Strategic Management Case Study: Godiva UK Business Expansion Analysis

This case study provides a comprehensive analysis of Godiva UK's strategic management practices within the UK confectionery market. It begins with an overview of Godiva's background, key challenges like changing customer preferences and increasing competition. The study employs a PESTLE analysis to assess the external business environment, Porter's Five Forces to evaluate the micro-environment, and value chain analysis to scrutinize internal factors. It identifies competitive strategies using Porter's generic strategies and concludes with strategic management recommendations for Godiva UK's expansion. The financial challenges faced by the firm, including decreasing asset values and increasing liabilities, are also highlighted. The analysis covers factors such as political, economic, social, technological, legal, and environmental influences, offering insights into the company's strategic positioning and future prospects.

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 .................................7
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.............................................................................................................................16
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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 (GODIVA U.K. LIMITED, 2015). 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).
Cited firm is facing financial challenges, one of the main issue that is faced by cited firm
is reducing value of assets. In the year 2014 value of fixed assets in the organization was
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2118221 but in 2015 it reached to 1700736. Value of current assets is also decreasing. That
shows that firm is not utilizing its assets well. Furthermore, liabilities of the entity is increasing
per year. In the year 2014 liability of the Godiva was 1502561 but in 2015 it reached to 2045385
(GODIVA U.K. LIMITED, 2015).
Key challenges experienced by the company
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
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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,
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. Political stability is the
major concern for the company that supports
in conducting business smoothly.
Conservative party has won election in the
year 2015. Political support helps cited firm
in smooth running of the business. Strong
democratic set up, political stability and
strong position in global politics are helpful in
conducting operations smoothly.
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
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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. UK has faced
economic slow down in the year 2013 due to
which GDP stood at 4.48%. At that time it
was difficult for the business to gain high
revenues because it has affected the
purchasing power of consumers. Strong
economy growth creates positive environment
for the business but due to low productivity
rate company has to face complexity.
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 increasing health issues like obesity,
diabetes and more. The country has strong
education and health sector thus, people are
well aware with the health services and they
prefer to get such type of quality products and
services that are beneficial for them.
Company also take care of these things and
offer quality products and services to
consumers in order to make them satisfy
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towards the brand. But child poverty and
immigration act sometimes create problem for
the firm to grow well (Marketline, 2016).
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. Company invest large amount in
research and development and adopts high
technologies so that it can improve its product
quality. Effective intellectual property rights
are positive sign for the business to grow well
in this industry but regulatory control
sometime create difficulty for the business in
smooth running of operations.
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. Business
freedom, low tax rates are positive for the
business that gives positive result to the firm.
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But tax evasion creates difficulty for the
entity (Marketline, 2016).
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. Strong global
influences and good track record in
implementing environmental policies are
helpful in providing quality products without
harm to consumers.
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
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 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.
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
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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
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.
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Figure 1: An overview of the business environment factors
(Source: Dierickx and Cool 2013, p. 1504)
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.
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