In March of 2012 Steve Parkland was hired as the new president at Charles Chocolates. He was immediately faced with numerous decisions about the future of the company. The board of directors had tasked Parkland with doubling or tripling the size of the company over the next decade, but the board and the senior management team had different opinions about the strategy that would accomplish this goal. The main issues that Parkland faced were how to increase the company’s operations while maintaining the traditional culture and support of the board. The premium chocolate industry is a large market in the United States and continues to grow around 10% annually. It is also populated with very strong competitors both internationally, with companies like Godiva (Nestle), and local companies like Delice. Both competitors are priced higher than Charles and have higher sales.
This is most likely because Godiva and Delice have modern trendy packaging for their products. The number and strength of competitors means that buyers have very high bargaining power, but it also means that the threat of new entrants is low because it is hard to gain a piece of a market saturated with such powerful players. The majority of the suppliers to the chocolate industry sell commodity products whose price is set by the market and their power and influence is low.
There are numerous substitute products for affluent customers’, confections and pastries being the most significant, but chocolate will always be a stable product so it is a medium level threat. To compete in such a challenging industry Parkland needs to revitalize the company’s packaging and its marketing campaign. New packing is an ideal way to begin because it demonstrates the changes that will be taking place in following years without compromising the company’s heritage or corporate culture. Charles’ current marketing strategy strongly targets the local community which it already has a strong presence in.
Charles needs to increase its marketing to the tourist community. The advertisements should follow industry trends for use of ethically responsible ingredients to produce the highest quality chocolates. In order to attract and keep the new, non-local, customer base Parkland needs to increase Charles online presences and sales channels.
This is a low risk, low cost opportunity with the potential for large growth in new geographical areas. If Parkland wants to achieve the aggressive growth that the board desires his ability to improve the capabilities and the operations of the company will be one of his greatest barriers. Due to the affluent nature of the customers and the possible variety in the product Parkland should focus on improving the company’s organizational capabilities. A new plant will eventually be needed but that decision can be delayed if Charles can streamline its operations.
Parkland needs to institute policies that will measure productivity and develop an accurate method of forecasting sales. This will result in lower inventory carrying costs, fewer out of stock issues, and fewer backorders that need to be filled. If Charles can reduce the number of back orders and out-of-stock products it can focus on a single product line at a time which will reduce the frequency of expensive switching costs.
There are many other growth opportunities that Parkland may pursue in the future. He may wish to grow the Sandwich Heaven segment of the business, growing the corporate connections of the company, and expanding into other physical locations in the states. These are all viable options for the future but the ones listed above are the best for Charles’ current situation. By improving packaging, marketing, online sales, and internal organizational capabilities the company can grow significantly without large changes to the tradition of the company and without taking on too much additional risk.