decision making in the larger context of corporate expansion, both within the US market and abroad. Thus its organizational culture and leadership strategies are reflected in its focused strategic initiatives such as SWOT, PESTEL analysis and so on. However its leadership related and organizational culture centric problems have been highlighted in order to focus attention on its current level of operations. 1. Introduction Business strategy is defined as the longer term directional thrust of the organization with specific focus of attention on resource capability enhancement strategies to achieve organizational goals in a competitive environment to satisfy stakeholders’ demands (Johnson and Scholes, 2002). The Real Chocolate Company Inc. has been in business for approximately three decades and now has become one of the top hundred fastest growing small public companies in the USA. Its concentration on gourmet niche chocolate market in the US is particularly significant against the backdrop of ever increasing diversity and complexity of the gourmet chocolate industry. With almost 300 chocolates in the portfolio and a further 100 turned out on special occasions like the Valentine’s Day, the company has achieved a marvelous feat of targeting every segment of the gourmet chocolate market. The company’s success is determined by the quality and strange enough the quantity of the product. With a gamut of popular proprietary recipes of its own, the company has positioned itself in the US market with unparalleled success. Its use of the best ingredients and chocolates has led to the current wave of demand for its caramel-coated apples, truffles, toffees and fudges among others which include even a range of sugar-free sweets. The company has been marketing a health-centric line of products to the health conscious customer. According to the National Confectioners’ Association (NCA) in 2006 alone the retail sales of confectionery topped $ 28.9 billion in the US while that of retail chocolate sales surpassed $ 16.3 billion in the same year. The gourmet chocolate consumption is about 10% of the total and was worth $ 1.3 billion in 2005. Multinational chocolate marketers like Master Foods USA, Nestle USA Inc., Crafts Food Inc. and Ferrero USA Inc. have captured a sizeable market for each while upcoming firms like RCC Inc. has been dependent on the innovation-related strategic strength. Such strategic initiatives necessarily require a shift in both internal and external operational policies. 2. Analysis 2.1. External environmental analysis Political, economic, social and technological influences on organizations can be interpreted under various examples. RCC Inc. operates in the same external environment where these influences along with environmental and legal/regulatory regimes impact on the company’s performance. In the first instance in a highly competitive gourmet chocolate market, economic factors such as different price and income elasticities of demand and government policies, e.g. fiscal, monetary, national minimum wage and so on could have an impact on the organization. According to market analysts gourmet chocolates have acquired a new health related dimension. With a concentrated focus on the mass market, gourmet chocolates would be a successful phenomenon at the domestic level. (Montuori, May 8, 2006, www.findarticles.com). RCC Inc. has predictably well got into the pre-act of proactive marketing strategy by pushing a line of candy-based products that have captured the imagination of kids and adults alike. Mass market product placement strategies are determined by a number of factors such as price and income elasticities of demand, supply constraints, regulatory regimes, the market structure, e.g. oligopoly and the nature of competition. 2. 2. SWOT Analysis SWOT or strengths, weaknesses, opportunities and threats analysis is a technique used by business analysts to identify and analyze environmental factors that influence a business organization’s performance in a variety of ways, including its decision making and corporate behavior (Mello, 2003). Figure 1: RCC Inc. SWOT Environment Source: Writer’s own diagram These policies along with government regulations and environmental laws affect businesses in a manner that leads to organizational responses in keeping with its own competitive environment for long term survival. Strengths in this market environment are an internal organizational quality that enables the business to survive and compete against other competitors. A weakness is also an internal organizational problem that affects it negatively while giving an opportunity to rivals such as accumulating bad debt. An opportunity comes basically from the external environment such as a rival’s inability to meet demand. Finally a threat is also a basically external matter, e.g. a rival’s sales promotion campaigns. 2.3. Corporate strategy Strategic processes and systems within the organization involve all management functions and corporate decisions. The company would have to initiate its strategic functional processes and systems in keeping with its own strategic competitive environment as determined by SWOT analysis. For instance internal organizational arrangements for communication, quality management, internal value chain management, employee relations, HRM function, budgetary control, cash flow management, motivation and so on will have to be aligned with organizational goals. A gourmet chocolate manufacturer would have to take into consideration the competitive environment and available strategic choices. Strategic capabilities of small-timers partially or wholly depend on this link with MNCs which manufacture their products. While strategic market orientation is determined by its own internal strengths, strategic product orientation comes from selling branded and patented products. Strategic marketing capabilities coupled with brand loyalty of customers, help gourmet chocolate manufacturers to position themselves in the market at an advantageous level vis-à-vis their rivals who might lack such capabilities. Product dimensions like texture, colour and content give an added value to it in the eyes of the potential customer. Gourmet chocolate firms which have strategic marketing and overall corporate capabilities would be able to enhance those values through better customer relations. The health appeal of the product plays a very significant role here as consumers tend to associate brand with product quality. Brand dependency is probably the most inescapable outcome related to this strategic approach. Competitive strength of the organization is determined by its corporate strategies including the marketing strategy. For example a chocolate manufacturer would have to initiate its corporate strategy of satisfying the consumer with a range of chocolates so that competitors would be compelled to match its own strength or adopt a different policy approach such as lower prices to attract customers. 2.4. Business strategy Its business strategy is basically determined by the efficient resource management techniques that have been adopted in order to face off competition in a highly competitive environment. A gourmet chocolate manufacturer has to face more threats on a day-to-day basis from its rivals so that efficient resource utilization and rationalization to enhance capacity would be much more desirable from the viewpoint of strategic competitive strength. Rivals depend on their brand image and promotion strategy to increase sales while much of their competitive edge consists of pricing and quality policies. For instance Consumers of eating chocolates in general and gourmet chocolates in particular are often influenced by exogenous variables like professional writing on current health care trends. 2.5. The companys structure and control systems and leadership style RCC Inc.’s management structure consists of a flatter thinly layered hierarchy of senior managers and subordinates with a very few layers of supervisors and assistant mangers coming in between. The top management including the directors and the Chief Executive Officer (CEO) exercise little overall control over the staff and adopt a more relaxed transformational leadership style. Transformational leadership is primarily and immediately concerned with winning the support of those subordinates to achieve predefined organizational goals. At RCC Inc. too this strategy can be seen. Thus subordinate staff enjoys a greater degree of freedom. While many such objectives are not realized in the short run due to a variety of reasons such as inadequate planning and wrong forecasts about cash flow, sales revenue and profits, there can be some recovery in the long term. Transformational leader seeks with fervent hope to inculcate a sense of responsibility and pride in achievements among the subordinates. Organizational culture is essentially connected with leadership style. However despite the above mentioned positive outcomes there are some negative ones as well. In the first instance though employees are sought to be motivated with a degree of freedom for decision making in such areas as quality improvement, there is very little desire on the part of the top management to delegate powers and responsibility for such decisions. Thus it’s clear that most of the responsibility for important decision making rests with the top management. Secondly the above mentioned transformational leadership qualities aren’t fully implemented concerning transferring powers to subordinates. For example while the top management retains the power to make decisions, both important and not-so-important, quality circles are just formed to discuss the routine problems such as those encountered in the process of making out mixing ratios. Thirdly though the company’s leadership style is basically democratic there much less attention being paid to carry out diversity programs of an international nature. While there is some cultural diversity at RCC Inc. it’s not regarded as a trend setter for future changes. In other words the management assumes that cultural diversity requires little attention against the backdrop of evolving competition related problems. While there is a big question mark hanging over cultural uniformity in the chocolate industry in the US, RCC Inc. doesn’t seem to have taken an interest in cultural diversity to the extent it should have. Fourthly international HRM practices that are associated with culturally diverse staff have not been fully implemented at RCC Inc. Internationally accepted HRM practices require a change at the institutional level. Organizations need to adopt some such practices as Training & Development, skills reorientation, job enrichment and acculturation (or cultural assimilation) to retain the staff. Finally RCC Inc. has failed somewhat badly in its efforts to identify and address leadership related programs of reducing redundancies and absenteeism. While the company has made considerable profits some redundancies and absenteeism have been noticed. There is considerable absenteeism due to a lack of performance related pay. Employees regard that existing performance reacted pay schemes don’t adequately compensate workers’ efforts to the total output. 2. 6. Organizational culture/behavior Organizational culture is basically the very nature or the character of the organization. In other words organizational culture refers to a system of values, beliefs, assumptions, norms and even the way in which the organization’s members conduct. Irrespective of its size every organization seeks to achieve some goals. It’s these goals that define the very culture of the organization. Though organizational goals are nearly identical or homogeneous there can be some very pronounced differences between the ways of two organizations seeking to achieve the same goals. In fact the company has initiated some cultural diversity programs for the staff recently in its efforts to create an environment of inclusion and diversity for the employees of the company. But it’s faced with a series of constraints/problems. In the first place RCC Inc. has never been able to implement a proper public relations program with good community outreach. This is due to the fact that independent marketing programs targeted at gourmet chocolate segments are less likely to include such broader approaches. Secondly the top management at RCC Inc. has been less responsive to conflict resolution mechanisms as suggested by the labor force. Currently what’s available as dispute settlement mechanisms aren’t adequate to meet the demands of employees. Thirdly there is a communication problem. As already pointed out the vertical organizational structure of RCC Inc. doesn’t allow the freedom of communication feedback from the employees on the lower layers of the hierarchy to the top management. There have been some complaints from the lower level staff that there is very little impact on management decisions by way of better communication between the top management and the employees. This is true to a certain extent though there is still a sound system of internal communication with quality circles being formed and well informed about decisions in advance. Fourthly there is a very serious problem at RCC Inc. associated naturally with sustainability. Resource use involves some environmental concerns among interest groups that have demanded a degree of transparency in its mission and vision and a commitment to protecting resources. Organizational culture demands a degree of corporate responsibility towards meeting demands of the community. While the company buys its raw materials such as cocoa and sugar in the competitive open markets, there are some resource constraints in times of seasonal pressures on supply chains. It’s in respect of this particular outcome that sustainability problem has been raised by many interest groups. In other words organizational culture or and behavior is connected with the company’s competition policy of paying higher prices to sustain its supply lines disregarding the consequences of supplier behavior. Finally RCC Inc. has been receiving complaints about its vision as a quality leader in the gourmet chocolate market. Its organizational culture is customer-centric and employee motivating but nevertheless quality targets of some of its products are achieved at the expense of employee welfare. For instance many employees involved in quality improvement programs at the company complain about its strategic vision in achieving ISO 9001certification because the standards set out by the 9000 quality series would require some structural changes at the organizational level. The inability of the company to initiate some of the changes to bring about a qualitative shift in order to achieve these standards is one of the reasons for these complaints. Either the commitment on the part of the management isn’t adequate or resources committed to these programs aren’t adequate or both. 3. Conclusions RCC Inc. has been known for its strategic product – market – price centric approach in the US chocolate market and abroad. With a diversity of gourmet chocolate brands it has captured the imagination of many customers. Its corporate strategy and business development policy have invariably put it ahead of many rivals though some characteristically poor management practices such as placing too much emphasis on niche marketing and avoiding mass marketing trends and its potential growth prospects in the mainstream marketing domain have produced some negative results as well. 4. Recommendations RCC Inc. has not successfully adopted a product diversification strategy. The existing strategy of producing gourmet chocolates and sugar-free candy for the health-conscious customer isn’t going to reward efforts unless the company adopts a diversification strategy based on the parallel mass marketing approach in which range of chocolates irrespective of pre-chosen niche market segments are produced and put on the market with emphasis on brand. In other words, as a corollary of the above its current brand strategy needs a more convincing program of proactive marketing. Currently its advertising is basically limited to the niche markets where it sells mostly the gourmet chocolates. Though health conscious consumers of chocolate would prefer gourmet chocolates and sugar-free candies these market segments are increasingly being invaded by big companies that invest millions in R&D. Thus RCC Inc. needs to rethink its current strategic focus on niche markets and come round to initiating changes in its current mass market policy of self-imposed restrictions. Right now the company is faced with a deficient performance in marketing and sales, operations and services. Indeed services aren’t many for a manufacturing firm. However RCC Inc. has to carry out public relations with a strategic focus on the provision of product details to consumers. REFERENCES 1. Johnson, G. and Scholes, K. (2002). Exploring Corporate Strategy. Retrieved from, www.ciao.co.uk on June 20th 2009. 2. Mello, S. (2003). Customer-centric Product Definition: The Key to Great Product Development. Massachusetts: PDC Professional Publishing. 3. Montuori, 2006, “Gourmet Chocolates Drive Candy Category; Retailers and Specialists Alike Focus on Gourmet Treats”, DSN Retailing Today, Retrieved from www.findarticles.com on June 20th 2009. BIBLIOGRAPHY 1. Locke, E. A. (Editor). (2003). The Blackwell Handbook of Principles of Organizational Behavior (Blackwell Handbooks in Management). Wiley-Blackwell: Oxford. 2. Miner, J. B. (2005).Organizational Behavior I: Essential Theories of Motivation and Leadership. New York: M.E. Sharpe. 3. Northouse, P. G. (2006). Leadership: Theory and Practice. (4th ed). London: Sage Publications, Inc. 4. Riggio, R. E., Murphy, S. E. & Pirozzolo, F. J. (Editors). (2001). Multiple Intelligences and Leadership (Volume in Leas Organization and Management Series). New Jersey: Lawrence Erlbaum. 5. Rowe, W. G. (2007). Cases in Leadership (Ivey Casebook Series). London: Sage Publications, Inc. 6. Yammarino, F. J. & Dansereau, F. (Editor). (2004). Multi-Level Issues in Organizational Behavior and Processes. London: JAI Press. Read More