Global Strategy Case Analysis for Scharffen Berger Chocolate Company

This report provides a complete understanding of the case of Scharffen Berger Chocolate Company, including external analysis, 5-year scenario planning, and strategic recommendations. The company faces competition in the premium chocolate market and needs to focus on quality control and innovation to maintain its competitive advantage.

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GLOBAL STRATEGY CASE ANALYSIS
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1GLOBAL STRATEGY CASE ANALYSIS
Executive Summary
The report provides a complete understanding about the case, by focusing on reading
of case. Scharffen Berger Chocolate Company was founded by Robert Steinborn, and John
Scharffen Berger in the year 1996. From the external analysis of the case, it has been found
that the company started testing their different type of chocolate beans for examining the
flavor. By the year 1997, the company started manufacturing small batches of chocolate from
rental space in San Francisco. Later the owner of the company released that they would
require extra space for expanding their business. However, it has been found from the case
that the chocolate industry is classified into wide categories including mass market and the
premium marker. In this, almost $14 billion of the mass market was controlled by Hershey
food organization, Nestle and Mars that produced high competition for the company as they
covered almost 75% of the market.
From the segment of price it is observed from the case, that the industry has been
defined as a retail pricing with $10to $100 per pound of chocolate. In this regards, premium
price was considered as the growth segment in the industry with 15-20% of the annual
growth. However, from the case study it is evident that within the premium segment, Scahffer
Berger was seen to be at the high-end position in terms of their price as well positioning.
Moreover, the company sold its chocolate through five major retail stores including grocery
outlets and their own company website. As a result of which several visitors from all around
the country shopped their chocolate products including consumers from New York, San
Francisco and California.
As the major strategic plan of company for a period of 5 year, the company
determined to produce chocolate for the standard quality from the finest coco bean that is
available for meeting the demands of the customers and to obtain high share in the market. In

2GLOBAL STRATEGY CASE ANALYSIS
this standard quality of the chocolate producer is also required to be managed during both the
process of production and production of final products for managing the brand equity of the
company. However, from the report it has been seen that for the expansion of business,
quality control plays a crucial role in ensuring the quality of process and product. Therefore,
it is recommended that in order to ensure the quality of the process all the management
employee and machine operation are needed to be investigated on a regular basis.
External analysis of Scharffen Berger’s industry
Porter’s Five Forces
Power of the consumer
Consumers are often very demanding, as they want to purchase the best products
available for them by paying the minimum price for the product (Noble 2017). By doing so,
the consumer are putting pressure on the Scharffen Berger Chocolate company profits in their
long run. However, since the company has more powerful and strong customers in United
States and many other location, the bargaining power of the customers are increasing
provided with their ability to seek increasing price discount on the chocolate products.
However, since the production of the company is increasing the power of the customer is
being reduced.
Power of the suppliers
All most all the companies operating in chocolate industry in United States.
Therefore, there are increasing number of suppliers in the country who produces high quality
and different variety of chocolates including, white milk chocolate, dark chocolate (Poelmans
and Rousseau 2016). However, Scharffen Berger Chocolate are sold through 4000 retail
outlets in United States that is comparatively more than the urban scale areas. This supply
distribution through different channels is allowing the company to obtain distribution with

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nontraditional chains thereby helping them to grow their segment for premium food. Owing
to more than 30,000 visitors toured, each of the factory outlets of the company and many of
the tourist ought the chocolates. This helped in increasing the bargaining power of the supply
of the company provided with increase in the number of distribution chains, which was
previously the growing segment of the premium food markers.
Potential entry in the market
New entrants in the chocolate market industry is evident as the chocolate industry
products are constantly bringing innovation in their products, with new ways of doing things
and are putting pressure on the Unites States company through lower pricing strategy (Dovey
et al. 2017). The chocolate company needs to manage all these challenges and need to build
effective challenges to protect its competitive advantage. Therefore, the company in order to
address these issues by innovating their chocolate produces. New products in the chocolate
industry will bring new customers and will give the old customers with a reason to buy the
products. The company can as well develop economies of scale, so that they could reduce the
fixed cost for each of the unit by building capacities and spending more money on the
research and development.
Substitutes
The threat of being substitutes in case of chocolate production and cocoa industry I
higher than any other industry. As stated by Gallo et al. (2018), It is due to the threat from
products such as non-chocolate snacks, chips and fruits items. Therefore, when a new
product meets similar needs of the customer in various ways, the profit of the industry may
suffer. Therefore, in order to address the issue the company is required to behave in a service
oriented way rather than products oriented. Moreover, the company is needed understand the
needs of the customers and need to increase the cost of switching for the customers.

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Rivalry within the Industry
It has been found from the case study that chocolate industry in United States is
classified in to two major segments, mass market and the premium market. In this context,
Hershey Food Company, Mars, Inc., dominates the $14 billion of the mass market and Nestle
who has collectivelly managed 75% of the market. Al these company controls the process
related refining and packaging thereby increasing competition for Scharffen Berger
Chocolate Company. These company increases the level of competition by produce in milk
chocolate that accounts for 70% of the total chocolate sales in the United States.
5-year scenario planning analysis
From the 5 year planning scenario of the case it is found that that company
distinguished their service from their competitors, by turning their business in to premium
chocolate producers, “ from beans to bar” thereby managing all the process in the chocolate
production.
However, in this planning process it is necessary to be noted that while expanding the
business, quality control has a vital role and it may become more complicated in case of all
organizational process to ensure both the process as well as quality. Therefore, in order to
ensure the quality of the process the company successfully maintained the chocolate factory
including other components, and equipment’s such as machine operators. On the contrary, for
the purpose of quality control, the quality of the chocolate was tested for at least to times in a
month, where the beans and chocolates were tested at several stages of the process of
production. Within a period of few years, the company’s sales increase from $1.1 million in
the year 199 to $10.0 million in the year 2014. However, it was assumed that in the year 2005
the production would be increasing over $15 million. It has been found that the company
primarily produces chocolate products to four consumers, by which the company also made

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professionals sizes of chocolate bars that were used mostly for the food service industry.
Later in the year 2001-04 the company increased its sale by 20% through is extra dark
chocolate products along with the sweet products that made up to almost 87%. Again, it is
observed from the case, that the company opened its first retail stores in 2003, and by the
year 2004, the company was completely accountable for 10% increase in sales. Therefore, by
increasing its sales in more than 4000 retail stores in United states the company managed to
gain a high amount of products distribition.by the early 2005, along with the increasing
demand, the company owners comes to the conclusion that it is not possible for the company
to expand their capacity without the addition of the extra equipment.
Recommending strategic activities
The company provides premium chocolate brand, for capturing a wider dimension of
market segment. In order to do so, the company is required to strategies and make a effective
planning for deciding over the determines of the products, for adding capability in the
production in line with the technology. It has been seen from the case study that customer is
the major priority in accordance whose requirement all the products is needed to be
developed manifested with taste and requirement of the customer (Aichner 2014). However,
followed by the current trend it has been seen that the customers increasingly prefer dark and
standard chocolates. Moreover, as a part of increasing in demand of the products, in their
upcoming future, the company is required to effectively evaluate the development of new
technologies for transforming the raw materials in to finalized products (Davvetas and
Diamantopoulos 2016). Therefore, in the account of tastes and due to health benefits of the
customers, the company needs to address the increasing variety of dark coffee for addressing
the needs of the customers.

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References and Bibliography
Aichner, T., 2014. Country-of-origin marketing: A list of typical strategies with
examples. Journal of Brand Management, 21(1), pp.81-93.
da Silva Lopes, T., 2016. Building Brand Reputation through Third-Party Endorsement: Fair
Trade in British Chocolate. Business History Review, 90(3), pp.457-482.
Davvetas, V. and Diamantopoulos, A., 2016. How product category shapes preferences
toward global and local brands: A schema theory perspective. Journal of international
marketing, 24(4), pp.61-81.
De Meulenaer, S., Dens, N. and De Pelsmacker, P., 2015. Which cues cause consumers to
perceive brands as more global? A conjoint analysis. International Marketing Review, 32(6),
pp.606-626.
Dovey, T.M., Torab, T., Yen, D., Boyland, E.J. and Halford, J.C., 2017. Responsiveness to
healthy advertisements in adults: An experiment assessing beyond brand snack selection and
the impact of restrained eating. Appetite, 112, pp.102-106.
Gallo, P.J., Antolin-Lopez, R. and Montiel, I., 2018. Associative Sustainable Business
Models: Cases in the bean-to-bar chocolate industry. Journal of Cleaner Production, 174,
pp.905-916.
Gallo, P.J., Antolin-Lopez, R. and Montiel, I., 2018. Associative Sustainable Business
Models: Cases in the bean-to-bar chocolate industry. Journal of Cleaner Production, 174,
pp.905-916.
Noble, M.D., 2017. Chocolate and The Consumption of Forests: A Cross-National
Examination of Ecologically Unequal Exchange in Cocoa Exports. Journal of World-Systems
Research, 23(2), pp.236-268.

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Poelmans, E. and Rousseau, S., 2016. How do chocolate lovers balance taste and ethical
considerations?. British Food Journal, 118(2), pp.343-361.
Strizhakova, Y. and Coulter, R.A., 2015. Drivers of local relative to global brand purchases:
A contingency approach. Journal of International Marketing, 23(1), pp.1-22.

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Appendix
Overview
 Robert Steinberg and John Scharffen Berger founded the Scharffen Berger Chocolate
the year 1996.
 The chocolate maker company in the United states competing for $1.2 billion
standards quality chocolate segment
 The company has almost 60 employees that operates within 27,000 square feet with
20,000 square area of production.
 The company faced a high demand for outgrowing production of chocolate for the
premium products,
Business overview
 Unsweetened products with 99% of cacao, extra dark chocolates with 82% and semi-
sweet chocolate with more than 62% of Cacao.
Pricing:
 The retail pricing for the products is $0.50 for 5 gm. chocolates,, $2.00 for 1 ounce of
chocolate with an approximate amount of $0.35
Sales:
 In the year 1998 the sales of the company was $0.6 million, $10 million in the year
2004 and more than $15 million assumed to be in the year 2005.