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Habitual Chocolate Case Study

Essay by   •  August 7, 2019  •  Case Study  •  748 Words (3 Pages)  •  60 Views

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The Definition of Success

Habitual chocolate is a successful chocolate manufacturing and retailing company in London, Ontario. The company has been in the chocolate industry for several years, providing customers with a variety of artisan, high-quality chocolate. To continue its success and growth, owner Philippe Lehner must decide whether to purchase a new storefront and production facility in Woodstock, Ontario or continue its operations in London.

Critical Issues

Habitual chocolate stands out with its fair trade and organic certified chocolate and Lehner’s unique experience with chocolate manufacturing. However, as seen in exhibit A, low-profit margins (15%) leave little room to adapt to cost changes or revenue decline. In the same way, higher product variety from competitors along with volatility in raw material costs and changes to Farmer’s market policy places the firm in a disadvantage. Yet, the growing market for artisan chocolate presents an opportunity for Habitual chocolate to open a new facility and expand its operations, which addresses the company’s major threats. Taking these elements into account, critical issues are the following:

  • How profitable would it be to move the production facility to Woodstock Ontario?
  • How to respond to trends and new customer demands in the market?
  • What strategies can Lehner implement to increase market positioning, awareness and build customer preference and loyalty towards Habitual chocolate?

Situation Analysis

  • Corporate strategy

The company develops attainable strategies and monitors consumer changes in demands to keep up with the fluctuating market.

  •  Marketing:

Being able to differentiate itself from the competition is key to survive in such a busy industry. Making use of technology is a good way to attract more customers and build a strong brand. In the same way, marketing segmentation is an important factor. Habitual Chocolate must be able to attract its specific target market as seen in exhibit C. This can be done by taking into account how their needs differ from other segments and how can they be satisfied.

  • Human resources and leadership

Artisan production requires experience and knowledge of the product. Lehner is a professional chocolatier that brings quality and flavour to each chocolate, creating unique masterpieces for customers to enjoy. Although the company is not the biggest in the market,

  • Financial and operations

In a lapse of 1 year, Habitual chocolate was able to increase its sales revenue from $35,000 to $80,000 with a net income after taxes of $10,550 compared to -$1,000) from 2013, which indicates a growth opportunity in the market for artisan chocolate.

From a cash flow perspective, Lehner has planned to project a 2015 statement of earnings and statement of financial position to determine the overall standing of the company. Before he decides to move his operations or not, he must ensure his financial position is strong to avoid future consequences.

Decision Criteria

To remain competitive and maximize the company’s growth, Lehner must develop effective marketing strategies focused on its main competitive advantage- producing unique Fairtrade/organic chocolate.  Similarly, Lehner must determine whether his plan to expand to a new city will be financially supported to ensure future growth.


Exhibits

A.

Margin

Habitual Chocolate

Revenues:  $80,000

Variable Costs: $21,500

Fixed Costs: $47,950

Margin:

[pic 1]

Wholesale: [pic 2]

Retail: [pic 3]

B.

SWOT ANALYSIS

Strengths

- Unique Fairtrade/organic

- Artisan products

- Brand story and product strategy

Weaknesses

- Low-profit margins leave little room to adapt to cost changes or revenue declines

- Limited capacity

Opportunities

- The market for Fairtrade/organic chocolate is growing

- Technology is available at low cost and easy to use, for promotion

Threats

- The industry is highly competitive and differentiation is key

- Volatility in raw material costs puts the firm at risk

- changes to Farmer’s market policy puts production ability at imminent risk

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