STRATEGIC MANAGEMENT ANALYSIS AND RECOMMENDATIONS FOR GODIVA UK Executive Summary

STRATEGIC MANAGEMENT ANALYSIS AND RECOMMENDATIONS FOR
GODIVA UK
Executive Summary:
The GODIVA Chocolatier shop has its origins in Belgium. It was founded by Joseph Draps in 1926. He originally handcrafted praline chocolates in his workshop in Brussels. For many years, this had been exclusive to Belgium. In 1958, Joseph Draps began the expansion of GODIVA on the international scale by opening a boutique in Paris on Rue St. Honoré. Later the GODIVA line of boutiques were opened in Germany, United Kingdom, Italy and in many other countries. Over the years, Godiva expanded across Europe and entered the North American market… operating more than 450 boutiques and shops as well as airports in over 80 countries. It also has strong market hold in Asian countries such as Japan, China, Taiwan and Singapore. Godiva brand is loved worldwide and it brings best of Belgium chocolate taste to the world.

Pladis is a Turkish biscuit, chocolate and confectionary subsidiary owned by Yildiz Holding. Pladis owns the Ulker, McVities and Godiva brands. In the United Kingdom, Godiva has two channels of operations: Boutique outlets majorly in London and online sales of selected premium chocolates through their online sales website http://www.godivachocolates.co.uk and fast moving consumer goods (FMCG) channel where the Godiva chocolates are sold in super markets such as Sainsburys and high end departmental stores like John Lewis.

Through the FMCG channel, Godiva will be made available to a wider range of public on a global scale. The company is partnering with retailers in North America, China, UK, Turkey, Sweden, Netherlands and Saudi Arabia. The challenge is choosing the best of the Godiva chocolate masterpieces and making them available to wide range of supermarket chains. The other bigger challenge is that of selecting the target audience. Since it is the first time initiative, lot of innovation has to be brought in to collaborate and create an in-store brand immersion. The collaboration of Godiva chocolates with Sainsburys store is a very good move by the company which allows it to cater to a wider audience. The company is also identifying strategic partnerships with retailers across the world. The launch of Godiva masterpieces and Godiva chocolates through Sainsburys store forms a part of the company’s goal to be 2bn USD brand in the next five years. The launch is supported on a global scale by global media, in-store campaigns and PR.

External Analysis (Macro):
Here are the political, economic, social and technological factors that affect the strategic decision of Godiva chocolates to expand through FMCG channel and have an influence on business of the company. This analysis provides a competitive advantage. This analysis is also aims at discovering several external information to create new strategies.

PESTLE Analysis:
Political:
The company has to adhere to the Chocolate Directive. It is a set of rules which operate within the European Union. It defines the key elements of products that are sold as chocolates.

There is no specific legal framework for fair trade in Belgium.

It should comply with various government regulations such as safety, sanitation and health.

Regulations for labelling the product must be strictly followed.

Franchise operation must abide the registration and disclosure of information rule.

The addition of Taxes play an important role in pricing the product. If the value added taxes rise, the chocolate price will increase which will lead to reduced sales. If the taxes decrease, it is more likely the consumer would by the chocolates. A good and positive tax policy would help the growth of the company in new sector.

The barrier for market entry is low and hence can easily expand later on.

Economic:
The key here is to identify the periods where the exotic and box chocolate collection could be sold. This is seasonal. The sales would increase by two-third during Christmas. The other such periods where high sales could be expected is on Easter and Mother’s day.

In terms of operational efficiency, the skill levels, availability of expertise and innovation, the cost of living of the target market needs to be considered.

The rate of growth of market’s confidence is also one of the significant factors for the organization
There are few determining factors that affect the Supply and Demand for the chocolates. The supply determinants are number of suppliers, expected price and price of input costs. The determinants of demand are Income, Population and Age Group, Brand Image, Consumer Preference and Taste, Expected Future Price, Competition, Price of Complementary Goods and Cooling Weather and Recession. This kind of fluctuation in terms exchange rates effects the industry.

Customer’s choice on spending their income on luxury chocolates is also one of the concerns.

Expansion of the business would require skilled workers to be hired. This is dependent of availability of skilled employees and also the variation in unemployment rates.

Since the Godiva chocolate company has a great historical background, esteemed ethical values and has the hold on the market through its exclusive boutiques and stores, access to credit and loans is easier.
Social:
The social factors that need to be considered are Age distribution, Population growth, Income, Education, Cultural beliefs etc.

The sales of exotic and luxury chocolates rarely decrease during economic recession as they are considered as affordable luxury.

This is due to sociological factors like image and status.

So, the premium quality section can still grow in current economic situation.

Technological:
The pace of changes in technology is rapid, and this might affect the market.

The recipes of chocolates with natural additives and the advent of new technology has made the chocolates packaging attractive. It adds beauty to them and increases the desire in customers to purchase it.

Introducing new machineries and usage of pathogen testing systems ensures precision and manufacture of quality chocolates. Introduction of new flavors also helps to grow in the market.

Legal:
Godiva is one of the recognized brands in the world that do not require anything to protect its property and brand. There are a number of products in the market as its substitute but Godiva is very strong to be ahead in this competition. However, confectionary products have an uncertain future due to risks of obesity and health care.

Environmental:
The main factor that affects all companies is the environment. Fossil fuels are used in huge amounts and hence increasing in costs. There may be alternatives needed in the future. Furthermore, every brand needs a well-developed environmental image in the market. Therefore, Godiva must try to start investing in green technologies that is environment friendly processes.

5 Force Framework (Micro Analysis):
To apply Porter 5 forces model strategy to Godiva Company, the application of competitive forces to take advantage of a chosen market segment which is the FMCG channel is required. Few concepts that are applicable here are the role of low cost, differentiated, focus, and industry-wide. To ensure that competitiveness is achieved the company would reduce its product availability in the market. Godiva does not entirely depend on this concept and instead, it offers its product at a high cost to the market. The benefits here are felt to the company in its competition with companies like Hershey chocolate that uses cost leadership concept. Through this approach, Godiva emerges as the best company in terms of quality of its product that can be accessed in high market stalls away from those of its competitors (Hanna, 2004).

Godiva Company focuses on differentiation strategy where it’s marketing and selling is concentrated based on high-value products. These products are of high value, and the image is what is being sold as a display segment in terms of the packaging capability. Differentiation plays a crucial role as a distinguishing factor in the provision of essential products among many that are available in the market. The application of the best strategy by the Company enables it to reach the higher sector of the market in terms of financial capability. This approach has made the Company’s product most desirable in comparison with those of the competitor. Market penetration has been made possible thereby reaching a wide audience. Successful realization of best approach to apply in the market depends on the success of market research done. This makes the Company focus on research and development in areas of the market segment. An example to this is about the Singapore market that has seen the Company develop products in accordance to demand. This was supported by the idea of finding out about the needs of the people of Singapore. Intensive research and methodology would then be applied in coming to terms with segmentation theories of luxurious people. This is achievable in Singapore. The applicability of cultural attitudes through eating habits and premium quality needs fast-track research, and this is what Godiva concentrates on in segmentation theories.
THREAT OF NEW ENTRANTS
The increase of dairy products and nut allergies is having a negative effect on the cocoa and chocolate product industry. The obesity problem is also having a bad impact on sales within the chocolate industry. Based on the above observations, there is no significant threat of new entrants in the chocolate industry.

THE BARGAINING POWER OF BUYERS
According to the United Nations (2008) the buyer market of cocoa products has increased along with the concentration of the manufacturing segment. The hotels, which are one among the largest buyers of chocolates, have a wide range of chocolate producers to choose from. The high end retail stores also are one of the biggest buyers of wide variety of chocolates. There are several producers that offer branded, packaged chocolates. However, Godiva and a few other producers have a unique point of sales as producer of chocolate of a higher quality. This reduces the number of potential producers for buyers who wish to stock luxury chocolate products for their customers. Although Godiva will generate additional customer value for the buyer, it must be noted that it would not save the buyer money. Taking this into consideration, the bargaining power of buyers in the form of hotels and retail stores would be classified as medium.

COMPETITIVE RIVALRY
As an industry progresses and growth rates change each actor tries to gain a competitive advantage over its competitors. According to KPMG’s (2012) report on The Chocolate of Tomorrow, the main force behind the competitive rivalry in the chocolate industry is consumer behavior patterns. Consumers are segmented into three categories;
The Convenience Buyer
The Value Buyer
The Luxury Buyer
It can be seen that competitive rivalry within the chocolate industry is high due to the large number of players and how they react to consumer behavior patterns, wants and needs.

THREAT OF SUBSTITUTE PRODUCT
There are many organic products and also artificial and cheaper chocolates available. Hence the threat of substitution is high.

Internal Analysis (VRIO):
Value: Godiva chocolates are popular in gifting segment and major sales as gifts happen on Christmas, Easter and Valentine’s Day. The company also has rich traditional values of Belgian chocolate. There is also a focus on providing consumers the best quality chocolates with health benefits.

Rarity: It has a great brand image and the taste and flavors are exotic and unique. There are many traditional recipes included, which adds to its richness. To enrich the chocolates and make them more nutritious, the company is adding super seeds with health benefits like quinoa and hemp. Also, there is a focus on manufacturing more dark chocolates as there are studies which have proven that they are good for heart and brain wellness and have anti inflammatory properties.

Imitability: The Godiva chocolates are not imitable. More tactical and implicit knowledge is required for imitating.
Organization: It is well organized structurally and also has improved in packaging to capture value.

Porter’s Generic Competitive Strategy:
GODIVA Differentiation Strategy: GODIVA’s broad differentiation strategy includes differentiating its products from the competitors through a blend of substantial and non-substantial service and product features.
Research & Development: The main driving force to bring up the sales is innovation. This is a part of the differentiation strategy. GODIVA’s R;D department employs a global team of chefs and chocolatiers and they are dedicated come up with new products with new flavors as a part of new product development initiative (NPD) that aims to develop creative, innovative and extraordinary products that provides consumers with an extensive selection of chocolates. (Godiva, 2016) New products have to go through a series of tests and tasting before it is launched into the market. (The Huffington Post, 2014)
Product Differentiation: The beauty of GODIVA is that it differentiates itself through its products. Through its superior R;D abilities, GODIVA is able to create extensive lines of products such as the Truffles Chocolate selection which offers a wide variety of different flavors as compared to competitors. Other than this, GODIVA also offers exclusive product lines which its competitors are unable to match such as its Chocolate Dipped Strawberries and Soft Serve Ice-creams. With GODIVA exclusive products supplemented by a wide variety of product options to choose from, it helps GODIVA appeal and attract consumers to patronize and stay loyal to the brand.

Quality Control: GODIVA possesses a luxurious brand image and is known for its premium chocolate with excellent quality. (Cassell, 2010) Before GODIVA’s chocolate are ready for the launch, the production operator will conduct a series of quality check inspection on every single piece of chocolate to ensure quality perfection and that the chocolates are “GODIVA Worthy”. (Lupo, 2014) With such strict and uncompromising checks to ensure perfection in every piece of chocolate it produces, is what sets GODIVA apart from its competition due to its highly meticulous methods of production and quality check methods and exquisiteness.

Services: To further differentiate its products, GODIVA also provides value-added services which provide the differentiation of its products through customization services such as customized ivory ribbon services for consumers purchasing gift boxes, personalized messages with printed onto premium looking cards with a limit of 40 characters. (Godiva, 2016) GODIVA also caters to Weddings, Showers and Business Gifts.

The industrial analysis enables to cope with various forces associated with external competition and Godiva emerging victorious in conducting its business efficiently. Proper strategies will then be applied in trying to counter negative attributes and it is through the application of this mechanism that the company realizes its profitability goals shortly. The market segmentation theory covers such aspects that relate to geographical areas, behavioral, psychographic, and demographic (Kale, Singh & Raman, 2009). Market segmentation aims to capture and reach a wide audience in terms of mass consumerism and marketing (mass media). Godiva Company has been able to employ market segmentation strategies in various ways (Hutchinson, Quinn & Alexander, 2005). The company has been expanding its volume of production day in day out, and this is achieved through reduced prices of chocolate products. This is possible since the company easily achieves economies of scale, and this makes it possible to reduce the price and remain profitable. Godiva has been trying to utilize expansion strategies in the region of Asia and China in an effort aimed at owning a luxury category of chocolate (Hanna, 2004). This is met by the market segments theory that is applied by the company in reaching a broad target market. The behavioral mechanism has been observed in the Asian market and has shown a positive trend in the consumption of chocolate products in high volume. Habits and tastes have also been noted in these Asian regions that enable the company to concentrate on targeting these markets since there are significant sales volumes to be made (Hutchinson, Quinn & Alexander, 2005).

Strategic Direction:
Market:
Growing premium market beyond the mass market.

Getting into right market depends on having right infrastructure and assessment of business partner by obtaining knowledge of new markets.

It is more predominant to start at retail level.

Franchise or partnership model of marketing works well.

Making the premium chocolates available in super markets and drug stores.

The readily availability of these premium chocolates in super markets and drug stores help to boost the sales.

Selling smaller chocolate bars with same exotic flavors for a lower price would get the customers hooked to the taste and the brand, which would further make them buy bigger chocolates of higher price from the same brand.

Keeping the premium luxury chocolates near the point of sales in retail stores and super markets, attracts the consumers to buy the chocolate before check out.

The taglines like ‘gift yourself the joy’ and campaigns portraying these luxury chocolates as reward to self is also a great example of marketing indulgence.

Product:
Innovation in products while also retaining the old exotic and premium flavors.

Maintaining variety in flavors such as Truffels, caraques, croquants, fresh creams, marzipans, caramels, liquors, fruits, chocolate bars, bouchées, etc.

More than seventy different freshly made chocolate pieces are available for customers who wish to create their own list of assortments.
The company also offers an even wider range of more than 100 pieces for gifting, special occasion and personal indulgence,
Café Godiva gourmet coffees, Godiva hot chocolate, Biscotti, Mini-Biscotti and Godiva Biscuits are some of the other high selling products.

It also sells complimentary items to these chocolates such as Godiva Ice cream, Godiva Cappuccino liqueur, Godiva white chocolate liqueur, etc.

Service:
Partnering with retail stores such as Sainsbury: The step taken by Godiva to partner up with major supermarkets in the UK, North America and other countries to enter the mainstream retail sector and become a brand that’s worth 2 billion USD. Along with Sainsbury in the UK, entering Albert Heijn in the Netherlands is also a strategic move to improve sales in FMCG sector. The plans to expand its foot in China, North America, Turkey and Sweden with its new Masterpieces range is being made. Entering the retail sector is a new phase for Godiva’s marketing sector, as previously Godiva’s presence in the UK was only through their own stores which were premium boutiques. The Godiva chocolates were initially also available in top end retail stores such as John Lewis, Harrods and Selfridges. According to the anticipation the sales would double due to entering into mainstream retail sector and not just the top end premium ones. Since Sainsbury’s is the second largest supermarket in the UK in terms of revenues, with a 12.8% market share for 12 weeks, the sales of Godiva Masterpieces would be high. The Godiva Masterpieces line of chocolates would be available in as many as 500 Sainsbury stores across the UK. This decision is also on par with the rival Lindt and Godiva also can have a substantial revenue growth.

Customer Relationship Management: Building a long-term customer relationship plays an important role in success of a business. The sales team should making high efforts to build a long term consumer-seller relationship by providing best in class service. The practice of relationship selling and sales management expands attention on long-term consumer-seller connection which stresses on personalization, customization and empathy as key components in developing and keeping satisfied customers. To provide best customer service, resolving all the customer related issues needs by identifying the root cause is important. Thereafter, proactive strategies to prevent such issues needs to be developed. The key characteristic of a sales person should be identifying and knowing customer’s sensibility and treat them well. These things would help in creating a strong consumer-seller bond and also help in building a loyal brigade of customers. Not only just for the products, but a greater level of customer service helps Godiva boutiques to bring repeat customers to their retail locations.

The Impact of Technology on Sales: Technology has a huge impact on sales, as many consumers are exploring the online platforms to purchase the products rather than visiting the physical stores. Online sales help the company reach out to wider segment of consumers spanning all over the world. This would help the prestigious brand, which has introduced innovative collection of its special confections to raise to new levels of success in the chocolate industry. However, the relationship between sales professionals and consumers is required, be it in on location sales or ordering online or ordering by phone. Technology helps in developing and improving this relationship. By providing offers online like reward points and certificates, gift vouchers , Godiva can grow bigger and better in terms of revenue as well as market.

Sales through mobile application: A mobile application would also help in increasing the sales through online. This would help in improving sales as it provides notifications to the consumers regarding various offers and deals.