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Rocky Mountain Chocolate Factory Inc.
http://www.youtube.com/watch?v=yDH5BdbPymw
Timeline
1981: Founded by Crail & 2 partners in Colorado.
1982: Franchised first store in Colorado Springs& Park City,Utah
1983: Co-founding partners left RMFC
1986: RMCF went public(NASDAQ)
1992: Franchise Development Agreement covering Canada with Immaculate Confections Ltd. of Vancouver, BC.
1995:Store concept revised from Victorian décor
1995: Frank Crail announced “Entrepreneur Of The Year” by Chain Store Age
2000:Franchise Development Agreement covering the Gulf Cooperation Council States of United Arab Emirates, Qatar, Bahrain etc
2002: opened first full-service retail kiosk
2002: Won three National Paperbox Association Gold Awards
2007: Entered into Airport Franchise Development Agreement with The Grove Inc.
2008: RMCF owned 5 company owned stores and 329 franchised stores in 38 states
2008: Rated the number one franchise opportunity in the Candy category by Entrepreneur Magazine
Procurement Chain
Cocoa beans from Africa, Mexico
Chocolate from Guittard Choco Factory
Nuts beans from all over the world• Company owned store• Franchised stores
RMCF’s products • Approximately 300 chocolate candies • Other confectionery products are premium ingredients and proprietary recipes• In products include nut clusters, caramels, butter creams, mints and truffles • Special designs packages for seasonal holidays such Christmas, Easter,…• “Finest, highest quality ingredients” with no artificial preservation
50%40%
10%
Products manufactured in RMCF's factoryProducts made in-store Ice-creams,coffee others
Store locations
Regional centers Tourist areas
Outlet centers Street Fronts
Airport and other entertainment-
oriented shopping centers
•1400 centers in US•Concerns of expensive rent structures, competing food and beverage concepts
•110 factory outlets in US
Competitors 1. Scharffen Berger and Joseph Schimidt
•-medium-sized gourmet chocolate companies •-$46.6 million and $61.1million
2. Principal competitors •Alpine Confection Inc., Godiva Chocolatier Inc., See’s Candies Inc., Chocoladefabriken Lindt & Sprungli AG, Fannie May and Ethel M’s/ethel’s
3. Godiva Chololatier •Annual sale - $500million•Franchised retailed stores, company owned stores and distribution •Part of UK group, which is largest consumer goods company in Turkish food industry
4. Chocoladefabriken Lindt & Sprungli •Multiple brand names; Lindt, Ghirardelli, Caffarel, Hofbauer and Kufferle•Lindt & Sprungli; recognized leader in premium chocolate in more than 80 countries
5. Alpine confection Inc •Sale $125 million •Owned many candies company; Maxfield Candy•Produce confections under license for Hallmark and Mrs. Fields
6. See’s Candies •Manufactured over 100varieties of candies and over 200 retail candy shops
7. Wayne Zink and Randy Deer (new competitors)•Endangered Species Chocolate Company •Sale &16million •Natural food stores •Ganic and healthy products made with fair-traded ingredients
S• Socio-
cultural
T• Technologic
al
E• Economic
E• Ecological
P• Political-legal
Steep Analysis
Socio-cultural Factors
•Trend of handmade chocolates
•Premium chocolate to account for 25% of US market; sales predicted at $4.5 billion.
Changing lifestyle
•Rise in demand for premium segment of chocolates
•Focus on chemical and preservatives free chocolates
Status symbol and consumption pattern
•Concerns about exploitation of African workers
•Unethical organizations and fair trade practice
Human rights
•Rising awareness about healthy benefits of cocoa
•Demand for dark chocolate: reduces risk of hypertension, improved sugar metabolism
Health care
•Advertisements in regional and local newspaper
•Customized in-store promotions
•Concerns for Arab and States laws
Localized marketing
Technological Factors
Improvement in telecommunication
infrastructure
Easy to provide ongoing
support to franchises
Transportation network
Aids in delivery
Change in automated machinery
Introduction of NETZSCH’s ChocoEasy
Improved manufacturing
Patent protection
Propriety rights in US and Canada
Application for other expanding
markets
Economic Factors
Inflation
Rising prices Reduce purchasing power
Reduces Per Capita Income
Price fluctuations
changes in price of raw materials
Intra-company trade
Unemployment
Reduces income of people
Lowers demand for premium-chocolates
Economic Factors
Economic Integration
•Reduces trade barriers
Currency Convertibility
•Currency conversion between company and franchises
Credit availability
•Recession- decrease in GDP•Lowers loans
Ecological Factors
Global warming•Changing world temperature might impact plantation
Pollution •The transportation services as well as emission of waste from chocolate factory.
Political Factors
Franchising Regulations and tax laws
Corporate tax and repatriation tax subject to change
External Factors Weight Rating Weighted Score
Comments
Opportunities1) Growing demand in new markets2) Low-fat healthier snacks and
health-related benefits of chocolate
3) Growth remained for gourmet (higher-priced premium segment)
4) Consumption of confectionary are still high
5) Change in trend from mass-produced to handmade chocolates
0.150.05
0.15
0.1
0.05
33.5
2.5
2.5
4
0.450.175
0.375
0.25
0.2
1) increasing at a rate of 25% a year in the Asia-Pacific region and 30% in China
2) Diabetes, heart-attacks, low blood pressure , low cholesterol level
3) 25% in market, Russia is key market for European growth
4) Western Europe and North America; market are most mature but consumption is high
5) Premium chocolate to account for 25% of US market; sales predicted at $4.5 billion
Threats1) introduction of new
manufacturing process called NETZSCH’s Chocó Easy
2) The supply and price of the ingredients Coco bean subjects to volatility
3) Competitors are stronger and greater and high local confectionary competition
4) Economic and consumer trends5) Unethical Issue
0.15
0.1
0.1
0.10.05
3.5
3
2.5
22
0.525
0.15
0.375
0.20.1
1) Smaller chocolate companies are no longer dependent on large chocolate manufacturers
2) monetary fluctuations, economic, political and weather conditions
3) Greater name recognition, financial, marketing, and resources both domestically and globally
4) Consumer changing tastes and eating habits and recessionary forces of U.S economy
5) Exploitation of African workers and preference of ethical firms
Total Scores 1.00 2.8
External Factor Analysis Summary (EFAS Table)
Internal Factors Weight Rating Weighted Score
Comments
Strengths1) Product quality and freshness2) Marketing advantage3) Own trucking system4) attractive stores sizes generate
strong name recognition5) Packaging
0.10.150.050.15
0.05
3.53.544
3
0.350.5250.20.6
0.15
1) Store personal making fudge from start to finish
2) Unique in-store candy demonstrations3) Deliver quickly and cost effectively4) 40 stores at tourist areas, 1400 regional
centers, 95 stores at the mall 5) won 3 National Paperbox Association
Gold Awards in 2002, copper package
Weaknesses1) Small store sizes and inventory
storage2) No patent protection for recipe
3) Franchisees sell more store-made products or products purchased from third-party suppliers
4) Company owned only 5 stores
5) Little practice of mass production
0.1
0.15
0.15
0.05
0.05
2.5
3
2.5
2
2.5
0.25
0.45
0.375
0.1
0.125
1) 1,000 square feet, approx. 650 of which is selling space
2) Registration for trademarks, service marks, symbols, slogans, logos and emblems, but not for invention
3) Adversely affect total revenue and operations of company
4) Company focus on franchising more ( more than 280 franchises stores )5) large confectionary companies mostly
concentrated on mass production and have cost effective.
Total Scores 1.00 3.125
Internal Factor Analysis Summary (IFAS Table)
Strategic Factors Weight Rating score SHORT
Inter MediAte
LONG
Comments
S2) Marketing advantage
S4) attractive stores sizes generate strong name recognition
W2) No patent protection for recipe
W3) Franchisees sell more store-made products or products purchased from third-party suppliersO1) Growing demand in new markets
O3) Growth remained for gourmet (higher-priced premium segment) T1) introduction of new manufacturing process called NETZSCH’s Chocó EasyT3) Competitors are stronger and greater and high local confectionary competition
0.1
0.15
0.1
0.15
0.1
0.15
0.15
0.1
3.5
4
3
2.5
3
2.5
3.5
2.5
0.35
0.6
0.3
0.375
0.3
0.375
0.525
0.25
X
X
X
X
X
X
X
X
X
X
X
X
X
X
-Unique in-store candy demonstrations-40 stores at tourist areas, 1400 regional centers, 95 stores at the mall -Registration for trademarks, service marks, symbols, slogans, logos and emblems, but not for invention-Adversely affect total revenue and operations of company-increasing at a rate of 25% a year in the Asia-Pacific region and 30% in China-25% in market, Russia is key market for European growth-Smaller chocolate companies are no longer dependent on large chocolate manufacturers -Greater name recognition, financial, marketing, and resources both domestically and globally
Total 1 3.075
SFAS Table
Financial Analysis
Time-series analysis to check performance over the years.
2004-2008
Ratios covered:1. Return on investment2. Net profit margin3. Fixed asset turnover4. Inventory turnover5. Current ratio6. Debt to asset ratio
1.Profitability Ratios: ROI
2004 2005 2006 2007 2008
ROI 0.129070761822416
0.172311122199147
0.21327961514324
0.257091165560957
0.307254267853893
2.50%7.50%
12.50%17.50%22.50%27.50%32.50%
ROI
%
ROI = Net profit/ total assets
A measure of management’s efficiency, it shows the return on all the assets under its control, regardless of source of financing.
2004 2005 2006 2007 2008 -
2,000,000.00 4,000,000.00 6,000,000.00 8,000,000.00
10,000,000.00 12,000,000.00 14,000,000.00 16,000,000.00 18,000,000.00 20,000,000.00
total Assets Net profit after tax(NOPAT)
year
•Increased sales to speciality markets.•Decrease in general and administrative costs.•Lower depreciation cost.
2.Net profit margin
2004 2005 2006 2007 20080.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%18.0%
NPM
NPM
Net Profit Margin = Net Profit / sales x 100
Masures after-tax profits are generated by each dollar of sales.
2004 2005 2006 2007 2008
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
NOPATSales
Increase in sales revenue increase in royalty fees from 5% to 10%.
Activity Ratios3. Fixed Asser Turnover
2004 2005 2006 2007 20080.00000
1.00000
2.00000
3.00000
4.00000
5.00000
6.00000
Fixed Asset turnover
Fixed Asset turnover
Fixed asset turnover = Sales/Fixed assetsMeasures the utilization of the company’s fixed assets (i.e., plant and equipment)
2004 2005 2006 2007 2008
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
fixed AssetsSales
Fixed assets reduced due to lower company owned stores.
4.Inventory turnover
2004 2005 2006 2007 20080
2
4
6
8
10
12
inventory turnover
Inventory turnover =Net sales/ inventory
Indicates the effectiveness of the inventory management practices of the firm.
2004 2005 2006 2007 2008
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
Salesinventory
Decrease in inventory due to increase in in-store products(product mix shift).
5. Liquidity ratios: current ratio
2004 2005 2006 2007 2008
cur-rent ra-tio
2.66693764026665
3.56943008639216
3.59054059584431
3.3044456108227
2.35196649395128
0.25
1.25
2.25
3.25
current ratio
current ratioAxis Title
Current Ratio = Current Assets : Current Liabilities
2004 2005 2006 2007 20080
2000000
4000000
6000000
8000000
10000000
12000000
current assetscurrent liabilities
Change in inventories due to increase in in-store production, maturing of notes.
Lower incentive compensation cost.
Leverage Ratio 6. current liabilities to equity
2004 2005 2006 2007 20080.00%5.00%
10.00%15.00%20.00%25.00%30.00%35.00%
current liability to equity
Current liabilities to equity= current liability / equity x 100
Measures the short-term financing portionversus that provided by owners.
2004 2005 2006 2007 2008
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
16000000
current liabilitiesequity
•New line of credit of $300,000.•Increase in accounts payable.•Repurchase of stock; undervalued.
Financial Summary
Ratio AnalysisCurrent ratio BadFixed asset turnover
Good
Inventory turnover
Bad
Current liabilities to equity
Bad
ROI GoodNPM Good
Firm is better with long-term debt management rather than cash management.
Strategic alliance- successful???• RMCF was rated the
Number One Franchise Opportunity in the candy category by Entrepreneur magazine.
• Ranked 60 in Forbes annual listing of Americans best 200 Small Companies.
“Operators are the ones that really
make this company a success.
Strategy
INTERNATIONAL
Franchising and licensing is recommended.
To gain access to distribution channels
To overcome financial ,political and regulation barrier.
Business Level Strategy
Lower cost competitiveness strategy • cost reduction from experiences,
tight cost, overhead control• cost minimization in areas like
R&D, service, sales force, advertising and so on
Cost leadership
RMCF sought low-cost, high-return Cost minimizing in national advertising 1% of monthly sale from each franchised store
Benefits Risks Cost efficiency Defense against competitors Barrier for entrants Above-average returns on
investment Generate high market share High bargaining power to its
suppliers
Negative perception of customers on product value
Standardized products Low attractiveness Easily imitate by competitors Fast technology changing
RMCF sought low-cost, high-return publicity
opportunities through participation in local and
regional events, sponsorship, and charitable causes
No engaging in national advertising
1% of monthly sale from each franchised store
Su Myat Naing 5318123
Manufacturingo new manufacturing
process called NETZSCH’s Chocó Easy
o Speed & cost effective by automated process
Truckingo Deliver quickly and cost
effectively o fill products from 3rd
parties on return trip
RMCF matches with the business strategy
Recommendation Marketing Strategies to focus on ethical
practices of the firm and emphasis on hand-made chocolates to capture handmade chocolates trend and use existing brand recognition to next level.
Do joint venture to increase global presence and use firm’s quality chocolates as defense against competitors as well as to satisfy increasing demand.
Recommendation • Expansion to countries such as Japan and china
would be advisable• China have shown 30% of increasing consumption of
chocolates and 25% in Asia specific. Stores can be open in a place such as Shanghai ,Hongkong and Japan.
Expected Behaviour in China Chocolate confectionery is expected to experience
ongoing healthy constant value growth over the forecast period.
due to leading players further expanding into lower-tier cities and the premium trend in China.
A widening range of gift packs focused festivals will be a strong driver for sales growth.
manufacturers are seeking new sales areas in wedding sales by offering wedding gift packs.
Ferrero and Hershey’s are expected to continue to dominate wedding gift sales
http://www.euromonitor.com/chocolate-confectionery-in-china/report
Approximately-80,000 to 90,000 person per month of tourist
http://www.tourism.jp/en/statistics/
First Class- Five airport
The United States has been Japan's largest economic partner, taking 31.5 percent of its exports, supplying 22.3 percent of its imports
No specific trade agreement with United States.Japan is a high Income country
2008Japan 20082008
Confectionary Consumption in japan
Japanese Confectionery: Market Overview © Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6593 Market Analysis Report AAFC No. 11181E
Japanese Lifestyle
Indulgent foods such as premium chocolate, functional chewing gum and candy have become popular among Japanese office employees seeking a break from work stress. According to a consumer survey conducted by Datamonitor:• >77% of Japanese consumers believe it is very important
to find a way to escape from their stressful lives; • 16% of Japanese workers snack at work in the morning at
least twice a week.• 44% of surveyed consumers snack in the afternoon
during work hours more Japanese Confectionery: Market Overview © Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6593 Market Analysis Report AAFC No. 11181E
Consumption pattern
Japanese chocolate consumption in 2008 was equal to more than 6% of the world’s chocolate market value. The Japanese chocolate market is expected to reach $4.6 billion by 2013. Japan’s chocolate market chracterised as:Premium ingredients and functional benefits; Product segmentation that targets very specific
consumer groups; and High-end packaging that provides convenience and
portion control. Japanese Confectionery: Market Overview © Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6593 Market Analysis Report AAFC No. 11181E
Health Conscious
• Survey revealed that 49% of female and 40% of male Japanese consumers find enhanced nutrients in food and beverages very appealing. Japanese consumers continue to be willing to pay high prices for food products that are perceived to be of high-quality and that offer dietary supplements. Prefer dark and organic chocolate.
Japanese Confectionery: Market Overview © Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6593 Market Analysis Report AAFC No. 11181E
News article:
Fiat shares surge after deal to buy remaining Chrysler stake• Fiat is about to buy the remaining 41% shares of
Chrysler. It states that with this Fiat might be able to widen Fiat global reach as well as help Fiat lower its cost and compete more effectively with bigger players like Volkswagen
• The new business strategy being used cost leadership. As the firm will appeal to wider market as well as reduce cost from technology sharing.
• http://www.bbc.co.uk/news/business-25571200
News article:
Strategy change helps Washington glazing firm grow 35%• Fendor Ltd is a Washing based firm which specializes in
fire glazing. Due to saturated market of their core service they have diversified their business to high security environments like detention centres and mental health facilities. This diversification has enabled them to achieve growth by 35%.
• The strategy used by them is differentiation strategy because they now reach beyond intended glazing market to security and has differentiated their product from others via products like CleanVent and CleanGuard.
• http://www.thejournal.co.uk/business/business-news/strategy-change-helps-washington-glazing-6558097
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