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Rocky Mountain Chocolate Factory - Case Analysis

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trent houghton

on 1 November 2012

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Transcript of Rocky Mountain Chocolate Factory - Case Analysis

By: Young Tough Business Ninjas Derek Medeiros, Ashley Howley, Trent Houghton, Max Devaney, Noah Elwell STRATEGIC CASE ANALYSIS Current Situation Over 300 franchised stores and 5 company-owned stores
Ranked #60 on Forbe's 200 Best Small Companies
$16.7 million in annual revenue - 2008 Mission since 1981 to provide a diverse range of best quality chocolate OBJECTIVES Guarantee proper financial management during depression
Foster slow expansion
Nurture working relations STRATEGIES Selection of sites in tourist areas, regional and outlet centers, street fronts, and airports
Company-owned refrigerated trucks
New line of sugar-free candy for the health conscious
Store design encourages walk-ins to view and smell the product preparation POLICIES Distribution channel - trucks transport products and bring back ingredients
Strict standard of performance for franchises Strategic Managers No fewer than 3 and no greater than 9 directors
Catalyst Board of Directors - participates extensively
Panel of Directors contains all autonomous members except President and VP Frank Crail - Director, President,
CEO, Co-founder Elaborate organizational framework
Top management and BOD contain very diverse skills
Internal appraisal mechanism - loyal employees promoted and stay for a long time
Follow systematic approach to strategic management EXTERNAL ENVIRONMENT Natural Heat, rain, and snow deter foot traffic from tourist shopping
Weather effects cocoa beans
Severe weather can threaten distribution Societal Economic:
Unstable local and global conditions improving
Increasing consumer disposable income Technological:
Advancing manufacturing technologies
Automated processing machines
NETZSCH's ChocoEasy Political - Legal:
Fair trade and import/export regulations
Licensing costs
Trucking regulations
Labor strikes Sociocultural:
Support for ethical practices
Rise in health consciousness FINANCIALS Revenues from 3 sources:
sales from franchises
sales at company-owned stores
collecting franchise fees and royalties Revenues increased12.5% from fiscal 2006 to fiscal 2007, and 1% from 2007 to fiscal 2008
Net income increased 16.7% from fiscal 2006 to fiscal 2007, and4.6% from $4.7 million in fiscal 2007 to $5.0 million in fiscal 2008 THE TASK ENVIRONMENT
1) Entry Barriers - Medium
2) Bargaining power of suppliers - Low
3) Bargaining power of buyers - Medium
4) Threat of substitutes - Low 5) Rivalry among competing firms - High larger companies buying out small chocolate factories to enter into gourmet market
Mars, Inc. and Hershey Foods acquiring medium-sized gourmet chocolate companies and launching new lines
Godiva was acquired by the largest consumer goods company in the Turkish foods industry, Ulker Group
Global competitors have better name recognition and resources Leading manufacturer’s in Europe: Mars, Nestle, Cadbury, Ferrero, Lindt & Sprungli
Principal competitors - Alpine Confections, Inc., Godiva Chocolatier, Inc., See’s Candies, Inc., Ethel M’s, although RMCF owns more stores than any of them
Recognized leader in premium chocolate - Chocoladefabriken Lindt & Sprungli AG ; owns 6 production sites in Europe, 2 in US, distributes on four continents, presence in 80 countries (T)
Corporate Structure Franchising Corporate Resources Marketing
R & D
HRM Analysis of Strategic Factors Strengths
Producing very high quality, fresh organic products
Excellent franchising program
Selection of sites in targeted environments
Store atmosphere, ambiance, design, in-store preperation
Contracting suppliers at fixed prices for ingredients
Company-owned refrigerated trucks for distribution
Low cost marketing strategy
Corporation is quick to react to possible changes
Only offers products considered to be a luxury
Does not implement national advertising
Relying on proper operation of franchises
No considerable sustainability endeavors
Franchises place orders as frequently as every 2 weeks
Everyday expenditure is increasing
Lack of storage space within stores
Economic recovery from recession
Growth of real estate developments in key primary environments
Advanced manufacturing technologies and automated processes
Increasing customer will to pay more for better quality
Rising health consciousness causing growth in organic industry
High confectioners’ sugar consumption in Western Europe
Growing demand for Western goods and chocolate consumption in China and India
Tendency for larger companies to buy out smaller chocolate manufacturers
Highly competitive global chocolate market
Purchasing power on locations for potential franchises
Franchises purchasing less ingredients from the factory
NETZSCH's ChocoEasy technology
Fair trade regulations
Rising fuel costs
Strategic Alternatives and Recommended Strategy Expand to China & India (O7, S2)

Both countries have shown candy consumption increases - 25%-30% increase per-year in chocolate consumption
Growing demand for Western goods
One of our core competencies is franchising and effective licensing
We would not be up against high powered European competitors -in the short term - Chocoladefabriken Lindt & Sprungli AG
Drawback with these countries is that they are strongly oriented toward their own country's products
It would be very costly to license out
Battling trade regulations and Chinese economic barriers
Would be more of a “10 Year” strategic goal
Build East Coast manufacturing center/factory (O3, W5)
We only have 8 trucks and a Western manufacturing center in Durango, Colorado.
40% of revenues of RMCF stores and over half of revenue from franchises are incurred from products made in the factory. This would facilitate the expansion through the North East and South East.
Constantly providing franchises with factory products generates more company revenue and prevents franchises from too much in-store production
We could cover more territory in America
Would improve efficiency of company distribution channel
Extremely high start up costs to build a new manufacturing plant
Immediately, we would be in need of more company trucks to be built in order to more applicably service the east coast manufacturer
Would take away from the “Rocky Mountain” aspect of the company by producing closer to the Appalachian
Combat rising fuel cost Develop a promotional strategy using close ties to regional center site developers.
Growth of real estate in key primary environments
Core competency is our franchising abilities and location scouting
A good way to get around our lack of national advertising
Exploit our ability to contract suppliers at fixed prices for ingredients
Will not have strong control over implementation
RMCF makes less money off its franchises
Not as much control over strategic location if obligated to developers
RECOMMENDED STRATEGY We recommend building an east coast manufacturing plant in order to broaden our product reach without the international monetary and demographic barriers
In a long term view, we can combat fuel expenses by having a second central plant for our company trucks to service
We will still have a relevance in the locations we aim to target, given pre-existing stores and brand name awareness
The factory will be a centralized location in the Eastern US. Size of factory to be determined based on logistics, distribution channels, potential profit margin
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