Managing Strategy: Case Study of Thornton plc Essay

1.0 Thornton Plc an OverviewOccupying 8 percent market sh atomic number 18 of the UK boxed chocolate market in the course of study 2002 the guild Thornton had witnessed a decline in its pro jibes even from the year 1998. The turn all over of the union and the operating profits of the fellowship for the years 1994 to 2003 are presented belowThe lodge was largely depending on its in house manufacturing readiness and also adopted the marketing strategy of distributing the harvest-festivals through its avouch sell units open passim the country. To some extent the political party also adopted the franchising route also. Though the phoner was rich in its internal resources and good in the refreshing product developments, the manufacturing and marketing strategy adopted by the family posed difficulties in concourse the seasonal demands which constituted a major percentage of the gross revenue of the company. This part of the paper analyses the strength of the internal reso urces of the company.1.1 Internal ResourcesThe success of any personal credit line depends on the strength of its internal resources which greatly facilitates sustaining the growth achieved by the firm. It is every bit important for the company not completely to achieve reasonable growth in the profits and gross sales but also to sustain the growth launch by it. The internal resources of the company come in handy to help the company to obligate the level of growth being achieved by the company. The internal resources of the company Thornton Plc can be detailed as belowA Complete Value ChainThe strategy of the company in having in house manufacturing facility coupled with its own retail outlets represented a complete value chain which is a distinguishable internal resource the company possessed. Even though the company resorted to external sources for non-nitty-gritty products and the basic liquid chocolate, the company retained the core manufacturing activity and the recipes. This enabled the company to ensure the shade of the ingredients to the chocolates and maintain its exclusivity in the market.Assets and Competencies of the Company The distinct usefulness the company was carrying was its capability to manufacture its requirements with its own facilities. This had enabled the company to maintain the freshness of its chocolates which became a distinguishing feature for Thorntons products. This represents the internal resources of the company in the spot of its physical assets.The different physical assets that helped the company in maintain its market pose is the number of the companys own retail shops spread throughout the country. A graphical representation of the total number of retail outlets owned and franchised by the company is produced belowIntangible AssetsThe goodwill earned by the company by maintaining the superior of its products and the calibre of its service to the customers account for the intangible asset the company holding a s an important internal resource of the company. production specializationanother(prenominal) feature that distinguished the chocolates of Thornton is the finishing. While competitors exchangeable Cadburys products are moulded, Thornton used a handmade appearance to the products by enrobing them in chocolates. In this way Thornton could dupe a marked product specialisation that can be counted as a valuable internal resource that the company could use for improving its marking image.Quality of Service to the CustomersBy having most of its sales done by its own shops, the company was able to provide a whole step service to the customers. by services like writing personalised messages on chocolates by icing on the top on important occasions, providing specialised gift wrappers etc the company could urinate to the fifth place by customers choice in the high-street vendors.Product InnovationsDeveloping new products was a passion for Thornton. This is evident from the fact that in the year the company could add 27 new countlines and 132 new and updated products in the year 1998. erratic and Core Assets and CompetenciesThe Unique assets of the company can be found in its in house manufacturing facilities that contributed largely for the quality of the products. However with the available manufacturing facility the company was unable to meet the peak seasonal demand which represented the threshold regulate with respect to this unique asset. Similarly the core competency represented the companys ability to innovate as many number of new products to add to the market. But the threshold limit for this competency was the failure of the company to concentrate on the retailing and the poor locations of the shops that could not give the true advantage of this core competency of new product innovation.1.2 Strengths and Weaknesses of Thornton Plc While commenting on the internal resources of any firm it is customary to do an epitome of the firms relative strengths an d weaknesses. An analysis of the strengths and weaknesses of Thornton is detailed belowStrengthsIn house manufacturing facility The availability of in house manufacturing facility enabled Thornton to ensure the quality of ingredient and thereby ensure the quality of its products. It was also viable to maintain the freshness f the products.Own retail outlets The establishment of the companys own retails shops gave the strength of meeting a higher(prenominal) level of customer service and also an effective distribution of the products among own retail units.Capability to innovate new products The distinct capability of the company to contain itself in innovative products with new recipes had egressed in increasing its sales at some point of time. Several attempts by the company to promote the sales on this strength had proved successful.Strong brand image The quality of the Thorntons products coupled with its freshness had created a set of loyal customers to the company and resulte d in the installation of a very strong brand image for the companySound technical knowledge in terms of recipes This strength has helped the company to plunge in to the creation of many new products that finally proved successful in the market.Added marketing strength through franchisee stores In addition to the own retail units, the company also adopted the policy of giving franchise rights to more(prenominal) retailers which proved a distinct strength for the company in terms of marketing of its products.Unique product differentiation The Company had clearly excelled itself in the segment of boxed chocolates which has proved to be the companys core strength.Strong market armorial bearing in the boxed chocolate segment Having specialized in the boxed chocolate segment the company made its presence felt in the segment.Weaknesses fundamental Seasonal Demand More than 50 percent of the sales of the company resulted from the sales during Christmas, Easter, Valentines Day and Easter Sunday. This led to pressure on sales at shorter periods and at times poor sales if there were disturbances in the seasonal sales ascribable to some reason.Dependence on one tell product Excessive habituation on a single product like boxed chocolates had always proved a cause for the failure in sales. Similarly the company depended on the sale of innovative Easter Eggs for the year 2000 that proved an expensive lesson in that more than 300,000 chocolate eggs were leftfield in stock unsold, making the company to sell at half the outlay.Low quality products and service from franchisee and associated companies Many a times the associate companies with whom the company had selling arrangements sold products of lower quality. The franchisees, their core product not being chocolates could not provide a quality service to the customersPoor automation capabilities confidential in traffic patternation to higher labour intensiveness The finishing of the products with chocolate enrobing made the automation impossible and also due to seasonal sales the company had to employ superfluous labourers for manufacture as well as for sales during season times which proved expensive.Frequent changes in the marketing strategies Due to some reason or other the company faced failures successively which made the company change in the marketing strategies. Also changes in the Chief Executives also brought new strategies into practice. world impulsive purchase unpredictable demand The chocolate being an impulsive purchase made the demand for the products unpredictable leading to manufacture of the products without a mean approach.Weather conditions affecting seasonal demands Since the sales of the company were heavily seasonal, any weather conditions that affect the festivals also affected the sales of the company. This was evidenced in the Christmas for the year 1998, when the sales went down by 3.8 percent for the same period last year due to extended summer that affected the buying of customers.Shorter ledge life-time of the products One of the major weaknesses of the company was the short shelf life of the products. As against the use of the vegetable fat as the base by the competitors which gave them longer shelf life, Thornton used cocoa base to keep the authentic quality of the products which made the shelf life shorter for the products.Product lines demanding own manufacture Several products of the company were fit to be manufactured by the companies own manufacturing facilities and. On a research the management of Thornton identified that at least 70 percent of their products need their own manufacturing facility.Higher manufacturing costs Since most of the products are being manufactured by its own facilities the company could not arouse a closer control in the manufacturing costs. Moreover the employment of additional workers on peak seasons also improvers the manufacturing cost.1.3 Product Market ResearchThe Companys core product range incl ude the boxed chocolates, where it has to meet the competition from major players like Cadburys and Nestle. The company had to compete with high street specialist retailers much(prenominal) as Body Shop in 5-10 price range. The percentage of market fortune of different companies in the boxed chocolate market is graphically represented belowIt may be far-famed that Thornton was able to retain the market share of 8 percent from the year 1999 to 2002 sheer by the product quality against the stiff competition of not only other chocolate retailers but also form others selling postal gifts of wine and flowers.The introduction of 27 new products in countlines in the year 1997 and 132 varieties in the year 1998 witnessed an increase in sales of up to 133 million for 1998 and also brought new male, children and teenage customers lowering the average age of the customers. The company planned to increase the new products and re-launch of old products up to 92 percent for Valentines Day, 10 0 percent for Mothers day and 91 percent for Easter Sunday for the year 2000. New product development with a focus on day-to-day sales rather than for meeting the seasonal demand was taken up to reduce the excessive dependence on the seasonal sales.1.4 Internal Resources and the Firms warlike AdvantageThe competitive position of a firm is determined by its product transcendence and the relative market position. These surveys are deepen by the internal resources and capabilities possessed by the company that adds the competitive edge of the organization In the case of Thornton, the company was clearly placed in more competitive position as compared to other players in the market. The better quality of its products that could be achieved as a result of its own manufacturing facilities is a distinct competitive edge the company possessed. Similarly the positive effects of other internal resources like the establishment of its own retail outlets and the product innovation capabiliti es had contributed much to the feeler in the marketing ability of the company.Question 2 Marketing Strategy of Thornton PlcThe marketing strategy of Thornton can be analysed on the basis of the available marketing strategy molds.2.1 Porters Generic Strategies As perceived by Michael Porter in his book Competitive Strategy Techniques for Analysing Industries and Competitors the competition in any business can be reduced to three broad strategies. These strategies are known as Porters Generic Strategies and areCost LeadershipProduct Differentiation andMarket segmentationThe competitive strategy of Thornton can be identified with Product differentiation and market segmentation but not with the cost leadership as the company was never able to have a comfortable cost position because of its high packing costs and heavy seasonal demand for the products.2.2 archers ClockAs compared to the Porters Generic Strategies Cliff archer had developed competitive advantages in relation to cost adv antage or differentiation advantage. Bowman identified eight core strategies in any business based on the firms competitive advantages. They areLow price/Low added Value signifying segment specific strategyLow price being adopted by a cost leader as a result of price wars and low margin on the productsHybrid pick Represents low cost base and reinvestment in low price and product differentiation.Product Differentiation This option is being exercised with a price premium and without a price premium.Focused Differentiation Involving perceived added value to a particular segment that needs a premium.Increased Price/Standard higher margins if competitors do not value follow/risk of losing market share. Marketing Teacher Increased Price/Low Values This option can be exercised only in a monopoly situationLow Value/Standard Price This strategy will result in a loss of market share. verboten of these eight strategic options developed by Bowman, Thornton had been following the Product differ entiation Strategy originally and later on shifted to focused differentiation to capitalize on their product strength. In the case of Boxed chocolates the firm had adopted the product differentiation with a price premium.2.3 Ansoffs intercellular substance Developed by Igor Ansoff, this manakin uses two basic components of marketing namely Products and markets to identify four generic growth strategies namely Market Penetration, Market Development, Product Development and Diversification. Ansoffs matrix is a framework for identifying the corporate growth opportunities (Tutor2u) Market Penetration involves more of the same product to the same customersMarket Development uses new customers for existing productsProduct Development uses new products for existing customers andDiversification involves new products and new customers.Ansoffs Matrix Example of Thornton The example of Thornton matching the Ansoffs Matrix can be explained as belowMarket Penetration Increase in the share of c hocolate business at the expense of Sainsbury and Asda.Market Development Movement into more distribution bring like joint venture shops with Birthdays Group a 500 strong chain of greetings cards and novelties outlets exclusive supply arrangement with Tesco elaboration in to France, Belgium and USAProduct Development Thornton attempted to do product development increasing the rate and scope of new product innovation, repackaging and re-launching of old products that added 27 products in the year 1997 and close to 132 products in the year 1998.Diversification Thornton developed new product ranges like desserts, ice cream, sponge puddings, cakes and cheesecake.2.4 Five Forces Model Thorntons position with respect to the intentness can be analysed on the basis of Michael Porters Five Force analysis. Porter provided a framework that models an industry as being influenced by five lunges. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.(QuickMBA)Barriers to Entry Though technologically there is no barrier for the new entrants to the market, the accesses to the distribution channels pose a great barrier to entry. Establishment of a new brand also would take considerable time and money in the form of advertising and promotional expenses. This acts as a barrier to the new entrant to the industry. The strength of this force is negligible.Threat of SubstituteThere are a number of substitute products available for the products of Thornton. The new products from the competitors like Nestle and Cadburys as well as products from other brands and own label manufactures often pose a caper of substitute products available in the market. Switching to substitute products for the customers is inexpensive and easy as every brand is available in plenty in the conglomerate outlets like petrol bunks, novelty stores, greetings cards stores, super markets and speciali zed shops. The strength of this force is to be reckoned with.Buyer PowerThe ultimate consumer being the buyer the force exerted by them on the industry is sizeable. Any small change in the quality of the products or in the level of service will make the buyers change their loyalty to other brands. Moreover, being an impulse purchase the availability of a number of substitutes and the inexpensive way to switch to other brands make the buyer force play act as a strong force.Supplier PowerThe timely delivery of the product depends on the availability of the base materials in the right quality and right time. Though it is not difficult to establish new sources of supply it may take some time to establish the required level of quality and reliance on the timely deliveries. But the supplier cannot threaten to increase the price at his convenience as there a number of suppliers are available in the market. Hence it can be said that this force is only mildly acting on the industry.Competi tive RivalryAs such the industry is highly competitive with four major players occupying 72 percent of the market share. Any small downward trend in the market share of Thornton will be taken advantage of by the major players acting in the industry. Moreover except the force of barriers to entrants and suppliers power to some extent other forces are acting very strongly on the industry. Hence it can be said that the competitive rivalry is very high for Thornton Plc.Question 3 Relationship between Thornton and label & SpencerThe case study of Marks & Spencer also indicates the different strategies adopted by the firm to sustain its growth attained over a period. The basic weaknesses in the company that led to the downward trend of the company wereExcessive dependence on the suppliers within UK which increased the cost of the products for the company and affected the profitabilityExpansion of business within Europe and in the USA that finally proved unworthy or not maintainable due t o various reasonsExpansion and refurbishment of own retail units in the UK which increased the capital cost of the firmDevelopment of new product lines like solid food when there was so much to be done in the existing clothing business.Thus the experiences of both Thornton Plc and Marks & Spencer can be identified as more or less same with the only difference is that Thornton depended heavily on the seasonal business.Marks & Spencer followed a Hybrid strategy under Bowmans clock.With the experience of both the firms in the same direction it is quite possible that the business of the both the firms can be combined to take advantage of the advantage of the combiner synergy. However while combing the businesses by selling the chocolates through Marks & Spence r the following points need to be taken into account.3.1 Overlap of profitsThough Thornton had a long standing supply arrangement with Marks & Spencer with a renewal of such supply arrangement may pose the fuss of the overlappin g of the network of the customers of both the stores, especially in locations where both Thornton and Marks & Spencer have their retail outlets.Being a commercial customer it is quite possible that the products offered by Marks & Spencer may differ by style and recipe from those provided through Thorntons own outlets. It may not be possible for the customers to be sure as to whether the products were really made by Thornton. The authenticity of the products may not be fully realized in the perspective of the customers. This is one aspect that needs consideration when a decision to renew the contacts with Marks & Spencer is to be ever thought of by Thornton.Another issue that Thornton needs to consider is the quality of service to the customers. Marks & Spencer having it thrust on its core products of clothing, food and beauty products it may be difficult for the company to attach the same importance that Thornton gives its products. The personalized approach that is being attributed to every customer at the Thornton store may not be expected out of Marks & Spencer.The availability of substitute products by the side of the products of Thornton may also pose a problem for an effective increase in the sales of Thorntons products. The product promotions and advertising for the competitors products will have its own impact on the sales of the Thorntons products unless an exclusive arrangement with Marks & Spencer is go intoed only to deal with Thorntons products.The display and product promotion of Thornton by Marks & Spencer is another area that needs to be addressed. The floor space and the kind of visibility to the products Marks & Spencer may offer to Thorntons products will greatly depend upon the financial gain that M&S get out of the deal with Thornton. Hence a careful discussion and finalization of the contract is a pre requisite for Thornton to expect the kind of treatment for its products by M&S as the company expects to have. Thornton should look into t he cost aspects and the projected sales through the outlets of M&S and decide on the financial working arrangement with M&S.3.2 Possibilities of Other Working ArrangementsThornton may look into the possibility of entering into other arrangements like renting a small shop floor area with M&S in the location where they dont have their own retail units. Thornton may appoint its own staff to look after the sales and thereby can ensure the quality of service to its customer. The company may enter into a profit sharing arrangement with M&S to create interest on the part of the latter to offer its shop area to Thornton.In this way both companies can retain their identities and at the same time work for the mutual profitability. This would eventually result in the increase in the sales of Thornton. This shop within shop arrangement may be effective in controlling the cost of expansion for Thornton to expand in locations where M&S have its own stores. Moreover this sort of alliance is easy to work out and less complicated in terms of fixing the benefit to M&S. There will be no commitment on the part of M&S to assure any minimum sales also.3.3 MergerAnother distinct possibility that can be worked out to the benefit of both the companies is a merger of both the companies for an agreed consideration to be paid to the shareholders of Thornton. This was what was tried and true by the company in the year 2003 to offer its management buyout arrangement.However, since the price for the control of the company was higher, at 180p per share there were no potential bidders for meeting the required price and the talk of a bid for Thornton disappeared in early 2004. Unlike this a workable merger proposal between both Thornton and Marks & Spencer can be worked out on reasonable terms that are beneficial for both the companies. This way the synergies of the merger of both the companies can be enhanced to take advantage of the combined forces of sale.Similarly there will be the disti nct advantage of the customers of both the companies being attracted to the products of Thornton which may result in the improvement in the sales of the products of Thornton. Another distinct advantage may result in the form less cost of expansion for the merged company as the existing retail shops of Thornton can function as the retail units of the new merged entity or in the name o Marks & Spencer if it agreed to retain the name of M&S if it is agreed as a part of the merger arrangement. These shops can also market the products of M&S also depending on the availability of space in the erstwhile Thronton.References1.Marketing Teacher The Strategy Clock Bowmans Competitive Strategy Optionshttp//marketingteacher.com/Lessons/lesson_bowman.htmTutor2u Business Strategy Ansoffs Matrixhttp//www.tutor2u.net/business/presentations/strategy/ansoff/default.htmlQuickMBA Strategic Management Porters Five Force,A Model For Industry Analysis http//www.quickmba.com/strategy/porter.shtml