3Current situation Jeremy smith I. CURRENT SITUATIONA. Current Performance329 Franchised and 5 Company owned storesIncreasing revenues year to year with $16.7 Million in 2008Sales have slowed due to economic downturn but the company is in an excellent financial position to withstand the recession
4Current situation Jeremy Smith B. Strategic Posture1. MissionQuality, Taste, Value, and Variety of productsQuality of the product is the number one factor
5Current Situation Jeremy Smith B. Strategic Posture2. ObjectivesManage money carefully during economic downturnSlowed expansion and elimination of debtMaintain a good relationship with employees as well as franchisees
6Current Situation Jeremy Smith B. Strategic Posture3. StrategiesAdding stores in resort, tourist, street front, and entertainment-oriented locationsRMCF is repurchasing stock as it felt it was undervaluedOwns 8 refrigerated trucks to move products from factory to storesNew line of sugar free candies for the health conscious and those with special dietary requirementsEach store is setup to make product where customers can view and smell the end result
7Current Situation Jeremy Smith B. Strategic Posture4. PoliciesTrucks are sent out from the factories with product for stores but return with ingredients to make more product making the trips more cost effectiveFranchisees are held to a high standard of excellenceCompany ensures that store locations are spaced apart well and offer the best probability for successFree samples of fresh products made in stores
9Rocky Mountain Chocolate Factory Inc. Board of Directors Franklin CrailChairmanCEOPresidentBryan MerrymanDirectorVPCFOCOOTreasurerLee MortensonGerald KienClyde EngleScott Capdevielle
10Rocky Mountain Chocolate Factory Inc. Top Management Franklin CrailChief Executive OfficerPresidentDirectorBryan MerrymanVice PresidentChief Financial OfficerChief Operating OfficerTreasurerEdward DudleySenior Vice President –Sales and MarketingGregory PopeFranchise Developmentand OperationsJeremy KinneyVice President –FinanceJay HawsCreative ServicesDonna CoupeFranchise Supportand TrainingVirginia PerezCorporate SecretaryWillian JobsonChief Informations Officer
11III. External Environment : Opportunities and Threats (SWOT) Matt Misitano
12External Environment A. Natural Environment B. Societal Environment C. Task EnvironmentD. Summary of External FactorsThe External Environment consists of many different forces, these forces are (read slide)
13Natural Environment1. Extreme heat, Rain, Snow, Hurricanes, and Earthquakes negatively affect foot traffic and tourism. Weather conditions also affect crop production. 2. Severe weather conditions exist in all regions of the world and at different times depending on the season and geographic location.The Natural environment takes into account forces from the natural physical environment that either currently do or in the future will affect the corporation and the industry it is in, some of the natural environmental forces in this case are (.Read Slide)
14Societal Environment1. Economic 2. Technological 3. Political-Legal 4. SocioculturalThe societal environment includes 4 main forces, these forces are: Read slide.
15Economic forcesa. Unstable economic conditions locally and globally are in a recession cycle but there are signs locally that show the economy is trending into the recovery stage which will increase consumer spending. (O)b. Low cost marketing strategy . (O)c. Company owned trucks. (O)d. Hershey and Mars allocating financial resources to increase the premium chocolate products locally and globally. (T)e. Experts forecast that the Gourmet and Organic Chocolate industry will grow to become a $ 2 billion industry by (O)f. Fixed pricing contracts with vendors for ingredients. (O)Economic forces include (read a. and then come back to notes for b) (includes in store demonstrations, free samples, new packaging, charitable events, sponsorships, coupons, flyers, and mail order catalogs produced by its in house creative services department). Read c. then expand (c. reduces transportation costs, increases company assets, quicker delivery of products, and more cost effective). Read d. Read e. Read f. then expand (f. fixed prices allow RMCF to receive their ingredients at the same price regardless of market price fluctuations which allows RMCF to continually make profits and be competitive with their product pricing).
16Technological Forcesa. Increased Internet functionality and security increasing online consumption. (O) b. Dynamic manufacturing processes implemented using advanced planning and scheduling systems with lean processes to reduce and quickly turn over inventory reducing costs and storage space (O). c. Automated machine processes eliminating work previously done by hand increasing the speed, capacity, and efficiency of manufacturing processes. (O) d. New manufacturing process called NETZSCH’s ChocoEasy along with purchased automated factory equipment allowing the development of any size or variety of candy to be cost effectively manufactured using their own proprietary brand. (O) e. Small chocolate manufacturing companies are being bought by huge companies with automated machinery and processes in place to mass produce gourmet chocolate (T). f. Airport’s constructing more motorized walkways decreasing foot traffic and moving potential consumers through terminals faster (T).Technological Forces are read slide
17Political-Legal Forces a. Fair trade regulations and the use of child labor. (T) b. Licensing costs and regulation compliance with health, safety, sanitation, building, and fire agencies from each state where stores are located along with federal regulations for the manufacturing and distribution of food products. (T) c. Trucking regulations from federal, state, and Canadian provinces. (T) d. Import and Export regulations (T). e. Potential for striking labor forces like the 5 day strike by laborers on the Ivory Coast in 2006 due to unbearable working conditions. (T)Political and Legal forces are read slide.
18Sociocultural Forcesa. Trends show consumers are supporting chocolate companies that implement ethical practices and follow fair trade regulations. (T) b. Economic recovery leads to an increase in consumer’s disposable income increasing the consumer’s ability to purchase premium goods. (O) c. Research indicates Dark chocolate has health benefits. (O) d. Trends indicate consumers are willing to pay higher prices for organic and gourmet chocolates that they feel are healthier for them. (O)Sociocultural forces are read a. then expand (a. RMCF gets the majority of their ingredients from Western Africa were ethical labor practices are questionable, this is a threat. Read b. Read c. then expand (c. such as reducing the risk of dementia, diabetes, heart attacks, and strokes. Also research shows Dark chocolate can decrease blood pressure, lower cholesterol, and improve sugar metabolism). Read d.
19Task EnvironmentThe task environment forces that drive industry competition for Rocky Mountain Chocolate factory are: ingredient pricing, geographic locations, regulatory and licensing policies, large corporations entering the gourmet and organic market sectors, the ability to purchase optimal retail locations, and efficient manufacturing and distribution processes. These forces are broken down in the Task Environment and are rated as High, Medium, or Low forces depending on their impact.Read slide.
20Task Environment Forces and Ratings a. Threat of new entrants High: Large corporations like Mars and Hershey have positioned themselves to enter the market globally, and there are low entry barriers. (T) b. Bargaining power of buyers Medium: Gourmet chocolate is a leisure product and there are many alternate products and competitors. (T) c. Threat of substitute products or services High: Economic strength and consumer’s disposable income greatly affect gourmet product consumption and lower priced chocolate is very accessible to consumers. (T) d. Bargaining power of suppliers Low: Fixed pricing and alternative supplier options give RMCF leverage. (O) e. Rivalry among competing firms High: Industry growth and increasing entrants into the market pose a threat to RMCF. (T) f. Relative power of unions, governments, and special interest groups Medium: Consumer demand for fair trade and good ethical practices, union demands being met, and government regulations present challenges for RMCF. (T)Read slide.
21Task EnvironmentKey factors in the immediate and future task environment for Rocky Mountain Chocolate Factory Inc.Consumers demand for quality and healthy products as well as adherence to ethical labor practices.Big name competitors like Mars and Hershey entering the market locally and globally.Supplier’s willingness to provide ingredients at a fixed cost.Creditors ability to provide potential franchise owners with loanable funds. Labor unions and employers ability to work together to produce raw materials at a low cost while operating under regulated guidelines.Government and trade regulations dictate operating guidelines and entrance barriers in the industry.Interest groups and local communities will support corporations that display ethical business practices and protest against businesses that do not follow those guidelines.Shareholders will support and invest in profitable business activities and growth as long as profits are realized.Read Slide.
22Summary of External Factors (EFAS Table) Read Slide. Pass to next group member!
23IV. Internal Environment: Strengths & Weaknesses Diego Elizalde
24CORPORATE STRUCTUREIncorporated company, operates franchises nationally and internationally.The company operates as a highly cohesive unit, even though it has an active franchising program.Some decision making, such as pricing, is left to local stores. However, more important decisions, such as store placement, have to be approved by senior management.Corporate structure is clear to all company members. Training manual and operating specifications insure that this information is divulged to everyone.The Corporation’s structure is instrumental to effectively manage its large geographical footprint of franchises.Read Slide.
25CORPORATE cultureThe company values clear objectives and well defined goals.A review of the case study materials, plus a visit to their company website revealed no considerable sustainability efforts.Company culture is to adapt quickly and efficiently to challenges, such as establishing its own fleet of refrigerated shipping trucks after finding no suitable 3rd party provider.Internationalization is an important element of the corporate culture, as evidenced by its international franchising program.Read Slide.
26ResourcesMarketingUtilizes low cost marketing tactics, such as participation at local events.Store locations utilize existing customer bases to reduce marketing costs.National advertising is not a part of the firm’s marketing strategy.Company utilizes in-store advertising to stimulate impulse purchasing.Read Slide.
27resources Company consistently making a profit. FinanceCompany consistently making a profit.Operating expenses (led by fuel costs) increasing.Multiple income sources (sales to franchised stores, sales from company stores, and setup fees and royalties from franchises).Overall financial health is strong with excellent long term prospect.Research and DevelopmentSubstantial R&D investment goes into store concept, market research for store placement, and developing inviting spaces to promote sales.Over 300 recipes created by its Master Candy Maker.Utilizes company store as testing grounds for new products.Read Slide.
28resources Operations & Logistics Strong areas for this firm. Entrepreneurship has led to extremely streamlined operations.Perfect blend of in-store production and external purchasing.Efficient transportation solution by using own truck fleet.Human Resource ManagementMost employees are hourly.Utilizes temporary labor during peak times.Company emphasizes respect, commitment and professionalism.Company states wages and benefits are competitive and fair within the industry.Read Slide.
29Resources Information Technology Not stated in case study. Stores operate independently from main corporate structure.Some aspects of its operation must entail a certain level of Information Technology utilization, such as shipping, and company sales performance, inventory control, and accounting. However, Information technology does not appear to be a critical aspect of the operation.Read Slide.
30Summary of internal factors (ifas table) Read Slide.
32SITUATIONAL ANALYSIS (SWOT) StrengthsHigh Quality Product (won the 3 heart rating in a blind taste test)Highly cohesive corporate cultureStrong brand recognitionCareful selection of store sitesStrong Franchise Program (#1 in 2008, Entrepreneur magazine)
36REVIEW OF MISSIONAND OBJECTIVES Quality, taste, value and variety of productsQuality of the product is the number one factorObjectivesManage money carefully during economic downturnSlowed expansion and elimination of debtMaintain a good relationship with employees as well as franchisees
37REVIEW OF MISSION AND OBJECTIVES Rocky Mountain Chocolate Factory has continued to maintain its mission and objectives appropriately during times of expansion as well as recession.
38VI. Strategic Alternatives and Recommended Strategy Reilly Kindred
40TOWS- used to create New Strategies Strengths: Weaknesses:Opportunities: SO Strategies WO Strategies-Focus on future Internal fixes &growth improvementThreats: ST Strategies WT Strategies-External fixes for Survival
41Main Strategy Alternatives: Corporate StrategiesStability, Growth and RetrenchmentBusiness StrategiesCost Leadership and Differentiation
43Business StrategiesCost Leadership- lower cost competitive strategy aimed at huge markets and requires efficient operation for general affordable productDifferentiation- aimed at the broad mass market moving a product perceived as unique charging a premium
44Rocky Mountain Chocolate Factory A. STABILITY ALTERNATIVES 1. Growth Strategy- (horizontal growth through franchising) Pro: Continue reaching and expanding to new markets as profits carry forward. Con: May not allow enough time for thorough planning. 2. Differentiation- (unique product and production process adds mystique) Pro: Viable for above-average earnings for exceptional product resulting in brand loyalty lowering customer’s sensitivity to price. Con: May see losses in hard times because of it being a luxury. 3. Stability Strategy- Pro: Allows for proper training of new franchisees. Con: May result in loss market share. B. RECOMMENDED STRATEGY Growth is the recommended strategy for the Rocky Mountain Chocolate Factory. The total U.S. candy market approximated $29.3 billion of retail sales in 2009, with chocolate generating sales of approximately $16.9 billion. That’s almost 60% of the candy game. RMCF as of March 31, 2010, there were 11 Company-owned, 29 franchisee/licensee owned and 305 franchised Rocky Mountain Chocolate Factory stores operating in 36 states, Canada, and the United Arab Emirates. Franchising, licensing and exporting will help short and long term goals of the company.
45Discussion and/or Questions? Thank you for your attention! conclusionDiscussion and/or Questions? Thank you for your attention!