Strategic Management Report
In this strategic management report, the analysis of a UK based company called Godiva Chocolatier has been done. In order to understand the current strategic position of Godiva, external and internal analysis has been done. Relevant strategic recommendations have been provided as per the analysis. Along with this, the report also contains the details about the strategic directions for Godiva Chocolatier.
Strategic management refers to the process, which includes formulation of organizational objectives, analysis of the competitive environment, internal organization and evaluation of strategies, which can assist the management to implement, achieve the developed goals and improve the organizational performance. In this assignment, the case of a UK based company called Godiva Chocolatier has been taken into account. Godiva Chocolatier was established in the year 1926 in Brussels by Joseph Draps and the company was named after Lady Godiva. There company operates across Canada, United States, Asia and Europe and has around 10,000 retailers and 600 retail boutiques. Godiva is a premium chocolate manufacture, which also offers coffee, truffles, shakes, chocolate liqueurs, biscuits and other such related products. The turnover in the year 2015 of Godiva was around $792, which helped the company to develop its business further (Godiva.com, 2017).
In this report, the current strategic position of Godiva in the premium confectionary market of United Kingdom has been done in order to analyse the kind of challenges is being faced by the company. The report includes details about how the rapid market, economic and legal changes affect the operations of Godiva. The sales, labelling, packaging and other processes of Godiva are affected by the current market situations. The competitors of Godiva mainly target all types of customers, which becomes profitable for them. Hence, the company competition from other chocolate companies that offer non-premium chocolates and other related products at discount.
2. External Analysis
In order to analyse the external environment of Godiva Chocolatier, the framework of PESTEL analysis has been used below-
Trading in Belgium is easier for Godiva as there is no legal trade framework in Belgium. Since the company also operates in other countries, it is essential for the company to comply with the rules and regulations related to trade, food health and safety and operations. However, after the exit of UK from the EU referendum, the employment process of Godiva was affected as the Godiva UK hired people from the EU countries. Further, the changes in tax structure due this event have adopted many changes and new models are expected to be adopted (Mythily, 2015).
The demand in the economic market for premium chocolate has increased during the recent years. In case of Godiva UK, the trade business was largely affect by the Brexit event. The company suffered from lower sales volume as people did not prefer purchasing luxury and premium chocolates due to low disposable income and rising inflation (Biswas et al., 2017) Further, the rise in the cosy of sugar and cocoa, which are the main ingredients, would also result in increase in the cost of the chocolate. This might negatively affect the sales of Godiva and affect its future market position.
The demand for Godiva premium chocolate has increased since the customers have started making premium chocolate gift purchase and have started consuming it more due to status symbol (Kazemi and Esmaeili, 2010). They have also been attracted to the design and quality of assorted and seasonal chocolates. However, during economic recessions or high inflations, the customers do not prefer purchasing premium chocolates, which affect the sales of Godiva.
With the help of technological advancements, the food technologists of Godiva have been able to use natural additives, pathogen systems and kosher varieties in order to make their product quality better (Beckett, 2011).
As Godiva falls under the food industry, it is essential for the organization to consider investing in sustainable practices that can lead to positive outcome for the communities, partners and consumers.
The company faced a recent legal issues of warning letters from the public house of Lady Godiva which stated about the infringement of intellectual property rights. This has affected Godiva’s reputation and led boycott campaigns on social networking sites. It is important for the company to understand the importance of abiding by all the laws and legislations to maintain their reputation in the market.
Table 1: PESTEL Analysis of Godiva
(Source: Created by the author)
To analyse the internal environment of Godiva, Porter’s five forces framework has been used.
Threats of new entrants- As Godiva Chocolatier belong to the premium confectionery chocolate industry, the cost of capital and production cost is very high. Hence, the total number of new entrants would be low, as the new companies would face difficulties to settle in this industry. (Low)
Threat of substitute products- There are many premium chocolate companies that give competition to Godiva. Moreover, apart from the premium chocolates, the consumers have high demand for chocolates other than assorted or seasonal chocolates. Hence, in case of Godiva, there would be large number of substitute available, which might be a threat to the sales volume, and profit of the company (Barthorpe, 2010). (High)
Bargaining power of suppliers- The suppliers in case of confectionary market are large in number who have the power to control the total supply of raw material in the industry. In case Godiva is unable to maintain proper relations with the suppliers, they would face business issues with the suppliers. (High)
Bargaining power of customers- Since the Godiva products are more of seasonal and assorted chocolates, which are mostly utilised for gifting purposes, the customers have the option choosing other chocolate products from different companies. The lower cost of other products would attract the customers more and reduce the overall demand for luxurious chocolates.
Intensity of competitive rivalry- In order to understand the intensity of the type of competition Godiva has with other chocolate companies, it is essential to analyse its competitors’ market position. There are other companies other than Godiva, which offers luxurious chocolate products in the market. Companies like Mars, Ghirardelli Chocolate Co., Royce, Hershey’s, Mondelez, Ferrero, etc., are other premium chocolate companies that give tough competition to Godiva (Caroli et al., 2010)
3. Internal Analysis
In order to analyse the internal environment of Godiva, the framework of VRIO analysis has been chosen. The analytical techniques of VRIO analysis help in evaluating the resources of the company and its competitive advantage of the company. Given below is the VRIO analysis has been done below-
Valuable- In order to analyse how the resources of the company adds value, it is essential for the organization to look for better opportunities that can help in effectively utilising the resources of the organization. The resources of the company are considered to be important as it helps in developing quality products and services. The business organizations differentiate their products and lower the price of the product in order to provide better value to the customers. However, in case of Godiva, the products are not differentiated, as most of them are premium chocolate products. Further, the price of the products is also very high in comparison to other chocolate products, which in turn creates lower demand for the products and services for the regular chocolate consumers (Rothaermel, 2015). Contrary to this, as the company deals with only luxury chocolate, it utilises high quality raw materials and sets high price of the product in order to target the niche market. Bringing more variety and lower priced products would help the company to target the overall consumer market. (Yes)
Rareness- Unique and distinct factors related to the products provide the organization competitive advantage, which helps the organizations to sustain in the market. Proper utilisation of the resources and the quality of resources used helps the organization to have competitive parity. Hence, it is essential for the company to create a point of difference by utilising proper raw materials and chocolate production techniques that can maintain the company’s reputation amongst the customers. However, the company has many competitors because of which the case of rareness is lower. (No)
Imitable- The kind of product that is being offered by Godiva requires high quality ingredients which mostly comprises of high priced ingredient like cocoa, sugar, milk and high quality eggs. Moreover, there are different machineries and production techniques that are used by Godiva. It can be said that the kind of materials used and techniques implemented by Godiva develops uniqueness of the company’s products and positions it in the competitive market. Hence, it is difficult for other non-premium chocolate companies to imitate the resources of Godiva (Roxas and Chadee, 2011) (No)
Organized- The company is highly organized as it is able to utilise its resources and create brand value by offering its high quality and high priced products. The production process is well integrated and is effectively managed by the company. The organizational structure of the company helps in developing a rich culture, which assists the company to compete with other premium chocolate companies. (Yes)
4. Identification of Competitive Strategies
There are different strategies available that companies use for gaining competitive advantage over others (Teece, 2010). Michael E. Porter has defined four types of generic strategies that all types of companies can use for expanding its operations or increasing its market share. Godiva Chocolatier can also use one of the four strategies present in the Porter’s Generic Strategies framework for strengthening its current position in the UK market.
Cost Leadership strategy – According to this strategy, Godiva can become a low cost producer in the chocolate industry. The cost of production can be reduced and more profits can be made by charging the prevalent rates of the industry. The company can also increase its market share by charging low prices.
Differentiation strategy – As per this strategy, the luxury chocolate company can make its products more attractive as compared to its competitors. The company can introduce different and unique types of chocolates along with adopting another strategy for improving the brand image.
Cost Focus strategy – This strategy can be used by Godiva when it wants to target a niche market by developing low cost products. If this strategy is adopted by the company, then it will be serving a specific market and can easily build strong brand loyalty because of low competitors.
Differentiation focus strategy – This is another form of focus strategy that the chocolate company can use according to which, the company should be focusing on satisfying the requirements of customers in a niche market. Distinct products should be manufactured by Godiva for a particular segment of customers (Freeman, 2010).
According to the internal and external analysis that has been done on Godiva Chocolatier, it can be said that the company has various competitors. The management of the luxury chocolate company should use a combination of Cost Focus and Differentiation strategies, as they will be highly beneficial for the company. Since the company produces luxury chocolates, a niche market can be targeted by the management, which is the high income group of the UK. However, it can use the differentiation strategy for expanding its customer base by introducing a few unique chocolates for other consumer groups. If the company minimises its costs and introduces new and unique products, then its profits can be maximised and the market share can be increased.
5. Strategic Directions (Markets, Products, Services) & methods of expansion
Strategic Direction of marketing activities
There are various tools that can be used by the luxury chocolate company for marketing its products in a strategic manner. The company can use the Marketing Mix tool as it will help in giving a strategic direction to its marketing activities.
Product – Most of the chocolates that are produced by the company are targeted towards the consumers seeking elite tastes. Due to this the company loses out on various customers, leading to decreased market share. Thus, the company should start producing a new range of chocolates to target the other market segments as well.
Price – The Company offers luxury chocolates of different price ranges that start from $25 and range up to $100. Since a significant part of the United Kingdom cannot afford such costly chocolates, lower prices should be kept by Godiva for the new range that is being launched. This will allow the company to target the elite class as well as other segments of the market.
Place – There has been a significant increase in the number of online shoppers in the United Kingdom. Thus, the products that Godiva Chocolatier is marketing should be sold through its own e-commerce website or other online shopping sites along with the offline modes.
Promotion – There are various means through which the company can promote its products and services, out of which advertisements, public relations and hoardings are the most popular means. Godiva should also undertake online marketing through different social media sites like Facebook and Twitter so that a larger mass can be attracted. In-store promotions like giving samples, discounts, offers or gift vouchers are also effective ways for marketing the new products.
People – Since the human resources of the company represent the brand in different ways and play an integral role in the success of the organisation, it is important to provide effective training to them. This will improve the overall performance of the company along with the service provided to consumers.
Processes – A smooth process for online shopping should be there so that consumers can easily order the products that they require without any difficulty.
Physical Evidence – It is important to have attractive stores and optimised websites that consumers can easily manoeuvre through, because they comprise the physical evidence of the company.
Strategic Direction of product development and diversification
It is important for the company to grow and develop through diversification and product development strategies (Taylor, 2012). There are various tools available that can be used by Godiva for providing a strategic direction to its products, which includes the Ansoff Growth Matrix. According to this matrix, there are four types of strategies that can be adopted by the company for improving its market share in the country. This includes:
Diversification – As per this risky strategy, Godiva should be selling new and different products to a completely new market. Since the company will be moving to a market where it does not have any experience, there are chances that the strategy that can fail (Hesterly and Barney, 2010).
Market penetration strategy – This growth strategy is focused on selling the existing chocolate products that Godiva produces, to the existing markets. This is the least risky strategy as the main aim of the management is to increase the market share through different means like promotions and competitive pricing.
Product development strategy – According to this strategy, the company can expand its operations in the existing market by introducing new products. Thus, Godiva can conduct research for getting more details about the requirement of consumers and developing a new product.
Market development strategy – As per this strategy, the main aim of the company is to expand its operations by selling the products already being manufactured to new markets. Thus, the company can either venture into new geographic markets or new distribution channels.
The most optimal growth strategy for the company is the combination of product development and diversification strategy. If the luxury chocolate company is able to find the correct balance between reward and risk in the diversification strategy, then this marketing strategy will be highly rewarding for the company (Hussain et al., 2013). Additionally, if new products are manufactured by the company, then it will be highly beneficial for the company and it will be able to increase its market share in the country.
Strategic direction in service provision
Apart from focusing on the products that are being manufactured by Godiva Chocolatier, the company should also focus on providing excellent service for being able to improve its performance in the United Kingdom. There are various ways in which this can be achieved by the company, which includes:
Customer service – It is important for the company to be able treat customers with respect and dignity. Godiva should have attentive as well as friendly customer service representatives in the stores, so that proper suggestions can be provided to consumers and their queries can be solved. If the employees of the company have good skills related to customer service, then they will be able to interact with the clientele in a superior manner. If the consumers have a good experience while shopping for the goods and services, then they come back to the store in the future.
Quality goods – The Company should ensure that the products that are provided to consumers are free from any types of defects and the consumers get the quality that they expect from the company (David, 2011). Since Godiva is a luxury chocolate brand, superior quality chocolates are expected from the company, and if the same is not provided then it can have a detrimental effect on its performance. Thus, the company should ensure that the quality is not comprised while reducing the cost of products or introducing a new range.
Improvement – There are various ways in which improvement can be brought about in the company, but the most important way is to have effective employees. Proper training should be provided to the employees regarding effective manufacturing and service provision. The company should also keep the requirements of employees in mind and ensure that they are being rewarded for their performance, to keep them motivated.
It can be concluded that strategic management is extremely important for a company to be successful. In this paper, the current performance of Godiva Chocolatier, a luxury chocolate company, in the premium confectionary market of the United Kingdom has been analysed. Different tools have been used to analyse the micro and macro environments of the company for identifying its threats and opportunities, and strategic recommendations have been provided. This will help the company in improving its current market position in the country along with gaining a competitive edge.
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