You Are The Marketing Manager For Cocoa Delights, A Chain ✓ Solved

You are the Marketing Manager for ‘Cocoa Delights’, a chain

CASE STUDY Part 1 You are the Marketing Manager for ‘Cocoa Delights’, a chain of 15 gourmet dark chocolate stores in Melbourne, specializing in creating handmade dark chocolate products. The organisation is close to reaching its set goals and looking to activate the next phase in its development. The CEO has asked you to undertake an organisational review. To help you get started, the CEO has provided you with: The Cocoa Delights marketing plan (December 2018), An excerpt of the annual report by the Chair (December 2018), A subsequent interview, The latest report for the industry.

You review the annual report and note the following statement by the Chair of the Board. Within the next 5 years, Cocoa Delights will become a national retail brand that satisfies our customers with a range of unique, high quality dark chocolate, as well as providing exceptional customer service from our highly skilled and dedicated staff. At the time of the annual report, the Chair of the Board was interviewed by a reporter who made the recording available on their website. You watch and listen to the interview and hear the following statements by the Chair of the Board. Cocoa Delights has always been daring and unconventional. Creativity and innovation have always been our strength and the cornerstone of our success.

For our stakeholders, we have always been about stewardship and adhering to professional and moral standards of conduct in all that we do. For employees, we are committed to encouraging self-directed teams; we cultivate leadership and maintain high levels of safety. Externally, we are committed to sustainable environmental practices and offering meaningful value to our customers. By 2023, I see Cocoa Delights as being a significant retail presence in every Australian capital city, starting with 22 stores in the greater Melbourne area and growing to 100 stores Australia wide.

Our market strength is our ability to source the finest cocoa beans at prices that customers believe represent value for them but also provide the organisation with the required margins and financial returns. During your interview with the CEO, you ask about the changes taking place in legislation that could impact on Cocoa Delight’s operation. The CEO explains: There is a big push by governments on the issue of sustainability.

This focuses mostly on the environmental issues of waste management and energy conservation. In the past, Cocoa Delights stores have been deliberately designed to be bright and comfortable places to shop. This meant a significant cost in electricity usage to run the lights and air-conditioners. With the new laws, we are going to have to find ways to provide customers with what they want, without the high electricity usage. Another issue that the government is looking at is having the country of manufacture clearly stated on imported products, although at present the government is allowing the industry to self-regulate rather than pass laws. Cocoa Delights has always practiced this activity and is proud to be Australian made.

We see this as an opportunity to increase our market-share, as some of our competitors are selling chocolate products that are imported from countries with a poor reputation for quality and employment ethics. You then ask about the new phase in the strategic plan, which the CEO describes as a big step: We now need to change our focus from local suppliers of services to national ones, and to think about opportunities to save money by gaining a wider geographic benefit and choosing media with a national reach.

When asked about the current marketing plan against actual results for the year, the CEO reports: We achieved our store growth and sales growth, but our gross profit margins are currently sitting at 46%. I think we are still below the threshold for gourmet chocolate and hot drinks, which we predict should be at an average gross profit of 63%. Expansion in sales and cost-effectiveness are key issues here.

We have spent $60,000 on radio advertising and $280,000 overall, including PR, magazines, and direct marketing. While this radio advertising expenditure achieved sales results, it was at a significant cost that was not initially planned for. PR has been particularly useful, resulting in many write-ups on our unique offer. The customer loyalty lists had achieved a total of 34,500 and a survey indicates that 58% of people in the target market recognize the Cocoa Delights brand and what it represents.

Overall, our SWOT analysis in 2018 is still valid for today. Not much has changed in that regard. Studying the latest report for the industry, you note the following differences between Cocoa Delights’ marketing plan from 2018 and their current situation. Interest rates are in fact rising. Unemployment has also risen to 5.8%. The social trend towards people eating chocolate is growing stronger than anticipated. Broadband rollout has been delayed, putting on hold some of the organisation’s internet marketing plans.

Part 2 The Chair of the Board outlined the organisation’s vision in the following statement: ‘By 2024, I see Cocoa Delights with a significant retail presence in every Australian capital city, starting with 22 stores in the greater Melbourne area and growing to 100 stores Australia wide’. To achieve this vision, the Board has been exploring various options, including: Funding and running the expansion program as a wholly-owned operation, Franchising, Taking up the option of a joint venture. The CEO has approached you to examine the two options of either franchising and joint venture partner, and provide a report on each. The CEO has provided you with a consultant’s report on the franchising option, and a proposal from Haigh’s Chocolates on the joint venture option.

You have been asked to prepare a PEST analysis on the operating environment for both proposals, and then examine issues of costs and benefits, risk, fit, and potential impact of each of the proposals.

Paper For Above Instructions

The marketing landscape for Cocoa Delights is evolving, presenting both opportunities and challenges for its expansion. The analysis comprises various critical components that will assist in evaluating the proposed franchising and joint venture options using a detailed PEST analysis alongside an examination of costs, benefits, risks, fits, and impacts associated with each proposal.

Cost and Benefits

The concept of franchising for Cocoa Delights focuses on rapid growth through the establishment of franchise stores, allowing for an increased market presence without requiring significant capital investment from the company. Franchisees typically invest their own capital to open and operate the stores, thus leading to quicker expansion. The performance of proven models in existing markets can provide crucial data driving this approach.

The primary benefits of franchising include:

• Market Penetration: Franchising enables Cocoa Delights to tap into new markets quickly, with extensive franchisee networks already familiar with local dynamics.
• Financial Benefits: This option can potentially enhance financial returns as franchisees cover operational costs while aligning with Cocoa Delights' branding. Financial performance metrics can show a gross profit margin increase from 46% to an anticipated 63% following expansion.

The initial costs associated with franchising include the creation of a structured franchise model, recruitment, and training, alongside potential legal compliance issues arising from the need for franchise agreements. However, the financial and operational benefits are likely to outweigh these initial costs if managed effectively.

Risks

When engaging in franchising, Cocoa Delights can encounter various risks, particularly concerning conflicts of interest that could arise between franchisees and the company's overarching goals. For example, franchisees may prioritize their profits over the brand's reputation and service quality, leading to a fragmented customer experience.

Alternatively, a joint venture with Haigh’s Chocolates faces risks such as competition between the brands and divergent business interests, which could create friction and hinder collaborative efforts essential for success.

Fit

In terms of fitting into the current business environment, franchising aligns well with Cocoa Delights’ need for rapid growth and the adaptation of roles within management structures. Franchise systems can empower store managers to adopt owner-like responsibilities, enticing those with entrepreneurial spirit.

Conversely, aligning with Haigh’s Chocolates promotes operational synergy and resource sharing, significantly enhancing market entry capabilities. Both partners possess essential knowledge of their respective markets, thus ensuring a smoother integration process.

Impact

The expansion through franchising could result in simplified operational models and quicker scaling, but it also necessitates close monitoring of franchisee compliance to brand standards and regulatory practices. On the other hand, a joint venture may enhance Cocoa Delights' marketing effectiveness in new regions through shared advertising and lower operational costs, although it poses risk to the brand's perception in the premium segment.

Conclusion

In conclusion, both franchising and joint ventures have their unique advantages and challenges for Cocoa Delights, warranting a careful analysis of financial projections and potential market impacts. Engaging in either approach requires thorough planning and clearly defined objectives to ensure brand integrity while also capitalizing on growth opportunities. A successful partnership with Haigh’s Chocolates could enhance Cocoa Delights' reach within the market while preserving quality branding, and franchising could serve to rapidly increase store presence with a close eye on performance and brand assurance.

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