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Charles Chocolates (CC) is a privately held premium chocolate producer based in Portland, Maine with a history dating back to 1885. The selling channel is primarily retail and wholesale. The mission of CC is to remain committed to high quality, increase company size by two or three times and improve band integrity while maintaining strong community ties with existing loyal stakeholders. CC’s current strategy involves selling high quality products, maintaining traditional old fashioned values and practices to appease repeat consumers, attracting more loyal customers, and providing good customer service.
A new president has been hired to double or triple the size of CC, which is the objective. A plethora of issues regarding marketing, manufacturing, human resource, financial and strategic positioning all need to be considered in this for this venture to continue to grow, which encompasses manufacturing, retailing, wholesaling and Internet operations. For CC to transition into more growth one needs to assess who are the people? What is the opportunity?
The context? And what deal of risk and reward is involved? As such the first critical issue CC does not have the right people for growth and transition the company into a mature and serious player in the premium chocolate market.
The fact is Steve Parkland (President), Mary Bird (VP of marketing), and Sven Amundsen (VP of finance) are not suitable to grow the organization especially because their plans are not conducive to transition into growth and success. Additionally, they are not suitable to endorse a growth strategy that would mitigate the risk profile of the company such as losing market share, lack of contingency planning, not understanding the market and how to grow within it.
The company should first terminate and fire Steve Parkland. While the CEO meets the requirements in the job ad, being VP of operations for a meat processing company and president of a seafood company and GM of a meat processing subsidiary are different and not like the chocolate industry. Mr. Parkland’s short stints in marketing, sales, and operations is insufficient, therefore the job ad is not marketing for the right leader. Essentially Mr. Parkland lacks management depth in this industry and just because he enjoys the strategy aspect of general management, and wanted to move to New England does not mean he is the right person to be president.
Having the wrong leader is the number one reason for business failure. The presidents decision making must develop a plan for growth that includes building resources and capabilities within the organization is paramount however an inspirational and workable vision and leadership was lacking. As such this illustrates strategy implementation issues, as the president did not have a realistic plan to grow the company to reach two to three times its sales. In fact, it was likely that CC revenues would remain stagnant and profits would fluctuate and or shrink.
Furthermore, Mary Bird needs to also be let go as her vision and impact is no long conducive to success. Her vision is not going to achieve growth for the small company. Mary Bird wants to launch new products, which is not a good idea, as CC needs to first work on its brand and its core products, which have excellent quality and not marketed correctly. Mary also has issues with Ray Wong (VP of production), which is unacceptable for any company however, for this company to transition into growth Mr. Wong must be supported and shown loyalty as he is instrumental to the wellbeing and future prosperity of CC.
Mary Bird also encouraged the product development personal, purchasing planner and sales planner to report to her when these parties work more directly with Ray Wong. Her personal issues with Mr. Wong have interfered with the wellbeing and efficient operation of CC. Simply, Mary Bird was doing far too much, had the wrong marketing direction and seem like she does not know how to fill her position and how to manage. Mary managed the retail stores, developed marketing plans, oversaw the online and wholesale business, sandwich heaven, among many other things.
To move forward it is recommended that Mary Bird also be fired and her tasks needs to be reorganized and she does too much and therefore nothing well. To move forward, Sven Amundsen also needs to be fired, as someone who loves what they do, is current and knows how to make a company run efficenty is required. It is unacceptable that Mr. Amundsen maintained books by hand, as he never learned accounting or spreadsheet software programs. A key successful factor for any company is do they have the right people.
There is no precise way to measure quality of management but the trio were not aligned on the growth opportunities and there were far too many strategic issues such as, but not limited to, misunderstanding of market niche, mismanaged relationships with supplies, customers and other employees, diversification into an unrelated business area and lack of contingency planning.
Poor operational and management made by these three were affecting the smooth functioning and decision making process for CC and so acquiring new vibrant efficient and visionary personal is needed. First screen Ray Wong for the position of president and if he can implement the recommendations then promote him.
His track record and commitment is impeccable as he worked in the food and beverage industry and took courses in management. He is correct in wanted to regain control of scheduling and production this need to be substantially improved. Additionally, CC needs to improve its internal design by lower variety of products (limit batch manufacturing), keep better track of manufacturing and introduce electronic accounting. Furthermore, CC needs to cut costs and become more efficient by automatize operations, have specialize tasks for employees and not have them do multiple job functions and there needs to be quality control.
To move forward there can also not be any more significant inventories as assets get tied up creating a cash lag this puts CC at significant risk of becoming insolvent or meeting their short term financial obligations. Customers order with little lead time will be met by automatizing and having a faster production and consumer must wait if needed instead of stockpiling inventories – we cannot compromise quality for speed – it is counter productive, it is like smoking to lose weight, you solving one problem but substituting another.
More cuts can be achieved by cutting not so profitable product lines that dilute the brand (icecream). It is also worth considering the cutting of the ice cream product line since there are too many different products and batch processing and hand packaging were used so set up times were a significant component of costs. Additionally Sandwich Heaven has sizeable selling and administration costs (highest in 2011). These costs led to a reduction in liquidity for the company. Selling Sandwich Heaven is recommended as revenue is only slightly growing and there are too many issues such as quality staff. Lastly, close unprofitable store locations and the cruise ship sites, the remaining retail stores should be owned and not leased.
To move forward CC should market to a younger demographic and to do this CC should change its packaging, this should appeal to new markets and consumers as it is not just about chocolate, its about the gift, the experience, presentation. Marketing should then focus on CC superb quality as the glitzy and fashionable image and packaging will take care of itself. CC must also focus on retail & online as retail earns double with retail and online as wholesale sales + 10% commission. It is especially recommended to promote on line sales.
Move away from wholesale as it is not as profitable. It is also advisable to engage in aggressive promotions and marketing leading up to valentines and Christmas since CC observes a huge hike in their sales season in the winter holiday season. CC dominates a huge domestic market, however it is only in Eastern America.
To increase sales it is essential to expand without harming the traditional band image of the company. Improve the brand by changing the packaging as discussed and expand to new areas, increase brand name recognition and franchise chocolate stores in high traffic affluent regions. Further, it is recommended to open a new factory when sales increase since CC would need more internal capacity to produce products and fill orders.
Additionally, the production plant should be moved to with lower costs and easier to access to markets, especially since Portland real estate is expensive and has significant shipping costs to reach large markets. Lastly, CC produces one of the best quality chocolates produces its industry. Not only has it won various awards for having the best tasting quality chocolate, but also has achieved a loyal customer base globally.
This should be its focus when marketing and should be highlighted wherever possible. ANSWER The Charles Chocolates case was adequately analyzed. The unique culture of the firm must be taken into consideration in recommending a direction. It is old and suffers from inertia, partly because it has been successful (and partly because it is in Portland). However, the existing RESOURCES & CAPABILITIES are inadequate to support any growth, much less the desired growth. Key success factors in the luxury chocolate industry should appear early in the discussion to highlight the strategic direction the firm should take.
The best papers avoided making tactical decisions like changing packaging or firing employees. Rather they suggested a REVIEW of packaging as part of a strategic examination of the brand and a REVIEW of the org chart to suggest changes. Likewise, prioritizing resource/capability issues (operations, accounting, management) within the plan before commencing growth was convincing. The SMSA of Portland, Maine has 250,000 people, approximately. When expansion takes place, it must be toward areas the board can ‘understand’ (New England, online) before venturing to what the locals would consider foreign countries like California.
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