Company

The Strategic Management Model: Businesses vary in the processes they use to formulate and direct their strategic management activities. Sophisticated planners, such as General Electric, Procter & Gamble, and IBM, have developed more detailed processes than less formal planners of similar size. Small businesses that rely on the strategy formulation skills and limited time of an entrepreneur typically exhibit more basic planning concerns than those of larger firms in their industries. Understandably, firms with multiple products, markets, or technologies tend to use more complex strategic management systems.

However, despite differences in detail and the degree of formalization, the basic components of the models used to analyze strategic management operations are very similar. Components of the Strategic Management Model This section will define and briefly describe the key components of the strategic management model. Each of these components will receive much greater attention in a later chapter. The intention here is simply to introduce them. 1. Company Mission The mission of a company is the unique purpose that sets it apart from other companies of its type and identifies the scope of its operations.In short, the company mission describes company mission.

The unique purpose that sets a company apart from others of its type and identifies the scope of its operations. 2. Internal Analysis The company analyzes the quantity and quality of the company’s financial, human, and physical resources. It also assesses the strengths and weaknesses of the company’s management and organizational structure. Finally, it contrasts the company’s past successes and traditional concerns with the company’s current capabilities in an attempt to identify the company’s future capabilities. . External Environment A firm’s external environment consists of all the conditions and forces that affect its strategic options and define its competitive situation.

The strategic management model shows the external environment as three interactive segments: the remote, industry, and operating environments. 4. Strategic Analysis and Choice Simultaneous assessment of the external environment and the company profile enables a firm to identify a range of possibly attractive interactive opportunities.These opportunities are possible avenues for investment. However, they must be screened through the criterion of the company mission to generate a set of possible and desired opportunities. This screening process results in the selection of options from which a strategic choice is made. The process is meant to provide the combination of long-term objectives and generic and grand strategies that optimally position the firm in its external environment to achieve the company mission.

Strategic analysis and choice in single or dominant product/service businesses center around identifying strategies that are most effective at building sustainable competitive advantage based on key value chain activities and capabilities—core competencies of the firm. Multibusiness companies find their managers focused on the question of which combination of businesses maximizes shareholder value as the guiding theme during their strategic analysis and choice. 5. Long-Term ObjectivesThe results that an organization seeks over a multiyear period are its long-term objectives. Such objectives typically involve some or all of the following areas: profitability, return on investment, competitive position, technological leadership, productivity, employee relations, public responsibility, and employee development. 6. Generic and Grand Strategies Many businesses explicitly and all implicitly adopt one or more generic strategies characterizing their competitive orientation in the marketplace.

Low cost, differentiation, or focus strategies define the three fundamental options. Enlightened managers seek to create ways their firm possesses both low cost and differentiation competitive advantages as part of their overall generic strategy. They usually combine these capabilities with a comprehensive, general plan of major actions through which their firm intends to achieve its long-term objectives in a dynamic environment. Called the grand strategy, this statement of means indicates how the objectives are to be achieved.Although every grand strategy is, in fact, a unique package of long-term strategies, 15 basic approaches can be identified: concentration, market development, product development, innovation, horizontal integration, vertical integration, joint venture, strategic alliances, consortia, concentric diversification, conglomerate diversification, turnaround, divestiture, bankruptcy, and liquidation. 7. Short-Term Objectives & Action Plans Short-term objectives are the desired results that a company seeks over a period of one year or less.

They are logically consistent with the firm’s long-term objectives.Companies typically have many short-term objectives to provide guidance for their functional and operational activities. Thus, there are short-term marketing activities, raw material usage, employee turnover, and sales objectives, to name just four. Action plans translate generic and grand strategies into “action” by incorporating four elements. First, they identify specific actions to be undertaken in the next year or less as part of the business’s effort to build competitive advantage. Second, they establish a clear timeframe for completion of each action.Third, action plans create accountability by identifying who is responsible for each “action” in the plan.

Fourth, each “action” has one or more specific, immediate objectives that the action should achieve. 8. Functional Tactics Within the general framework created by the business’s generic and grand strategies, each business function needs to undertake activities that help build a sustainable competitive advantage. These short-term, limited-scope plans are called functional tactics. A radio ad campaign, an inventory reduction, and an introductory loan rate are examples of tactics.Managers in each business function develop tactics that delineate the functional activities undertaken in their part of the business and usually include them as a core part of their action plan. Functional tactics are detailed statements of the “means” or activities that will be used to achieve short-term objectives and establish competitive advantage.

9. Policies That Empower Action Speed is a critical necessity for success in today’s competitive, global marketplace. One way to enhance speed and responsiveness is to force/allow decisions to be made whenever possible at the lowest level in organizations.Policies are broad; precedent-setting decisions that guide or substitute for repetitive or time-sensitive managerial decision making. Creating policies that guide and “preauthorize” the thinking, decisions, and actions of operating managers and their subordinates in implementing the business’s strategy is essential for establishing and controlling the ongoing operating process of the firm in a manner consistent with the firm’s strategic objectives. Policies often increase managerial effectiveness by standardizing routine decisions and empowering or expanding the discretion of managers and subordinates in implementing business strategies.The following are examples of the nature and diversity of company policies: A requirement that managers have purchase requests for items costing more than $5,000 cosigned by the controller.

The minimum equity position required for all new McDonald’s franchises. The standard formula used to calculate return on investment for the six strategic business units of General Electric. A decision that Sears’s service and repair employees have the right to waive repair charges to appliance customers they feel have been poorly served by their Sears appliance. 0. Restructuring, Reengineering, and Refocusing the Organization Until this point in the strategic management process, managers have maintained a decidedly market-oriented focus as they formulate strategies and begin implementation through action plans and functional tactics. Now the process takes an internal focus—getting the work of the business done efficiently and effectively so as to make the strategy successful. What is the best way to organize ourselves to accomplish the mission? Where should leadership come from?What values should guide our daily activities—what should the organization and its people be like? How can we shape rewards to encourage appropriate action? The intense competition in the global marketplace has made this traditionally “internally focused” set of questions—how the activities within their business are conducted—recast them with unprecedented attentiveness to the marketplace.

Downsizing, restructuring, and reengineering are terms that reflect the critical stage in strategy implementation wherein managers attempt to recast their organization.The company’s structure, leadership, culture, and reward systems may all be changed to ensure cost competitiveness and quality demanded by unique requirements of its strategies. 11. Strategic Control and Continuous Improvement Strategic control is concerned with tracking a strategy as it is being implemented, detecting problems or changes in its underlying premises, and making necessary adjustments. In contrast to post action control, strategic control seeks to guide action on behalf of the generic and grand strategies as they are taking place and when the end results are still several years away.The rapid, accelerating change of the global marketplace of the last 10 years has made continuous improvement another aspect of strategic control in many organizations. Continuous improvement provides a way for managers to provide a form of strategic control that allows their organization to respond more proactively and timely to rapid developments in hundreds of areas that influence a business’s success.

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Bangalore-based Infosys is one of the biggest entrepreneurial and IT success stories of India. The Indian MNC has become a hallmark of the entrepreneurial capability of the country.

Those who helmed this IT giant, like Narayana Murthy, Nandan Nilekani , Kris Gopalakrishnan, N.S. Raghavan, Phaneesh Murthy and Mohandas Pai are today opulently contributing to the entrepreneurial story of India in the form of investments, startups and valuable mentorship.

So what makes an Infoscion special?

Entrepreneur India spoke to George Varghese, who has founded Extentor Solutions along with fellow Infoscion Sreekanth Keshava, which got rebranded to ET Marlabs after an investment from US based Marlabs.

ET Marlabs is a Gold Alliance partner to Salesforce. The company’s vision is to deliver business solutions leveraging the customer success platform from Salesforce. Born in the cloud betting on Salesforce, the leadership team at ET Marlabs has over 200 person years of combined IT/ITES experience across multiple industries and countries. They won the “Best Implementation Partner 2015” award in India from Salesforce. 

George, spent the first 12 years of his career in Japan where he worked with IBM and Hitachi as a software engineer and then went on to join Infosys in 1996. He was part of the founding team responsible for starting the company’s business operations in Japan. It was an entrepreneurial opportunity for George in Japan, wherein he had to manage a JV for Infosys, while also getting the business going on multiple fronts. 

Post that stint, George moved to Australia and along with an initial team of 15 people helped Infosys build its business in yet another international territory.

Talking about his learning from Infosys George said, “By the time I left the company, in 2010, I got a chance to interact with many of the Infosys founders from who I learnt the fundamentals required to start a great company.”

Key entrepreneurial skills learnt

When George returned to India, which was in 2010, he initially went about doing things on his bucket list, which included yoga, motorcycling and bio-dynamic farming. George, who is also an investor in the IT and education space, saw an opportunity with Salesforce come his way in 2012.

Remembering his early days at ET Marlabs as an entrepreneur, George said that a lot of guiding principles on building a corporate culture came from his time at Infosys, learnings from Japan, Australia and also from his time with the Art of Living foundation as a teacher.

“One of the most important things that I learnt from Infosys was the importance of treating people as our most important asset! Even more than Infosys it matters in our case today as ‘people’ are truly the only asset that we have. If someone burgles our office we don’t lose anything, as we own nothing. Our laptops are leased, our data is on the cloud and the only thing that is a truly valuable asset in our office is our people. As long as somebody doesn’t come and take that asset, I’m fine,” he said.

George recalls Narayana Murthy’s words saying, that the company’s assets walk out in the evening bringing down its value to zero and hence it is important for us to ensure that they return the next morning. In Infosys there was a huge focus on people those days, he said.

During his 14-year tenure at Infosys, George held several roles. He led the Banking & Capital markets business in Australia and New Zealand with a P&L responsibility of $75 million. Prior to that he was also Head of Public Sector, NSW State Sales Manager, and Head of Sales for the Northern region in Australia.

George was recognized by Infosys for his contribution and awarded the Infosys Business Development Award for Outstanding Performance (1998), followed by the Chairman’s Award for Excellence (2000).

Loving the customer is all that matters …!

ET Marlabs has a very impressive set of clientele which include the finest of the new breed startups like Urban Ladder, Clear Trip and Flipkart as well as corporate houses like CEAT, UB, Bosch, IIFLW and Adani Wilmar.

Speaking on keeping up an impressive client base George said, “The most important quality often lacking in Indian companies, that we focused on very early at ET, is what we call ‘client bliss’ which is all about just loving our clients and delivering bliss while serving them.  For some reason I find that whether it be a small service like fixing a telephone or getting a cable guy come home, the whole idea of customer service and its integrity is totally lacking in India.  In Japan, when you shake your hands with someone saying you’ll do something, it’s done and you do it 100% to perfection and promptness. There is no question of not doing it.”

George strongly believes that a project is complete only when the customer is smiling. You have to go that extra mile to check if the customer is genuinely happy and it is not just about meeting the specifications to collect the check, he adds.

Today over 80% of ET Marlabs business comes from the domestic market.  In the next couple of years, George plans to have an even balance between domestic and overseas business while IP built on the Salesforce platform would contribute to a third of the revenue.

British airways is one of the most valuable company in the world that is why I choose her. With the aim to evaluate the proportion of debt in British airways, we will study his financial gearing: income gearing and capital gearing. In order to calculate the company’s capital gearing according to the book value, we need especially the value of the long-term and short-term borrowings and the value of shareholders’ funds.

But, there is several different formulas which arises some issues: the fact that the book value is lower than the market value (the first formula) and provisions can be considered either as liabilities or assets (the second formula), depending on firm. Then I will calculate the Weighted Average Cost of Capital. In 2004, the way of doing the balance sheets changed that’s why there are some differences between two reports.

• Part 1 Measure of the gearing and income ratio
• Part 2 Measure of the debt and equity based upon the market value
• Part 3 Estimation of the WACC.

Measure of gearing and income ratios

We will take those expressions:

1. Debt to equity ratio=Long term Liabilities/Shareholders’funds
2. Debt to debt plus equity ratio=LTL/(LTL+ Shareholders’funds)
3. Long Term Borrowings/Shareholders’ funds

Gearing Ratio

Capital Gearing = LTL / Shareholders’ Funds

|2006 |2005 |2004 | |Capital Gearing |259. 75% |437. 6% |590. 7% |

To set an upper ratio; we can incorporate the LTL at the shareholder value. Capital Gearing = LTL / (LTL + Shareholders’ Funds)

|2006 |2005 |2004 | |Capital Gearing |72. 2% |81. 4% |85. 5% |

The provision are incorporates in those 2 formulas.

We can consider that the provision can be take as liabilities (highly certain) or as equity (ultra-prudence). Capital Gearing = Long Term Borrowing (LTL – provisions) / Shareholders’ Funds

|2006 |2005 |2004 | |Capital Gearing |193. 5% |341. 4 % |475,40% |

Net Debt: Net debt = (Finance debt – cash and liquid resources)/ Equity For British Airways, Net debt = (loans, finance leases and hire purchase arrangements + Convertible Capital Bonds, net of other current interest bearing deposits and cash and cash equivalents – overdrafts) British Airways’ definition from the annual report 2006)

|? million |2006 |2005 |2004 | |Capital Gearing |1641 |2922 |4158 |

The figures of long term liabilities are higher than the net debt that explain the fact that the ratios are different; The company health seem less vital, because of the cash and those equivalent, and deposits. Overdrafts are not representing a big amount, we include them. Since 2004 a policy of high liquidity is developed in order to reduce the debt, they tried to repay the debt earlier.

The debt are reduced by the conversion of the 112 millions of convertible bonds. “The ? 320 million 9 3/4 per cent Convertible Capital Bonds 2005 issued in 1989 matured on June 15, 2005. On that date 47,979,486 ordinary shares were issued in exchange for 112,317,274 Convertible Capital Bonds on the basis of one ordinary share for every 2. 34 Bonds held” (British Airways Report 2006). The capital gearing of the company is around 65% in almost all gearing indicators and more in som of them, as a conclusion we can say that the financial statement of the company is risky and more the company is weak due to the payment on the debt.

We can also highlight the fact that British Airways is finance by debt. Its has a important amount of lease and purchase arrangement, which exceeds the bank loans.

Income Gearing

This ratios show us the security of creditor’s fund and the debt exposure. While using Income Ration we highlight the relation of the company’s income and its interest commitments.

Income Ratio = Interest payable / Profit Before Interest and Tax |% |2006 |2005 |2004 | |Income Gearing |0,17 |0,26 |0,87 |

Interest are taking a lower place in the profit (strategy reduction of debt). In fact, we use the Interest cover to see if the company can meet its interest.

Interest cover = Profit before interest and tax / Interest charges |Times |2006 |2005 |2004 | |Interest Cover |5,79 |3,80 |1,15 |

The company can afford her interest.

1. Because of the decrease of the amount of debt,
2. The profit before tax and interest increased by 269%, the risk is less important.

We can also use another formula, which gives a better image of the finance. It based on the fact that cash has not been received. As a conclusion we can says that: :British Airways reduced its long term debt by 28. 5%, and keep their interest payment low and increase the PBIT strongly. From the shareholder point of view, the company takes high risks so they have a good return on investment although reduction of the debt of the company makes the rate of return lower and lower.

Measure of the debt and equity based on the market value

Value of Equity

Share Price*:Number of Shares*: 2004: ? 2,181 083 845 000 2005: ? ,941 082 903 000 2006: ? 2,791 130 882 000 *I took those which were in the report. *The difference in the number of shares between 2005 and 2006 is the conversion of the 112 millions of Convertible Bonds into 47,979,486 shares. The value of equity is now:

|? |2006 |2005 |2004 | |Value of Equity |3 155 160 780 |2 100 831 820 |2 362 782 100 |

Rating: Value of Debt

The rating shows that the company take risks for financing because she invest in high return share in the junk bond or high yield market those are really unstable.

This means that the company is highly financing by debt, investor need an important rate of return regards to the risk of non payment. In spite of that, British Airways’s main source of external funding is less sensitive to credit rating than the unsecured bond. The impact of the credit ration is not important for some parts of the debt. We will use the faire value of the debt to calculate the market value of debt. Because of the “”fair values of the Euro-Sterling notes and Euro-Sterling Bond 2016 are based on the quoted market values at March 31, 2006.

The fair values of floating rate borrowings are deemed to be equal to their carrying values. ” British Airways Report Example in March, 31st 2006: Market value of the debt is:

|? million |2006 |2005 |2004 | |Market Value of Debt |4 130 |4 682 |5 954 | |Book Value of Debt |4 081 |4 492 |5 716 |

The problem is: Those market values are blending the current liabilities.

In the purpose to respect the ratios made before, I will deduct with percentage the current liabilities. The new market value of debt is: |? million |2006 |2005 |2004 | |Market Value of Debt |3645 |4216 |5244 | |Book Value of Debt |3 602 |4 045 |5 034 |

There is the a market where Debt are trade daily, that explain the difference between years.

Measure of gearing based on market values

We use here the gearing ratio to compare the book value and the market value of the company: Capital Gearing = LTL / Shareholders’ Funds |% |2006 |2005 |2004 | |Capital Gearing |115,5 |200,7 |221,9 | We can make a second ratio in order to set an upper limit: Capital Gearing = LTL / (LTL + Shareholders’ Funds) % |2006 |2005 |2004 | |Capital Gearing |53,6 |66,7 |68,9 | Figures are lower than the one we made with the book value. The equity are valued in the book value at 25p whereas in the market value at an average price of the three years at 230p This divergence makes the ratios lower, thus with the book values the company seems to be less indebted and also less risky to investors.

Estimation of the Weighted Average Cost of Capital (WACC)

Cost of Equity

To estimate the cost of equity, we can use two ways:

1. The dividend valuation model
2. The Capital Asset Price Model (CAPM).

In this case, we can not use the dividend valuation model because the company did not distribute dividends since 2001, so the cost of equity will be 0 that would lead to irrelevant results. British Airways has not distributed dividends because: -They wants to strengthen the balance sheet by making new investment, then it invests into the company Quantas and also into the 5th Terminal in Heathrow.

British Airways is the 13th highest performing company out of the 93 FTSE 100 companies remaining for the performance period April,1st 2003 to March, 31st 2006. The board of director indicated that the payment of dividends will be resumed at an appropriate time. To calculate the cost of equity, the CAPM is the only model available: Ke = Rf + ? (Rm – Rf) Rf ( the risk-free return; Rm ( the market risk; ? ( quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market.

A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile. For British Airways, the Beta is, for the three years, 0,91. The risk-free return can be found in the website of the Bank of England for each years and the market risk is the caps of the FTSE 100 of year N less years N-1 divided by the caps year N-1: (Caps N – caps N-1) / caps N-1 The risk-free return rate is: 2004: 4,75% 2005: 5,1% 2006: 4,2%

The market risk is: |  |31. 03. 2006 |31. 03. 2005 |31. 03. 004 | |Caps FTSE 100 |5964,6 |4894,4 |4385,7 | |year N – year N-1 |1070,2 |508,7 |772,4 | |Market Risk (%) |21,87 |11,60 |21,38 | The Cost of Equity using the CAPM is: |% |2006 |2005 |2004 | |Cost of Equity |20,1 |10,9 |19,7 | )

Cost of debt

In order to obtain the cost of debt, the best ratio is to divide the interest payable by the debt: |% |2006 |2005 |2004 | |Cost Of Debt |2,62 |3,01 |3,50 | They leads to the same conclusion decrease in Debt and interest. We can add that no debt has been taken in 2006. All the purchase have been made by internal cash flow. c) The WACC The Weighted Average Cost of Capital is used to measure the cost of capital.

The formula is: Ko = Ke (Ve/Vo) + Kd (Vd/Vo) Where: Ke (the cost of equity Ve (the value of equity Kd (the cost of debt Vd (the value of debt Vo (the total value of the firm: |? million |2006 |2005 |2004 | |Vo |7 236 |6 593 |8 079 | The WACC is: |% |2006 |2005 |2004 | |WACC |10,08 |5,41 |8,04 |

The amount of Debt decreased but the WACC stay in the average, that because of the high level of the cost of equity. 2005 is discernible by a share price lower than the two other years. This leads to a lower shareholders’ funds and also an higher influence of the debt’s drop, therefore the lower WACC. However, the CAPM have some limitations.

He is based on several assumptions:

• The investors are rational and risk-adverse who set a level of risk.
• The investors have the same single-period planning horizon.
• The investors have homogeneous expectations on the future yield. The investors can borrow and lend unlimited amounts at a risk-free rate.
• There is neither taxes nor cost of transactions
• The investors have all an efficient portfolio which maximize the yield, for a level of risk given.

Whole of efficient portfolio form a curve called the efficiency frontier.

To conclude, from the point of view of market value, we can say that British airways succeeded to face its commitments in term of debt and equity. Indeed, they took advantage of an increase in share price. The repayment of share allowing to reduce the gearing in debt capital.

Any organization in its attempt to survive through decades of challenges and fall has to equip itself of necessary methodology and approaches to management in order to survive the course of change brought by time. In the world of entertainment, the Walt Disney Company is proven as one of the world’s best companies that sustained many setbacks and sustain transformation in order to meet the demand of the industry. Just like other organizations, Walt Disney Company continues to innovate and revolutionize itself in order to meet the customers’ need and demand globally.

It also upholds effective approaches to management through observance of organizational behavior concepts shaped by the company’s value which made it one of the best in the world. The latest report in terms of income held last year, July 2006, Disney has gained increase in its revenue by 12%. The President and CEO of Walt Disney Company, Mr. Robert Iger, explained the basis of their company’s revenue. According to him, “Disney’s strong third quarter financial results demonstrate the company’s unique ability to leverage great content across our many businesses.

” This success of Disney is attributed to many factors specifically in the management scheme that has undergone transformation for many years; however the culture is maintained to preserve its values and vision. In all aspects, Disney integrated effective concepts in their management style to help those targeted organizational goals with proven success all the while. This company is remarkably integrated some organizational behaviors which will be carefully studied and examined to analyze the factors in their success, specifically in the aspect of motivation, organizational culture and communication concept.

Disney’s Motivation Scheme The Disney Company holds both internal and external motivation which they always carry out during the course of their existence for without motivation, their company will not be that competitive globally. In terms of external motivation, they embrace power and control over entertainment market; Disney is struggling hard to continuously change the world of animation to make them always ahead of the others.

As Brinkoetter said, “The Disney approach is to pay attention to details and strive to exceed guest expectation” (work cited by Harnett) and for this reason, he said that about 65% of their business is “a repeat business;” retention of their clients is very important for Disney. The company’s marketing strategy is “is providing exactly what Americans want to believe about themselves and making a fortune in the offing” according to Fjellman (work cited in Mouse or multinational). What this man wanted to explain is that, Disney is giving American people a crafted narration and making them believes it although it is contradicting to reality.

He further explained that “they [Disney] have also played on the desires, wants, and fears of the American public in producing a vision of American history that they crave to believe is the truth” (Mouse or Multinational). For this reason, Disney has tightly control the entertainment market despite its fall in 1966 which made the company to grow and learn more how to control the world of animation. To point it out, Charles Solomon in his statement in an article published by Shyong in Daily Bruin, said, “Disney is such a pervasive influence on popular culture today, and one of the driving forces behind the history of animation. ”

Virgin atlantic is a british based airline. It is owned 51 percent by Richard Branson’s virgin group and 49 percent by singapore airlines. It is registered in the aviation industry with licences to carry people, cargo, and mail. Its headquarters are located in crawley England near the Gatwick airport. Virgin atlantic’s main base is in heathrow althogh by the year 2008 the airline had a global presence with flights to and from major cities of all the continents. Despite the global financial crisis virgin atlantic was one of the few airlines to return after tax profits in the last financial year.

Conception: V irgin atlantic was conceived as british antlantic airways in 1982. Later on Richard branson acuired a controlling stake causing the name to change to virgin atlantic. Later branson was to go ahead and buy out the entire stake. Surprisingly the airline managed to record profits within a year of its inaugural operations. Virgin atlantic has grown steadily grown into an international airline. By last year it was the british second largest airline in terms of mileage. This is mainly as a result of its many long-haul flights.

The success of the airline has not been without controversies especially when it was granted landing rights at heathrow despite british airways’ opposition to the move. The year 2000 saw virgin group sell 49 percent stake of virgin atlantic to singapore airlines. Competitors and technology: Since inception virgin atlantic’s biggest and most ardent competitor has been british airways. Although in any industry all firms are competitors, the two airlines have had much rivalry amongst themselves.

Despite normal competition strategies like low fares and spacier lounges the two airlines have been involved in some kind of ‘dirty competition tricks’ amongst themselves . Among the most notable rivalries include the use of the union flag to represent as the official british carrier. In addition to this virgin atlantic’s opposition to the merger of british airways and american airlines, caused the airline to paint a ‘No-Way BA/AA’ on their aircrafts. Additionally the two airlines have been involved in publicity stunts that have ended up to the law courts.

In addition virgin atlantic did expose a collusion for surcharging customers with british airways that caused the latter to be fined and the former to be given immunity. In terms of technology both firms have been at the forefront in trying to achieve customer satisfaction. As a result virgin atlantic was the first airline to use the airbus A340-600. Virgin atlantic offers seat-back televisions that are maeant to offer entertainment to all of its customres. In addition the airline offers audio/video on demand services on some of the more lucrative routes.

Oman Cement Company ( SAOG ) was formed in 1978. Rusayl Cement works was completed in 1983 with an one-year incorporate cement production capacity of 624,000 dozenss, of cement. In 1999 clinkering capacity expanded to a sum of 1.2 million dozenss per twelvemonth. The 2nd production line came on watercourse in mid 1998. Presently the company is working on spread outing the capacity of works signifier 1.26 MTS per twelvemonth to 1.70 MTS per twelvemonth by upgrading production line No. 1 and No. 2.

The company installations are:

Computerized Fabrication

Oman cement fabrication procedure is to the full computerized.

This avoids major jeopardies in fabrication and needs less work force.

Central Laboratory

The Quality Control is supported by cardinal research lab consisting of robotics, X-ray spectrometers, optical maser atom size analysers and computerized physical belongingss proving equipment.

Quality Management System and Environmental Management System

oman cement Quality Management System is in conformity with the Quality Assurance Procedures of ISO 9001: 2000 enfranchisement.

Pollution Control.

The Oman cement company produces many types of cement which are:

• Ordinary Portland Cement:

It is type I Portland cement. Its utilizations are strengthened concrete edifices, Bridgess and railroad constructions. The typical compound composings of this type are:

55 % ( C3S ) , 19 % ( C2S ) , 10 % ( C3A ) , 7 % ( C4AF ) , 2.8 % MgO, 2.9 % ( SO3 ) , 1.0 % Ignition loss, and 1.0 % free CaO.

• Sulphate Resistant Cement:

It is type V, is used where sulfate opposition is of import. Its typical compound composing is:

38 % ( C3S ) , 43 % ( C2S ) , 4 % ( C3A ) , 9 % ( C4AF ) , 1.9 % MgO, 1.8 % ( SO3 ) , 0.9 % Ignition loss, and 0.8 % free CaO.

• Moderate sulfate resistant:

It is type II cement. This type of cement can be used in constructions of considerable mass, such as big wharfs, heavy abutments, and heavy retaining walls. Its usage will cut down temperature rise particularly when the concrete is capable to hot conditions. Its typical compounds composing is:

51 % ( C3S ) , 24 % ( C2S ) , 6 % ( C3A ) , 11 % ( C4AF ) , 2.9 % MgO, 2.5 % ( SO3 ) , 0.8 % Ignition loss, and 1.0 % free CaO.

• Oil Well Cement

Oil good cement, used for oil Wellss grouting, normally made from Portland cement cinder or from blended hydraulic cements. It is used for cementing work in the boring of oil Wellss where they are capable to high temperatures and force per unit areas. Its typical compound composing is:

MgO: 6.0 % SO3: 3.0 % Loss On Ignition: 3.0 % C3S: 48 % -65 % C3A: 3.0 % Insoluble Residue: 0.75 % C4AF+2C3A: 24 %

Production methods

There are four phases to bring forth cement that Oman cement utilizing which are:

1. Preparation of the natural stuff at preies
2. Heating and chilling to bring forth cinder
3. Preparation of the cement
4. Cement wadding

Procedure description

• Preparation stuff at preies

The natural stuff contains of limestone ( 80 % of natural stuff ) , silica, aluminate and Fe ore. The preies located around the Oman cement works. At preies the natural stuffs are extracted with heavy equipments. Then the limestones are crushed with nomadic crushers connected with long conveyor belt to transport them to storage go throughing the car lab to analysis the samples with x-ray each two hours. After that the natural stuff are moved to reservoirs. Then they are moved with conveyer belt to the altogether factory to crunch the natural stuffs. Finally the crunching natural stuffs are moved to mixture reservoirs to acquire proper mixture before fed them to kiln.

• Heating and chilling to bring forth cinder

The natural stuffs are moved to impart, where heat exchange is occurred between these stuff and the raising hot gases from kiln, so the stuffs are separated from the gases. After that the stuff moved to calciner where the limestone is converted to calcium oxide, and so the calcined stuffs arefed to the kiln where the temperature about 1400 degree Celsius and so go forth from kiln to acquire cinder. Then the cinder leaves from kiln to air to cut down its temperature to 100 degree Celsiuss to be ready to be moved to cement factory.

• Preparation of cement

The cinder that came out of the ice chest will be transported by the pail concatenation conveyer to the silo. The bag filter on the top of the silo is sized for the eating by the pail concatenation conveyer and thermic air enlargement in the storage. The cinder extracted from the silo is transported by belt conveyers to the cement proportioning. The gypsum is added to the cinder. Then the proportioned stuffs are conveyed via belt conveyer to cement crunching. Materials land by ball factory are transported centrifuge by pail lift. The harsh atoms separated return to ball factory for regrinding while the all right merchandise is collected by the bag filter behind the centrifuge and so conveyed to cement silo with an air slide and pail lift. Cement silos is used to hive away the cement.

• Cement wadding

The cement from extraction systems under the cement silo is delivered to the buffer bin by air slide and the pail lift and vibrating screen, before being fed into each bagger. The bagged cement can be loaded straight or stored in depot temporarily.

Machinery and Equipments

1. Limestone Crusher used in rock prey to oppress limestone
2. Clay crusher used in rock prey to oppress clay
3. Limestone Stacker Used to travel limestone to preblending reserve
4. Limestone reclaimer Used to take preblended mixture from preblending reserve
5. Coal and Fe ore Crusher Used to oppress linear stuffs
6. Coal and Fe ore Stacker Used to travel Fe ore to conveyor belt so to proportioning station
7. Coal & Fe ore reclaimer Used for repossessing all linear stuffs and coal
8. Raw factory used for natural stuffs crunching and drying
9. Raw factory fan Used to set the factory recess temperature.
10. Preheater fan used to dry the natural stuffs
11. Preheater and precalciner Preheater used for preheating and partial decarbonation, and precalciner for calcination
12. Rotary kiln used to raise natural stuffs to a high temperature
13. Grate ice chest Used for slaking
14. Cement factory Used to crunch cement
15. Bag filter Used to roll up dust
16. Coal factory Used for coal drying
17. Bulk stevedore for truck Used to lade the majority
18. Cement bagger Used to pack cement merchandise

Quality control system

The quality control section in the Oman cement company map is to supervise merchandise quality in every phase of production get downing with pull outing the limestone from the prey till the phase of cement Millss, by taking samples and analysis them.

• The computing machine and x-ray analysis:

The mechanization lab consists of automaton, x-ray spectrometers, optical maser atom size analyser and computerized physical belongingss.

The samples will be taken by an automatic sampling station from a point between the altogether factory and homogenising silo and so transported manually to the cardinal car lab, where it will be semi-automatically prepared and sent to an X-Ray analyser. The consequences analyzed will be sent to a proportioning computing machine. The computing machine will cipher the ratio of natural stuffs and direct out the set value to constant feeder harmonizing to the chemical composings and natural repast faculty required.

• Physical analysis:

To prove the choiceness, soundness, puting clip, strength, specific gravitation, heat of hydration and loss on ignition of the cement to accomplish the American specifications demand.

• Care process:

The section maps are:

• Checking all machinery and equipments are work decently.
• Scheduling and be aftering for preventative care, prognostic care.
• Coordinating with all sections for day-to-day job.
• Planning, organizing of preventative and breakdown activities for accomplishing high works handiness to run into production mark.

The process that the Oman cement follows in instance of dislocation, preventative and shutdown care are:

• Breakdown care

In instance of any breakdown care in the production section, they give information sing the dislocation to the care section, and care workers are sent to the production works to repair machine failures.

• Preventive care

here, a squad of care workers is sent straight to the production workss to look into out whether there is any failure in the machinery or non.

• Shutdown care

When the works is shut down the employees in the production section sent a missive to the care section and consecutive stairss are taken by care section to work out the failures. The works closure occurs every 6 month in March and September.

The procedure of operating and monitoring production lines and machines immediately, so they can watch the failure and harm of the machines and equipments to mend them or replace them.

Technical direction

The proficient direction duty is to oversee all the mechanical, electrical things and keep the assorted equipments and everything that related to maintenance process, and this direction divided in many subdivisions:

The machine subdivision

The duty of this subdivision is prepare exigency and planning agenda and make it to all the equipments and describe it to name the unusual failure and hole it. Inspect the machinery, cheque with drawings and specifications and rectification. It contacts with shop subdivision to supply the needed replacing parts and besides contacts with other subdivisions to keep the equipments at the workshop.

At the workshop they fix the equipments in exigency conditions, look into the equipments if they work decently and routinely, takes care the equipments and aid to clean them.

The machine operation subdivision

The duty of this subdivision manufacture the replacing parts, make an order outside the company to acquire new parts, lathe the machine parts the required the workshops.

The immediate machine care subdivision

The duty of this subdivision is to look into and repair the production lines.

The electrical subdivision

The electricity section is responsible to mend and guarantee the continuance of the work of all electrical and electronic equipment and preciseness instruments on the production line and besides supervises contact with other subdivisions to that the electricity working decently.

Introduction

The Real Chocolate Company is a market follower in the gourmet segment of America’s chocolate industry with less than 6 percent market share. The company’s products comprise of over 100 types of chocolate, 15 types of fudge and over 30 varieties of caramel-covered apples. Also on offer are more than 100 seasonal products. Distinctive products associated with the firm include “Paw” which is made of chocolate, caramel and roasted nuts. Other favourites produced by the firm include nut clusters, butter creams, truffles and toffee. The company also dips a variety of fruits, nuts, and cookies in milk, dark, or white chocolate. Recently introduced is a line of sugar-free and no-sugar-added sweets. Real Chocolate Company also offers on-site products such as fudge and caramel apples.

Key stakeholders in the company include the owner, Sarah Smith; employees, customers and suppliers of cocoa beans, sugar and dairy products. The strategic purpose of the company is to become the leading chocolatier in the U.S. The company hopes to attain this goal through the manufacture of high quality products.

External Analysis

The following sections describe the political, economic, socio-cultural, environmental and legal aspects of the U.S chocolate industry.

Economic

According to NCA (2004g), the global chocolate industry is worth an estimated $60 billion. Estimates also indicate that 2005 sales in the U.S rose by 2.6 percent to stand at $15.7 billion. These rose to $16.3 billion in 2006 and are estimated to increase to $18 billion by 2011 (Packaged Facts, 2007). In the U.S also, the premium chocolate market is expanding rapidly, underpinned by rising demand in fair trade and organic products. This has more than made up for the fall in demand for sugar free and other innovative products (Packaged Facts, 2007). Gourmet chocolate comprises a tenth of the entire U.S chocolate market and was worth $1.3 billion in 2005. Forecasts show that this segment will expand by 6.4 percent to reach $1.8 billion in 2010. However, reduced economic growth occasioned by the global meltdown has led to lower disposable incomes and this may negatively affect the chocolate industry as chocolates are deemed to be luxury items.

 Political

The chocolate industry, like other industries, is affected by political happenings. For example, America’s high sugar tariffs have made its chocolate less competitive. Chocolate made in Canada, for instance, is less expensive than that made in the U.S since Canada buys sugar from the international market which is 20-30 percent cheaper (South Grow, 2008). Political instability in major producers of cocoa such as Ivory Coast has at many times affected the global supply of cocoa beans.

Environmental

Global warming has impacted negatively on the quality of cocoa ingredients procured by many firms due to the higher shipping temperatures. If not redressed, this phenomenon may negatively affect chocolate companies in the long run. Diseases such as witches’ broom occasionally affect the global supply of cocoa hence the price of chocolate (Busi 0009, p.84).

Socio-Cultural

Socio-cultural factors play a major role in the U.S chocolate industry. For instance, increasing health consciousness is a main driver for innovation and rising demand. Datamonitor (2005) (cited in NCA, 2009; NCA, 2004c) indicates that luxury chocolate products are in great demand from customers who need to meet their lifestyle needs. According to NCA (2004), holidays such as ‘Halloween/back to school, Easter, winter holidays (Christmas, Hanukah,  Kwanza) and Valentines Day provide great opportunities for the chocolate companies to rake in huge sales. Yet anther socio-cultural factor which impacts on this industry is that of ethics. The quest for fair trade has seen a surge in demand for socially responsible chocolate products (Global Exchange, 2005). Besides, the market offered by children is becoming more important because they are increasingly prone to make their own purchase decisions without reference to their parents. Parents are also becoming bolder in their choices (Frost & Sullivan, 2008). Reports indicate that chocolate is mainly consumed by younger unmarried adults and college graduates. Additionally, consumption of gourmet chocolate is not linked to high income groups. Regarding ethnicity, Asians are the largest consumers of gourmet chocolate (BUSI000, p.83).

Technological

Technology is important in the chocolate industry as high tech equipment is needed to provide the required products through stringent processes and controls. The rate of technological change is rapid and R&D is a critical aspect of the manufacturing process (NCA, 2004).

Legal

The industry is bound by FDA Standards of Identity (Guittard, 2007). The industry is also subject to various safety, health, hygiene and franchise operation laws. The Food Allergen Labelling and Consumer Protection Act of 2004 together with the Nutrition Labelling and Education Act of 1990 control the way chocolate products are packaged. In a move that could negatively affect the industry, candy taxes and vending restrictions have been introduced in several states. Other states have also introduced lead caps in candy. Positively though, the Central American Free Trade Agreement (CAFTA) was enacted four years ago and permits more sugar imports into the country (BUSI000, p.83).

Porter’s Five Forces

According to Porter (1998), any industry is affected by five forces. These forces include supplier power, barriers to entry, rivalry, the threat of substitutes, and buyer power. America’s chocolate industry is no exception as these forces also impact on it.

In this industry, supplier power is low. This is because suppliers are many and their offerings are tightly regimented. Additionally, inputs are not very well differentiated, switching costs are relatively low and the buyers are concentrated. Besides, there is always the possibility of forwarding integration by the chocolate companies. Finally, the products are commodity products.

The degree of rivalry in the chocolate industry is very high. This is because the market is highly fragmented, products are little differentiated and switching costs are extremely low. Additionally, the industry is highly concentrated as the two dominant players – Hershey’s and M;M/Mars- control about 67 percent of the American market (Global Exchange, 2005). Other factors which enhance the degree of rivalry include the high fixed costs especially as appertains to storage and the perishable nature of chocolates. Besides, high exit barriers, wide availability of proprietary products and highly diversified players are all key factors which play a major role in enhancing rivalry in this industry.

Barriers to entry are also high. These barriers are mainly occasioned by the high capital costs and large economies of scale needed to successfully compete in the market. Proprietary know-how manifested in the recipes is also required. There are also significant barriers related to distribution due to the high costs needed to set up selling outlets at prime locations. Besides barriers related to distribution, entrants need to satisfy a raft of legal requirements. The proprietary learning curve is very high, going by the sheer number of processes and procedures which go into the manufacture. These have substantially increased entry barriers

The threat of substitutes is high as buyers have a tendency to use other products. The extremely low switching costs also contribute to the high threat of substitutes. Finally, the buyer power is low. This is due to the high possibility of forward integration by the chocolate manufacturers. This is manifested by the many chocolate manufacturers with their own distribution systems. Additionally, the buyers are highly fragmented and do not have any big impact on pricing and product. The industry is currently in the growth phase of the product life cycle but is nearly reaching maturity.

• Internal analysis
•  SWOT analysis
•  Strengths

The Real Chocolate Company has various strengths which have enabled it to sustain its market share. First, the company has a high brand visibility with well-known trademarks and compelling packages. Secondly, the company has a good reputation for quality. Thirdly, The Real Chocolate Company has numerous proprietary recipes which ensure that high quality and distinct products are manufactured. Fourthly, the company is renowned for its good customer service. Besides, the company has a diversified product mix which includes a range of more than 100 chocolate types, 15 varieties of fudge and more than 30 different types of caramel-covered applets. Other strengths include well-branded stores, skills in chocolate production and an extensive distribution network consisting of strategically located stores. The company ranks among the top firms in the country in terms of growth. Finally, the company has a strong innovation culture manifested in unique products such as sugar free and no-sugar added sweets.

Weaknesses

Weaknesses of the company include its concentration in a small market segment and an over-reliance on franchisees. The company mainly targets the gourmet segment which forms only 10 percent of the entire chocolate market. This has limited the firm’s revenue base. Regarding the over-dependence on franchisees, the company gets more than 70 percent of its income from sales to franchisees and 20 percent from franchise and royalty fees. Only 8 percent of the income is attained from company-owned store sales.

Finally, the Real Chocolate Company uses manual processes to manufacture its products, a factor that hampers process efficiency.

Opportunities

Opportunities in the U.S chocolate industry are many and include an increasingly health-conscious populace in America which forms a big market for innovative products. Research indicates that chocolate does not cause acne as previously believed, has almost non-existent amounts of caffeine, does not cause dental caries, does not lead to higher cholesterol levels and has no effect whatsoever on weight gain. Benefits offered by chocolate include the high level of essential nutrients such as proteins, iron, riboflavin, calcium, niacin, potassium and zinc. Additionally, chocolate has flavonoids which can help the heart. These benefits are causing Americans to consume more chocolate and products with companies that can leverage the benefits have an opportunity to substantially increase their market share (NCA, 2004c).

The organic segment equally provides a big opportunity for chocolate companies to cash in. According to Articlesbase (2008), many customers have a preference for organic chocolate. Besides, a rising appetite for black chocolate and ethical and exotic flavours also portends opportunities for chocolate manufacturers. Another opportunity is caused by American’s tendency to eat out. According to Frost ; Sullivan (2008), more and more Americans are eating out. Estimates show that out-of-home events will rise by 8.8 billion while snacking events will rise by 7 billion this year as compared to 2003 figures. It is also forecast that an additional 3 billion food service dealings will be carried out this year compared to 2004. This presents a huge opportunity for the company to cash in on the demand

Threats

The company is faced by many threats. Perhaps the most potent of these is the global economic meltdown which is bound to negatively affect chocolate sales since chocolates are essentially luxury items. Additionally, it has constrained the availability of credit hence financing for expansion activities. Besides the threat posed by poor economic performance, another threat includes the wide availability of substitute products. Legislative initiatives to subject the industry to FDA content standards also pose threats to the company. Global warming has had undesirable impacts on shipping temperatures hence the quality of cocoa ingredients procured by many firms. If not redressed, this can negatively affect the company in the long run. Cheaper products by companies such as Hershey and those from more efficient producers such as Canada are another threat. Ethical issues facing the industry such as a public outcry on the use of child labour in cocoa farms and exploitative practices of the chocolate companies also threaten the survival of the company. Alongside this, the Real Chocolate Company-like many other chocolate companies- is expected to adhere to fair trade practices and socially responsible products in a bid to redress the ethical concerns (Frost ; Sullivan, 2008). This will indubitably increase costs and make the firm’s products more costly. Other threats include cocoa diseases such as witches’ broom, black pod and frosty pod leading to global yield losses and erratic supply.

Critical Success Factors

Critical success factors (CSFs) refer to those mission-critical processes essential for the success of any given business (Clint Burdett, 2008). The most important CSF in America’s chocolate industry is a reliable supply of the basic ingredients namely cocoa, dairy ingredients and sugar. Of particular importance is the procurement of the highest quality cocoa beans which can give the end consumers the desired taste and consistency. Another important CSF is the availability of a good distribution network with strategically located stores. Top secret recipes which especially specify the temperatures applied, the percentage of ingredients used, blending formulas and the time interlude used need to be carefully form another critical success factor. Other important CSFs are production which needs to be innovative and top-notch, technology and cost management.  Technology is important as it helps to improve the physical appearance, flavour and shelf life all of which are important for the success of chocolates.

How Is the Company Performing

Whereas the revenues of the Real Chocolate Company are on upward trend and the firm has recorded a steady and rapid expansion in recent times, its sales form less than 6 percent of the total gourmet market sales. The company is a market follower, trailing far behind competitors such as Godiva Chocolatier (annual sales = $825 million), Russell Stover, (annual sales = $450 million) and See’s Candies (annual sales = $325 million). Recent years have seen an increase in its net margins, indicating that profitability has been increasing over the last three years. Other positive indicators include higher return on assets (ROA), return on equity (ROE) and leverage. This implies that the company has efficiently used resources at its disposal and that shareholders continue to get good returns for their investment. Over the same period, the company has had marginal declines in its current and quick ratios and total asset turnover. This means that Real Chocolate Company is not very liquid and may find it hard to settle current liabilities when they become due (see Appendix B).

Problem Diagnosis

Several problems facing the Real Chocolate Company were identified in the preceding section. First the company is faced with the prospect of slow sales and the unavailability of credit to fund expansion due to the poor economic climate in the United States. Secondly, the company has a small revenue base as it primarily concentrates on the small gourmet market. This focus strategy may backfire as other broad market leaders can quite easily come up with products to serve sub-segments of this market, compete against the company on price and grab a substantial market share. Besides, it is entirely possible for other more efficient producers to slice out some sub-segment which they are able to serve better. A case in point is the organic chocolate market where many big players are getting in. To conform to current expectations, the company is also faced with the demands for production of fair trade and socially responsible products. Additionally, the company has to contend with stiff competition from other more efficient producers of chocolate. Another problem facing the Real Chocolate Company is the relatively weak performance of its retail stores, with more than 90 percent of its revenues accruing from franchise fees, royalties and franchisee sales. Finally, the Real Chocolate Company is faced with the problem of high threat of substitutes.

In order to maintain its market share and achieve its strategic objective of being a market leader, the company needs to find solutions to these problems. What can the company do to enhance its sales with the current global economic crisis? How can the company fund its future expansion? How can the company increase its revenue and produce fair trade and socially responsible products? What strategies can the company use in order to overcome the stiff competition and sustain its market share? Finally, what options does the company have in its quest to ensure that substitute products do not hurt its bottom-line? The following section explores the different strategic options available to the company.

Generation of Strategic Options

According to Arnsoff’s matrix, companies can expand their market share through market penetration or product development. In the former, the objective is to attain increased growth using the available products so that the market share can be enhanced. In the latter, the aim is to target the available products at new market segments. Companies can also attain growth by creating new products which are aimed at existing segments. Finally, increased growth can be attained through diversification

A cursory look at the chocolate industry in the United States reveals several facts. One, switching costs are quite high. To take advantage of this observation, the Real Chocolate Company could strive to build customer loyalty through several methods. An important strategy which can help the company attain this goal would be through production of differentiated chocolate products. In the Arnsoff matrix, this compares to producing new products at existing market segments. If well implemented, this can help the company introduce differentiated and highly visible brands and enhance market penetration by locking in loyal customers (Porter, 1998).

Secondly, the company needs to diversify its product mix so that it can serve the mass market and other bigger chocolate market segments other than the gourmet segment. This will help increase the company’s revenue base, increase its market share, and reduce the uncertainty associated with over-dependence on a small segment. Additionally, this move will enable the company to weather the current economic crisis better since it will have recourse to an expanded market. Besides, it will reduce the covert threat posed by chocolate substitutes. To capture the mass market, the company needs to have products that can compete on the basis of price. As such, it could adopt the cost leadership strategy.

To take advantage of the opportunities proffered by the emergent organic chocolate, ethnic and exotic flavour and health conscious segments of the market, the Real Chocolate Company would do well to invest in procurement, R&D and technology processes that would help it obtain the required input and innovate new products for these segments. Technology would improve the physical appearance, flavour and shelf life of its products, a factor that would help raise its profile among connoisseurs of chocolate. The company would need to raise additional cash to fund these strategic initiatives. With the current credit crunch and high interest rates, funding from the banks may not be immediately forthcoming or would be a tad too expensive. To overcome this problem, the company can raise an initial public offering (IPO) and sell a stake to the public. Alternatively, the company can enter into strategic alliances or make targeted acquisitions of smaller entities which are focussed on specific niche markets.

Moreover, the company can turn to the Caribbean countries for the principal supply of cocoa beans. This would be a clever move in several respects. First, it will enable the company to obtain the highest quality cocoa beans in the world and thus ensure that its products are unquestionably of the best quality. Secondly, it would ensure a steady supply for the company in the foreseeable future and do away with the often erratic supply occasioned by political instability in major producers such as Cote de Ivoire. Third, almost all organic cocoa comes from this region and this would help the firm satisfy the emergent organic segment. Finally, cocoa beans from the Caribbean are not associated with child labour and exploitative practices. This would do away with the ethical problems facing the company (Suma, n.d).

In addition, the company could open a manufacturing plant in Canada, more so for its products which are marketed there. This will help lower the price of its products especially since it would be able to import sugar from the international market which is cheaper as the Canadian government imposes no tariffs on sugar. Since sugar forms close to 20 percent of the chocolate production costs, this would indubitably help the company compete on the basis of price.

Finally, the company can solve the problem of poor retail sales through a number of initiatives. To do this, the Real Chocolate Company can resort to improve the sales by utilizing non-traditional retailers such as cash registers at national stores. Besides fully exploiting the Halloween, Easter, Christmas and winter holidays, the company can also concentrate on conventionally non-candy holidays such as July 4th. Another strategy which the company can make use of is to cross sell its products with other related items such as wine and greeting cards. The company can also use other mass distribution channels to sell its gourmet products.

Evaluation of Strategic Options

From the foregoing, it would seem that the company is not short of ideas which it could implement in order to overcome its weaknesses, threats and other problems facing it. The selected strategy should be able to ensure that the company maintains its current share of the market and increases its market penetration while developing products for the emerging market segments. Based on the industry characteristics described, the cost leadership strategy would seem to be the Real Chocolate Company’s optimal strategy. This is because America’s chocolate industry is fast approaching the maturity phase, meaning that firms which are able to compete on the basis of price will sustain a larger market share in the long run. Since the company’s key competency is its distribution channel and the firm has access to a reliable supply of high quality cocoa beans, this particular strategy would seem to be a feasible option. The strategy is also plausible considering America’s economic meltdown.

However, the strategy also calls for high capital requirements which the company may not realize in the short term, and also requires unrivalled production skills. The strategy also demands efficiency in production processes and the company may be hard pressed to attain this as it has manual production processes. A solution in this regard would be for the company to invest in automated and top-notch technology. However, the rapid change of technology mentioned previously would mean that its competitors would almost certainly acquire better technology and wipe out any advantages enjoyed by the Real Chocolate Company. Besides, the industry leaders are more efficient producers and can sustain a long drawn-out price war.

A more feasible strategy for the company is thus needed. A differentiation strategy whose target scope is industry wide seems to be the best strategic choice the company can adopt.  This strategy is suitable because the company has a good reputation for high quality products and its trademark is well renowned. Moreover, the firm has a powerful sales team which can ably communicate the differentiated products’ strengths. Besides, the company has a rich tradition of research and innovation as evidenced by its existing products. These skills and innovative strength make the differentiation strategy to be highly likely to succeed. The threat of imitation by competitors would be very low because of the company’s IP policy which safeguards its top-secret recipes. Through this strategy, the Real Chocolate Company will be able to diversify into other market segments and thus expand its market share and revenue base. It will also be able to build customer loyalty, weather the current economic crisis, substantially reduce the threat of substitutes, and take advantage of the emergent market segments.

Description of Selected Strategy

The differentiation strategy requires that companies originate novel products which provide its customers with unique features and which are seen to be superior to other existing products. Due to their unique features and superior value, the products are able to command a premium price (Porter, 1998). Since the selected strategy is industry-wide, it means that the company will create products targeted at all market segments.

Using this strategy, the Real Chocolate Company would produce differentiated organic chocolate products. The company would also produce a diverse range of flavoured products with both ethnic and exotic flavours as well as products with unique tastes. The strategy would additionally see the company tap into the healthy segment market with highly differentiated products that give its customers a number of health benefits. For instance, the company could develop chocolate with omega 3 fatty acids and calcium to compete with products from Nestle, Ghirardelli and Botticelli. The company would also come up with chocolates fortified with vitamins, flavoured skin enhancing ingredients and branded sugar free sweets.

According to statistics, dark chocolate sales rose by almost 50 percent from 2003 to 2006 and provide a viable segment for companies in this industry (BUSI000, p.83). By producing differentiated dark chocolate, the Real Chocolate Company would challenge for market leadership in this category. The company can also produce differentiated products which are targeted at other market segments such as baking chocolate. Production of dutch chocolate products would enable the company to target bakeries, ice cream manufacturers, beverage companies and households. On the other hand, differentiated products with chocolate flavoured coating would be tailored at the lower end market.  Other differentiated products would include white chocolate. To further tap into the market formed by ethically conscious individuals, the Real Chocolate Company could have its products certified as fair trade brands.

Resources required to ensure that the strategy is well executed are listed as follows

• investment in research and development
• Investment in fair deal certification. The company will also need to contract only the suppliers who meet the minimum fair trade standards
• investment in skilled personnel
• investment in technology
• promotional budget

 Action Plan for Implementation

The action plan for implementation is presented in the following section and is condensed in table 1 below. The entire plan revolves around the ability of the company to raise the money required for the plan’s execution. As such, the initial step is the financing part. It is proposed that the firm raise the required funds through an IPO. The funding process will involve the shareholders and management and is expected to take close to a year. Once the funding has been secured, the next stage will be the acquisition of new technology. This will be carried out by the firm’s management after a due diligence of the available options.  All employees will be trained on the new technology as well as the strategic direction to be followed and training will be continuous rather than a one-off event. Once the technology is acquired, the next step will be for the company to set up processes that will help it to attain fair trade certification. Concomitant with this will be the setting up of an active R&D department which will drive the innovation process. After these have been implemented, the next stage will involve the creation of new selling channels. The firm’s management and employees will all participate in these plans.

Conclusion

This paper looked at the Real Chocolate Company in depth and sought to craft a strategy which will help it attain its objective of being a leading chocolate company. Whereas the firm has attained high profitability and achieved rapid growth in recent times, it is faced with many threats which could potentially derail it. These threats include cutthroat competition, a shrinking economy, a hostile legislative environment, and ethical issues among others. There are also numerous opportunities which the company needs to exploit. For the company to take advantage of these opportunities and overcome the threats and its weaknesses, it needs to come up with an effective strategy. It is recommended that the Real Chocolate Company adopts a differentiation strategy with an industry wide target scope. This will enable it to serve the emergent segments and gain increased market penetration by developing new products for the existing segments.

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