Strategic Management: A Case Study of Godiva UK

This case study explores the utilization of strategic management in the expansion of Godiva UK in the confectionary market. It includes an analysis of the external and internal business environment, competitive strategies, and recommendations for strategic directions.

STRATEGIC MANAGEMENT
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Executive summary
The increasing use of strategic management has created effective impact on several industries in
recent times. In the particular scenario, the focus is placed on the expansion of the UK business
industry. The established confectionary company, Godiva UK, has been chosen in this case study
in order to demonstrate the diverged utilization of strategic management. The study begins with a
brief overview of Godiva’s background and its main challenges. The PESTLE analysis is used to
evaluate the external business environment of the firm in order to expand in the UK
confectionary market. The micro environment is demonstrated with the help of the Porter’s 5
force framework and the value chain analysis is used to identify the deep rooted issues in the
internal factors of Godiva. The study further proceeds with the identification of the issues with
the help of competitive strategies (Porter’s generic strategies) and concludes with effective
recommendations under strategic directions in management.
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Table of Contents
Introduction......................................................................................................................................4
Company background......................................................................................................................4
Key challenges experienced by the company..............................................................................4
Change in customer purchasing trends........................................................................................5
Increasing competitors over the years..........................................................................................5
An analysis of the external environment to identify threats and opportunities for Godiva UK......5
Extended explanation of the Macro and the Micro environment of the firm..................................8
Internal environmental analysis and detecting the strengths and weakness....................................9
Primary activities.........................................................................................................................9
Supportive activities.....................................................................................................................9
Final analysis..............................................................................................................................10
Recognition of the competitive Strategies.....................................................................................11
The Generic strategies of competing in the UK chocolate market with other brands...............11
An overview of strategic directions in management for Godiva UK............................................13
Strategy execution to expand in the UK chocolate market............................................................14
Conclusion.....................................................................................................................................14
Reference List................................................................................................................................15
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Introduction
The term strategic management revolves around the techniques of organizational structure of a
company. There are large number of companies in today’s world, introducing advanced notions
of business and business types. Along with which the market competition is on the verge of
constant enlargement. There are increasing number of managers and industrialists seeking
assistance from the advanced tools and technology for better progress. The use of strategic
management is of high importance in certain scenarios, in order to sustain the competitive nature
of the firm. Strategic management not only acts as a single entity but consists of a number of
subdivisions, methods and techniques. In this case study, the well known brand called Godiva
UK is highlighted, in order to breakdown the possibilities and limitations of the way of using
strategic management.
Company background
The Godiva UK is one of the established confectionary brands in the United Kingdom. The
company is best known for its rapid expansion and establishing high customer satisfaction with
variety of products. The company produces more than 100 types of confectionary products and
chocolates. The nature of the company is private limited and is a small scale company, with large
number of unique products. The magnificent hierarchical structure and management system of
the company has been creating strong competition for the renowned large scale companies in the
United Kingdom. The company is controlled by the hierarchies of the eminent heads that is the
Chief executive, president, the managing directors and the operations. Godiva has made a
remarkable impact on the consumers by adapting tools and technology for increasing the quality
of its products. The increase in the sale of the premium chocolate has increased by 17.5% from
2013. Moreover, the company uses health safety measures in its food products to achieve
customer appreciation and build reputation, which has been stable since, 2010. The overall
revenue of Godiva UK has been increasing in percentage over the years and increased by 32.5 %
every year. The company also predicts larger achievements and expansion in the upcoming years
(godivachocolates, 2017).
Key challenges experienced by the company
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The Godiva UK has expanded to other regions from one branch and improvised effort of
techniques and methods to grow in terms of revenue, profile and reputation. Despite, the firm
also experienced key hindrances on the path of establishment. In the opinion of Grant (2015,
p.3), as the company expanded, the pressure on the management increased simultaneously, that
impacted the entire chain of business in several ways. Some of the core issues faced by Godiva
are as follows,
Change in customer purchasing trends
As mentioned earlier in the study, the Godiva, UK, produced variety of products, for instance,
ultra dark bars. Large tablet bars, dark and milk confectionaries. The premium chocolate
category became one of the most popular products and the sale increased till approximately $ 3
billion in a year exceeding the other products. The manufacturing of all products involved tie up
with a number of companies, which lead to high negligence of the other products. The struggling
change in the course of purchase leads to decreased sales percentage of other products.
Increasing competitors over the years
The Godiva UK is a standard brand name in the United Kingdom and is highly popular in
London. The expansion of the company and its reputational stability, as per the annual reports of
the recent years has established competition to other brands. At the same time, companies like
the Brammer UK Ltd, Acorn and Mars Inc. are some of the eminent brand names in the UK.
Henceforth, Godiva has been equally receiving firm competitions from other companies in order
to sustain the business.
An analysis of the external environment to identify threats and opportunities
for Godiva UK
According to Dyer and Singh (2015, p.660), in order to continue a competitive nature in the
market, the external and internal environments of a company plays a key role. Appropriate
strategic evaluation of the business environment is required in this scenario, while the Godiva,
UK is expanding as a brand in the United Kingdom confectionary market. The evaluation can be
performed by the effective theory of PESTEL analysis. The factors of the theory are as follows,
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Political factors The British business style is highly affected
by the political affluences made by the UK
government today. For instance, changes in
the fiscal policy, the regulations of European
Union (EU). The recent imbalances in the tax
revenue system UK has affected the decision
making and investment amounts performed by
the company.
Economic factors In case of economic factors, Godiva faced
plenty of challenges which lead to loss due to
the turndown in global economy. Most of the
large brands were a victim of the global
economic turndown. The consumers and
customers became aware of the factor, which
lead to negligence of the important store
locations of Godiva. At the same time the
competitors gained advantage due to
dissimilar channels used for its sale and were
less impacted by the turndown.
Social factors Godiva posses’ immense number of safety
measures and health quality maintenance in
food items. The company restricts the use of
hazardous of harmful substances in the
confectionaries to sustain taste. Even though,
United kingdom public health association has
set limitations to the consumption of sweet
products. Especially for children group, due to
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increasing health issues like obesity, diabetes
and more.
Technological factors In terms of technology, unlike the other
factors, the Godiva maintained a standard
position in terms of technology. The firm
adapted unique machineries, equipments, like
hygienic packing, foils, and brew machineries.
in order to improve product quality. The
company involved manpower and also
utilized technology at the same time and
invested on the advanced technological
availabilities in UK, with a standard business
turn over.
Legal factors
The company requires maintaining certain
rules and regulations and maintaining a
balance with the business. The legal
conditions for Godiva include, labeling of the
products, consumer and employee rights, job
security. Due to the high technology usage,
the sudden decrease man power lead to legal
disputes in the recent times.
Environmental factors As per Peteraf (2014, p.179), the
environmental factors like, work ethics,
sustainability, environment friendly products
has been a challenge over the years for
Godiva, UK. Though the company has been
involved in introduction of eco- friendly
products and services.
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Extended explanation of the Macro and the Micro environment of the firm
The strategic market evaluation for Godiva UK includes the macro as well as micro business
environmental factors. The macro factors in the United Kingdom are sets of unavoidable factors.
The contribution to entire GDP from the brand Godiva has been on large percentages. At the
same time, as explained in the PESTEL analysis, the nation’s changes in the political scenario,
such as the criteria of European Union (EU), have set limitations to the trade policies of Godiva.
Additionally, the running of their business requires certain authorizations, such as location
permissions and service license. According to Porter (2015, p.234), the external or macro factors
play a key role in impacting the internal decision making, financial statements and growth of the
firm.
The Godiva, UK, adapted two types of channels to execute the business that is the Godiva
(FMCG) and specific store outlets in London. In this scenario, the internal factors or the micro
factors depicts to the following parts of Godiva,
● Consumers
● Competitors
● Product suppliers
● Sellers
The porter’s 5 forces frameworks consists of essential assessing tools such as the, supplier and
buyer power, competitive rivalry, threat of the new entry. According to the framework, Godiva
consists of large number of employees and workers after the expansion. The company enforces a
number of strategic management techniques to cope up with the imbalance often occurring due
to internal environment disputes. The decision of investments made by Godiva to the high
technological usage impacted the company in a negative way as well. The company also adopted
new measures to increase sales percentage and increase the quality of the product, with the right
usage of the internal environment factors. Henceforth, the management operations team of the
confectionary company played an equally eminent role in the execution of the improvement
plans. Godiva also required maintaining a definite relationship with its suppliers and resellers
which eventually aided in betterment of the company.
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Figure 1: A representation of the Porter’s 5 force framework
(Source: Wheelen and Hunger (2017, p.169)
Internal environmental analysis and detecting the strengths and weakness
As explained earlier in the study, the internal environmental factors can be assessed with the help
of the value chain analysis model. The value chain is an effective theory and helps in identifying
the most productive sources in the business. For example, the equipments like, the depositors,
extruders used for the designing of the confectionaries, enrobes and confectionary decorators
shared almost 40.5% of the company’s entire revenue. As stated by Barney (2013, p.99), the
usage also involved loss in revenue income due to high maintenance cost. The value chain is
highly efficient to figure out expense differentiation among the resources.
Primary activities
The primary activities of Godiva specifically consist of the marketing and sales department
which is one of the direct contributors to the income resource of the company. The primary
activities also take in account the, management operations department of Godiva along with the
outbound and inbound logistics.
Supportive activities
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On the other hand, the supportive activities in Godiva include the infrastructure of the firm,
which is a huge factor in contributing to the sales percentage. The factors involve Godiva’s
technical equipments and firm procurement.
Final analysis
The investment on equipments by the company has increased the maintenance cost by 30%,
whereas the hiring of labor power has gone down. Godiva requires hiring of skillful employees
with customer service experience and experience in the retail industry. An experience in
confectionery production shall contribute to the firm and help in balancing out the high amount
of revenue invested in the usage of the machineries used in production. Godiva have drastically
increased product quality which has helped in maintaining high reputation and brand name. One
of the drawbacks that the company has undergone due to large focus on quality is decrease in
product volume. Increasing the product volume along with the quality shall improvise on large
percentage of sales at the same time, since the Godiva possess a large number of buyers.
Moreover, one of the key weaknesses of Godiva, as per the evaluation lies in the management
system that needs to emphasize on the areas of spending on intermediate goods, raw materials
and marketing in a tactful way.
Figure 1: An overview of the business environment factors
(Source: Dierickx and Cool 2013, p. 1504)
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Recognition of the competitive Strategies
As per Sakas et al. (2014, p.187), the competitive strategies significantly brings out the detailed
aspects and loops in the business. The details include a combination of the pros and cons and
identification of which helps in improving business and sustaining its market position. The
strategies also include a set of long term improvement plans and acts as a sharp tool to
comparably decrease the competitions from neighbour companies.
Figure 2: Sources of competitive strategies
(Source: Peppard and Ward 2016, p.167)
The Generic strategies of competing in the UK chocolate market with other
brands
Cost Leadership
Some of the largest competitors of the Godiva UK are the Acron, Mars Inc. The cost leadership
factor of the Porter’s generic strategy shall filter the loops of the company that are obstacles to
cost cutting. For example, the Godiva consists of immense number of products and a variety of
services. The tremendous increase in the premium chocolate category has lead to inattention of
the other types of products. The cost leadership factor shall help in identification of the issue and
enforce improvement of the other confectionaries to execute increased sale percentage.
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Differentiation leadership
On the other hand, the differentiation leadership factor depicts to the highlighting of one key
product to create a significant impression on the consumers. In case of Godiva, the key product
like the premium and the popular gift package of confectionaries reached the sale percentage of $
3 billion per annum but the sales percentage of the other products, which is approximately about
97 products were left behind. This caused a large percentage of loss in the final revenue of
Godiva, mainly from the year 2012 to 2015. Therefore, choosing the key product should create a
remarkable mark on customer psyche and make the brand name popular but at the same time,
balancing along with other services and products of the company is also necessary to avoid
financial loss.
Cost Focus
The cost focus factor, particularly emphasize on the cost cutting and management of the
company. In the opinion of Schilke (2014, p.140), the Godiva, UK is highly dependable on
certain market segments for its rapid growth and exceeding profit. Some of the segments are
more important compared to the others. In this scenario, the manufacturing department is highly
essential for the organization. The customer attraction and reputation up gradation is created by
the upcoming of new products and the public look up to the manufacturing style, quality and the
final outcome. The sales and marketing segment later follows in the entire chain depending on
the manufacturing ending with the after sale segment. Henceforth, it is to notify that, the key
market segment is one of the most effective resources of the business. The cost focus factor helps
the marketers to segment and emphasize on the particular segment, such as the manufacturing
segment for Godiva, UK.
Differentiation Focus
The differentiation focus is one of the most crucial techniques that help to cut competitors and
enforce the company growth movement forward increasing market position rapidly. In the
particular case study, the Godiva is highly known for implementing the specific strategy in the
existing products. Under this strategy, the company modifies its special products and uses it as
strength to decrease competition around. For example, the addition of distinctive features in the
popular products can make it more appealing to the buyers. The Godiva is always chosen by the
customers when it comes to the purchasing confectionaries. In contrary, the modification of the
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same confectionary, that is the premium, can change the mind of customers to purchase the
products from the competitions of Godiva. The modifications can include, addition of certain
flavors to the premium, introduction of special offers and more.
An overview of strategic directions in management for Godiva UK
As stated by Li and Liu (2014, p.2793), the strategic directions are particularized sets of
strategies that provide the marketers and managers with effective techniques to manage change
or consequential influences.
Building the mission and vision
The mission and vision of the Godiva is to expand globally and produce high quality product.
The improvement in any segment requires a clear understanding and establishment of the
mission and vision. These factors separately hold up the concept of what exactly are the
company aims and how the firm desires to proceed with the aims. The clear structure of the
mission statement also provides the general public, consumers and clients with a clear idea about
the company building trust among the users and buyers. Thus, the first step to spread the brand
name and make position in the market of UK confectionary is influencing the consumer psyche
in a better way with a firm mission and vision statement.
Developing and planning of the strategies
The developing and planning strategies also includes subcategories. In explanation, the
developing and planning is basically performed in order to achieve the goals and the objectives.
The Godiva can focus on segments such as,
● Flexibility
● Dependability
● Product quality
● Product volume
● Increasing customer value
Godiva UK, possess some existing improvement strategies, which are already contributing in
the beneficial factors. In Order to meet market targets in a comparably rapid way, the Godiva can
launch new training programs to train the staffs and employees to prioritize customers and
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consumers on a higher level. According to Molina-Azorín et al. (2015, p.41), the effort to retain
valuable customers can spread the word of mouth about the company. The word of mouth is one
of the strongest and simplest strategies to build the right reputation in the market. In addition, the
research and method
Strategy execution to expand in the UK chocolate market
The execution of the above strategies can be helped by following the long term action plan. The
execution of the suggested plans is quite different from planning and development. In this
scenario, the mentioned targets of Godiva UK, might not reach expectations 90% of the time but
involvement of specific strategies to the execution method shall make the plan fall in place.
According to Leonidou et al. (2013, p.94), the right distribution of job roles for the staff
department can be introduced. Moreover the use of equipments involves several risk factors,
which is a common issue among most employees working in the manufacturing department.
Therefore, the introduction of advanced safety measures will reduce the chances of risk
increasing employee satisfaction and enthusiasm.
Conclusion
As gathered from the above study, the chances of expansion of the company with the utilization
of strategic management theories and techniques are highly essential. In Order to cope up with
the complex market situations in today's world, most management system deviate from the
traditional ways of management tactics. The management strategies have proven to uplift every
kind of business sector much more rapidly, with the different usage of its strategies and tools.
The advanced management theories and technology available are one of the main reasons for the
rapid expansion of the small scale business and private Ltd Company like the Godiva, UK as
well. The theories provides the core understanding of the internal, external, micro and macro
environments of business which provides a marketer with standardized understanding of the
factors. The tools involved strategic management can also help an entrepreneur expand in terms
of profile, skills and profit in a rapid way.
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