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Thorntons final presentation
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Business strategic presentation on Thornton's plc 2015
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Thorntons final presentation
- ‘If you don’t have a smile, we’ll give you one of ours’ Business Strategy Analysis Luke Dexter Liz Wilson Alice Hart Gillian Day
- History Of The Business • Founded in 1911, in Sheffield, by William Thornton. Alfreton Factory. • Steady growth throughout the decades and became publically listed on the London stock exchange at the end of the 1980s • Present Day: 247 Stores + 186 Franchise Shops (UK & Ireland) • Acquired by Ferrero for £112m in June 2015 – Change of strategy/direction? (Image:WorldChocolateGuide,2010)
- The Nature Of The Business • Premium chocolate industry but in recent years has branched into a new market sectors with cafés, biscuits and ice cream. • Seasonal sales have big effect on profits. 13% of global confectionary sales happen during holidays. UK Market share during Easter (2013) grew to 4.7% from 4%. [1] • Ferrero acquisition likely to lead to a change in market sectors and additional products – will want a return on their investment. (Image: Chocolate Hearts, 2014)[1] Just Food, 2013
- Key Performance Indicators 07/01 2011 13/01 2012 11/01 2013 10/01 2014 09/01 2015 95.5p 9.875p 45p 135.5p 83p THT Share Price http://www.iii.co.uk/research/LSE:THT Data obtained from Thornton’s Annual Statements 2011-14
- Strategic Direction Of The Company • Can be seen to be a focused Differentiation Strategy on strategy clock. • Subject to change since acquisition - Will be concerned to meet Ferrero’s expectations. • Aims to increase market share. • To market chocolate as a gift. • Transition period between CEO’s. • Strategy in the past few years has been to reduce number of stores which were loss-making. 296 Stores in 2013 – 247 January 2015. [2] • Aims to also sell wholesale to supermarket groups to get their products in more locations. [2] Thorntons, 2015 ‘The strategy clock represents different positions in a market where customers have different requirements in terms of value for money’ Johnson, Whittington & Scholes (2012, Pg. 150.
- Scope Of Distribution 2011 2012 2013 2014 Business Model & Operating profit data obtained from Thornton’s Annual Statements 2011-2014
- Luxury own-brand chocolate, toffee and fudge. Seasonal & Themed chocolate shapes. Selection trays Online Own Stores Supermarkets Luxury Biscuits New as of October 2015 Online Own Stores Supermarkets Gifts Personalisation through icing service. Introduced Hampers, Flowers and Cards Online Own Stores Café Thorntons Sells hot drinks (Tea, Coffee, Hot Chocolate) cakes and Thornton’s chocolates Online (Hot Drink Products) Own Stores Ice Creams Sells Tubs and Cones of Ice Creams in a variety of flavours – not just chocolate Own Stores Supermarkets Extent Of Product Diversity
- Scope Of Market & Competition • Competition from ‘value’ chocolate companies such as Cadburys, as well as luxury brands such as Lindt & Hotel Chocolat. • Hotel Chocolat – Established 1988. £8.3m pre-tax profit for the six months until 28 December 2014, whereas Thorntons raised £6.6m profit for the same period. Hotel Chocolat 81 Stores, Thorntons 242. [3] • UK chocolate sales grew by 1.6% in 2014 = £4.1bn, however, chocolate sold fell 1% to 437 million kg. [4] • Cocoa and raw ingredient prices rising. Alongside a more health conscious society is likely to halt a increase in chocolate consumed. • 1/3rd of British chocolate buyers buy premium products either "regularly" or "all the time“. [5] [3] Independent, 2015 [4] Mintel, 2014 [5] Canadean, 2014
- Task 2 Critically evaluate external environment of your chosen organisation and how it impacts organisational strategy. Please consider how your organisation responds to the environmental pressures.
- PESTLE Analysis POLITICAL Cocoa Supplies Sugar European Union ECONOMIC Unemployment Bank rate increases Increased VAT SOCIAL Gifts Treats Healthy Eating TECHNOLOGICAL Online Shopping Manufacturing Developments Advertising LEGAL Employment Law EU Regulations ENVIRONMENTAL Global Warming Waste/Energy Reduction Sustainability
- • Low, Lack of Experience • Limited access to Suppliers/Distributers • Strong, can switch to a competitor • Low, alternative suppliers available • High, other products available • Strong competitive rivalry in shops and high street Porter’s Five Forces
- Low Price High Price Low Quality High Quality Price information correct 01.11.2015 Positioning Map
- Mintel Report FIGURE 18: Leading brands’ sales in the UK retail chocolate assortments market, by value, 2013/14 and 2014/15 2013/14* Share 2014/15* Share % change £m % £m % Celebrations (Mars) 95 10 102 10 +7.4 Quality Street (Nestlé) 97 10 97 10 - Lindt (Lindt & Sprüngli) 81 9 97 10 +19.8 Thorntons (Thorntons) 100 11 96 10 -4.0 Ferrero (Ferrero) 72 8 87 9 +20.8 Source: Mintel Report Chocolate Confectionery - UK - May 2015 Mintel Report
- Source: confectionarynews.com Market Share
- Task 3 Analyse organisational resources and capabilities and how they contribute to the organisational competitive advantage.
- Resources & Competences Resources Competences -Tangible Resources • Plant (Derby) • Technology, such as machinery or equipment • Retail outlets/ Cafes • FMCG channels • 3868 Employees • Suppliers/Customers -Intangible Resources • Family Culture • Corporate Culture • R&D Frame work • Brand awareness • Marketing Strategy (Gifting) • Company knowledge and experience • Cash flow • Budgets • Communication • Budgeting and planning knowledge • Capacity to recruit and train staff • Management, and people skills • Effective management ( In all area: structure people, financial, production/manufactural) • Attention to communication • Establishing focus • Motivational support and performance management • Team work • Managing change • Developing and empowering others • Culture and style • Effect service • Flexibility • Safety • Leadership “Resources are the assets that organisations have or can call upon. Competences are the ways those assets are used or deployed effectively” Johnson, Whittington & Scholes (2012. P. 51.) Key: • Physical resources • Financial resources • Human resources • Intellectual capital
- Threshold Capabilities Threshold Resources • Plant (Derby) • Technology, such as machinery or equipment • Retail outlets/ Cafes • FMCG channels • 3868 Employees Threshold Competences • Communication • Budgeting and planning knowledge • Capacity to recruit and train staff • Management, and people skills “Threshold Capabilities are those needed for a an organisation to meet the necessary requirements to compete in a given market and achieve parity with competitors in that market.” Johnson, Whittington & Scholes (2012. P. 53.) Table 3.2 Johnson, Whittington & Scholes (2012. P. 53.)
- Distinctive/Dynamic Capabilities Unique Resources • Family Culture • Corporate Culture • R&D Frame work • Brand awareness • Marketing Strategy (Gifting) Core Competences • Effective management ( In all area: structure people, money, production) • Attention to communication • Establishing focus • Motivational support and performance management • Team work • Managing change • Developing and empowering others • Culture and style • Effect service • Flexibility • Safety • Leadership • Ethos “A basis for superior performance depends on a company having distinctive or unique capabilities that are of value to customers and which competitors find difficult to imitate. Johnson, Whittington & Scholes (2012. P. 53.) ” Table 3.2 Johnson, Whittington & Scholes (2012. P. 53.)
- Competitor Benchmarking Strengths Weaknesses Thornton’s • High quality product • One manufacturing site • Gifting marketing • Ageing packaging • High price • Only targets UK markets Cadbury • World wide brand • High brand loyalty • Price • Quality of product • Limited products • Seasonal sales Hotel Chocolat • High quality product • Offers more than 1 area of products (hotel) • World wide brand • Highly priced • Relatively new brand • Bland marketing Lindt • Highly regarded world wide brand • High quality product • Excellent brand reputation • Highly priced product • Realises mostly on seasonal sales • Not as easily available as other brands “Benchmarking is a way of discovering what is the best performance being achieved – whether in a particular company, by a competitor or by an entirely different industry. This information can then be used to identify gaps in an organization’s processes in order to achieve a competitive advantage” Stroud (No date)
- The Value Chain (M.Porter 1985) “If organisations are to achieve competitive advantage by delivering value to customers, managers need to understand which activities they undertake are especially important in creating that value and which are not,” (Johnson, Scholes, & Whittington, 2009, p. 74) Customer service Complaints/ product help Branding pricing and promotion Online & Instore both own retail outlets and FMCG Order handling/Logistical planning, Delivery, dispatch Manufacturing, Packing, Production control, Labour control, quality control, Maintenances Quality control, Raw material planning/control, Supply receipt Plant, Retail outlet, Franchise, FMCG channels Training, Recruitment, personnel development and retention Sophisticated hybrid plant (Robotics) Purchasing/accounts, sourcing
- VRIN (Barney 1991) Value Rarity Inimitability Non- Substitutability “The criteria of the VRIN Framework clearly rules out best practices as a source of competitive advantage. If other firms can easily understand and copy a capability, it is not a source of advantage.” (http://createadvantage.com/glossary/vrin-framework, no date) Value adding services: • Firm infrastructure – aspects of both retail, franchise and focus on FMCG • Human resource management- Focus on their people • Operations- One manufacturing site = One result Rare activities: • Brand awareness • Quality of different products produced (for more than one market) • ‘Gift’ Marketing Qualities difficult to intimate: • Great respect for corporate social responsibility • Organisational culture • Excellent R&D framework Resource or competences which can not be substituted: • Family recipe • Knowledge and experience • Excellent supply chain history and development
- Task 4 Evaluate how your chosen organisation manages stakeholders and through what mechanisms and initiatives.
- Thornton's Employees of Thornton's Supermarkets Governments Suppliers Ferrero Rocher Employee of Suppliers Farmers Customers Smile Train Charity BRCGS DHL HP –IT Solutions Local Community Stakeholders Adapted from R E Freeman Strategic Management A Shareholder Approach Pitman 1984
- Employees of Cocoa and Palm oil suppliers Loyal Customers, Suppliers and all employees Governments, Large retailers and supermarkets Owners Stakeholder Mapping The power & Interest Matrix Power Low Low High High Adapted from A . Medlow 1986 Level of Interest
- Influences on Strategic Purpose Governance structure Strategic purpose Social responsibility and ethics Stakeholder expectations • Invest in learning • Sponsor sporting events • Committed reducing there carbon foot print with DHL • There main charity is smile train • Developing the farmers businesses • Rebalance and Grow • Revitalise • Restore • Strong growth in the FMCG division • Growth of the business profitability • Long-term success • The owners • CEO • Management team
- Thornton's Chain of Governance Board Audit Committee Nomination Committee Remuneration Committee Chief Executive Officer Strategic Governance First line of defence Operational and Financial Governance Senior Management Team Operational Management Central Support Functions Risk Management Functions (Including internal audits and external advisors) Second line of defence Third line of defence
- The Chain of Corporate Governance CEO Senior Management Operational Management Central Support Functions Risk Management Board Audit Committee Remuneration Committee Nomination Committee
- Ferrero Giovanni Ferrero new owner of Thornton's Thornton's is no longer a PLC it was removed from the stock market 20/08/2015
- Ferrero Acquisition • Ferrero brought Thornton's because it’s the leading premium brand in the uk • Statement made by Mr Ferrero “We have long admired Thornton's and what they have achieved in the UK, as demonstrated by their tremendous customer loyalty, and we look forward to working with their experienced team,” Mr Ferrero said. The group has sought to build its UK presence over the past three years, targeting the family confectionery segment with its Kinder Egg brands. After the death of Mr Ferrero his son Giovanni Ferrero now chief executive of Ferrero International inherited the Ferrero company and his strategy is to seek to make acquisitions.
- Task 5 Conclude whether business strategy of your chosen organisation is sustainable or not. Justify your opinion.
- 3 year strategy Revitalise Providing refreshed products Branding/packaging Restore Providing the market with competitive products with overall profitability Gifting focus on food products (expand to larger market) Rebalance and grow Ensure our products are available where people want to buy them FMCG Information taken from: Thornton’s annual statement (2014 p.04)
- Adapted from: H.I. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6 [6] Telegraph, 2014 Strategic Directions – Ansoff’s Matrix
- SWOT Strengths • Well known brand & Reputation • High quality products • Operations in lucrative markets • Quality of service • Uniqueness • No outsourcing manufacturing or distribution • lean combination of robotics and human hand decoration • Positive future with larger parent company • Entry into new product markets Weaknesses • Franchise weakness • In-house manufacturing unable to meet demand due to seasonal peaks • Location • Outlets of shop • Most money made through seasonal sales • Confusing product focus (especially online) Opportunities • Developing Strategy under new takeout • More opportunities for automation • Expansion into foreign markets • Internal/organic development Threats • Competitors • Supermarket own brands • Other small and specialist chocolate companies “SWOT summarises the strengths, weaknesses, opportunities and threats likely to impact on strategy development” Johnson, Whittington & Scholes (2012. P. 65.)
- TOW’S Matrix
- Source: Adapted from D. Faulkner and C. Bowman, The Essence of Competitive Rivalry, Prentice Hall 1995. The Strategy Clock Hybrid Strategies (3) Non-Competitive Strategies (4) Low-Price Strategies (2) Differentiation Strategies (1)
- References Task 1 - Just Food, (2013) ‘Thorntons sales propelled by share gains’: http://www.just-food.com/news/thorntons-sales- propelled-by-share-gains_id122935.aspx (Last Accessed 03.11.2015) Task 1 - iii, (2015) ‘LSE:THT Data’ http://www.iii.co.uk/research/LSE:THT (Last Accessed 03/11/2015) All Tasks - Thorntons Corporate Website , (2015): http://www.thorntons.co.uk (Last accessed 03.11.2015) All Tasks - Johnson, G., Whittington, R and Scholes, K. (2012) Fundamentals of Strategy. 2nd edn. Essex: Pearson Education Limited Task 3 - Stroud, J.D Understanding the purpose of benchmarking http://www.isixsigma.com/methodology/benchmarking/under standing-purpose-and-use-benchmarking/ (no date) (Accessed 04.11.2015) Task 3 - Creating Advantage, VRIN Framework, http://createadvantage.com/glossary/vrin-framework, (no date) (Accessed 04.11.2015) Task 1 & 2 - Canadean, (2015) ‘Chocolate Consumption report in the UK’: http://canadeanreportstore.industryreportstore.com/packaged -food/confectionery.html?region=169 (Last accessed 03.11.2015) Task 1 & 2- Mintel, (2015) ‘Confectionary Chocolate Report May 2015: https://courseresources.derby.ac.uk/courses/1/2015-AUT-OC- KED- 5LO501/groups/_21818_1//_966225_1/Mintel%20Report%20S ep%202015.rtf (Last accessed 03.11.20015) Task 1 The Independent, (2015) ‘Hotel Chocolat Profits Surge’: http://www.independent.co.uk/news/business/news/hotel- chocolat-in-profits-surge-as-thorntons-struggles- 10131652.html (Last accessed 03.11.2015) Task 5 – Telegraph, (2015) ‘Chinese Shoppers and British Products’ http://www.telegraph.co.uk/finance/newsbysector/retailandco nsumer/11242945/Chinese-shoppers-choose-to-buy-British- online.html (Last accessed 03.11.2015
- Task 4 - Strategy http://www.foodmanufacture.co.uk/People/Thorntons-restructures- board-to-boost-performance Task 4 - Ferrero Rocher buys Thornton’s http://www.chicagotribune.com/news/sns-wp-blm-europe-rich- 4be78028-65d2-11e5-bdb6-6861f4521205-20151003-story.html Task 4 - Thornton’s' chief executive quits after a torrid year http://www.telegraph.co.uk/finance/11612064/Thorntons-chief- executive-quits-after-a-torrid-year.html Task 4- Ferrero says take-up of offer on Thornton’s at 75 percent http://uk.reuters.com/article/2015/07/10/uk-ferrero-thorntons- idUKKCN0PK0F320150710 Task 4 - Chocolate Makers Unite as Ferrero to Buy Britain’s Thornton’s http://www.bloomberg.com/news/articles/2015-06-22/chocolate- makers-unite-as-ferrero-to-buy-britain-s-thorntons Task 4 - Corporate Social Responsibility http://www.thorntons.co.uk/content.jsp?pageName=corporate_socia l_responsibility References Task 4 - Corporate Social Responsibility 2 http://www.thorntons.co.uk/assets/category_files/pdf/Thorntons%2 0CSR%202014.pdf Task 2 – Reuters UK http://uk.reuters.com/article/2015/07/10/ferrero-thorntons- idUKL8N0ZQ0DC20150710 Task 2 – Gov UK https://www.gov.uk/government/news/new-evidence-review-of- measures-to-reduce-sugar-consumption Task 2 – Confectionary News http://www.confectionerynews.com/Manufacturers/Ferrero-signals- intent-to-raise-retail-game-with-Thorntons-buy Task 2 - D. Faulkner and C. Bowman, The Essence of Competitive Rivalry, Prentice Hall 1995.
Notes de l'éditeur
- This presentation is a business strategy analysis of the confectioner ‘Thorntons’, and for my segment I will be focusing on the strategic direction and scope of the company.
- Thorntons is over 100 years old, being founded in 1911 by William Thornton. The first store was opened in Sheffield. And the only factory it has operates in Alfreton, Derbyshire. Thorntons continuously grew to become a major confectioner having good growth throughout the 60s 70s and 80s, despite them losing some stores and having a tough time during World War 2 in which the nation’s growth seemed to be on hold; and it became a publically listed company on the London Stock Exchange at the end of the 1980s. Present day Thorntons has around 247 stores and an additional 186 franchise shops. Having closed around 120 Stores since 2010 as part of its strategy that I shall mention in forthcoming slides. In June of this year, the Italian confectioner Ferrero, of Ferrero Roche and Kinder Fame, bought Thorntons for £112m. This acquisition for Ferrero may lead to change of direction for Thorntons, again I shall be analysing this in the coming slides. IMAGE: http://worldchocolateguide.com/wp-content/uploads/2010/07/Shop-Front.jpg
- As for the nature of the business, Thorntons operates in the premium chocolate industry and has done for many years, until in recent years it has tried to enter a new market sectors by opening Cafés, selling ice cream and biscuits, each of which comes with new competitors. The business also can tend to suffer from seasonal downturns or upturns in sales. With 13% of annual confectionary sales happening during seasonal periods for the global confectionary market. Seasonal periods such as Easter, Christmas and Valentines day all having an effect. Thorntons UK market share grew during Easter to 4.7% from 4%. (confectionary news). So the seasonal period is an area that Thorntons should concentrate on. (Just Food, 2013) Ferrero Acquiring Thorntons means that their current strategy and direction is likely to change, as Ferrero will want a return on their investment. I wouldn’t expect much to change in the way of the iconic branding or core products changing, Ferrero will want to keep the British brand’s history and values alive to avoid a backlash from the British public encountered when Kraft purchased the chocolatier Cadburys. IMAGE: http://www.chocolate-hearts.co.uk/wp-content/uploads/thorntons-thanks-mum-chocolate-collection.jpg Just Food, 2013: http://www.just-food.com/news/thorntons-sales-propelled-by-share-gains_id122935.aspx
- Looking at the key performance indicators for the company over the last 4 years, it is clear that things are starting to turn around following the CEO’s introduced strategy in 2011. The new strategy which involved closing loss making stores shows it had a detrimental effect on figures for 2012., but has since began to grow revenue and profit. What it is clear to see from the past 4 years is that its revenues have barely changed from around the £220 million mark which could mean a variety of things involving lack of increases in sales, increased production costs and so forth. Analysing the Share price of Thorntons shows mixed fortunes with a particularly bad year in 2012 where the share price reached 9.875 pence, this correlates to the poor profit figures for that year. Following this though, the share price continues to correlate with the profits as they began to rise until here on the 26th June 2015, when it was announced that Ferrero had bought Thorntons, the share price rose sharply to 144.25p. Thorntons share price data is no longer available following Ferrero’s acquisition as Ferrero is a private company with no shares available. http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11086245/Chocolatier-Thorntons-taste-success-as-profits-surge.html http://www.thisismoney.co.uk/money/markets/article-2750582/Thorntons-new-strategy-pays-chocolatier-battles-brink-meltdown-60-cent-profit-surge.html GRAPH: http://www.iii.co.uk/research/LSE:THT All taken from annual statements
- Whilst the direction of the company is subject to changes through Ferrero’s acquisition, it may not change a lot from what its vision has been in the recent years. Thorntons vision is to become Britain’s best loved chocolate brand through providing good quality chocolate, and having good supplier and customer relations which can be through ethical ingredient sourcing. No doubt, Thorntons will aim to meet Ferrero’s expectations of the company. It aims to market chocolate as a gift, which it does by selling premium priced and quality products and personalisation through icing services. Their previous CEO, Jonathan Hart, who recently stepped down in June this year after serving 4 years as the CEO, implemented a strategy to reduce the number of loss making stores in a bid to change their fortunes. Thorntons went from 296 stores in 2013 to 247 stores as of January this year. They have been in a CEO transition period since June and a new CEO, when found, they will further offer new directions and strategies to the company. (http://www.ft.com/fastft/324422/thorntons-ceo-jonathan-hart-steps-down) Thorntons also wants to sell wholesale chocolates to supermarket groups and get their products inside supermarket stores and in more locations, this can be seen through Thorntons Easter eggs being on sale in supermarket chains such as ASDA and TESCO during Easter periods.
- When it comes to their scope of distribution, they have 2 channels to get their products to the customer, the retail division which is through their own brand retail outlets and stores on the high streets, and their FMCG division (Fast moving consumer goods) which goes through international and UK commercial customers such as supermarkets. The infographic above taken from Thorntons 2014 annual statement shows their vision for the future and how they have developed, this shows the past present and future business models, although there are no references to time horizons. It can be seen that year on year the FMCG shows increased operating profits, to an overall increase since 2011 of 44%, whereas the retail division shows mixed results generating less profit than the FMCG division, declining 46% since 2011, BUT STILL PROFITABLE, so it is only natural that the company intends to become 1 division of FMCG with sub divisions following this, as it is becoming the route that brings the most profits. This shows an operational strategy of Thorntons, showing how it can deliver the corporate level strategy. WWAN Image: Thorntons annual statement 2014.
- As for product diversity, Thorntons sell their traditional luxury own brand chocolate and fudge , which comes in a variety of shapes and sizes; ranging from traditional 50g bars, assorted trays and larger shaped and themed chocolate figurines. All these products contribute toward the company’s diversification strategy, some of the products that they also offer include: Ice Cream, Drinks in their Cafes, and Seasonal confectionary such as Easter Eggs and Christmas chocolate. Showing new company direction already, Thorntons as recent as the start of October 2015, introduced biscuits to their product line up, attempting to enter the uk biscuit market. Whilst many of these products are distributed through their stores, Thorntons also operates an online store to meet consumer demands. Thorntons also offers a service in the way that they will use icing to write a message of the customer’s choice on the chocolate while customers wait, at no additional cost. This helps personalise the chocolate as a gift. These products meet the market and consumer needs, such as a large choice of chocolate based food, creating a strategic fit. Since the Ferrero takeover, it is expected much of these core products will stay the same, but we could see the introduction of further products in new markets, such as the recent biscuit product introduction. IMAGES: http://www.foodbev.com/wp-content/uploads/2015/10/Thorntons-DoubleChoc-WaferRolls-Visual_RS1220.jpg https://images.thorntons.co.uk/get/w/380/h/380/60723.image?notfound=notavailable http://twelve52.co.uk/wp-content/gallery/chocolate/8.jpg https://images.thorntons.co.uk/get/w/380/h/380/61991.image?notfound=notavailable http://www.piazzacentre.co.uk/media/thorntons_offer.JPG.jpg
- When it comes to the UK chocolate market, Thorntons faces competition from ‘value’ chocolate companies such as Cadbury's as well as luxury brands such as lindt. Although Thorntons may be seen by the many as a luxury brand, Cadbury’s and value chocolatiers still offer similar products through their ‘dairy milk trays’ and premium ranges. A competitor is ‘Hotel Chocolat’. Which was only established in 1988 and in 2014 reported an £8.3m pre tax profit for the 6 months until the end of December, in comparison to Thorntons £6.6m profit in the same period. This could be a problem for Thorntons, as Hotel Chocolat has just 81 shops in comparison to Thorntons 242. (Independent, 2015). As for the overall UK chocolate market. Sales grew last year (2014) by 1.6% to over £4.1 billion, but the amount of chocolate sold fell 1% to 437 million kg. (Mintel, 2014). What Thorntons and a lot of chocolatier manufacturers now face is increasing costs of raw ingredients such as cocoa, and a social problem of the fact that people in todays society are more health conscious and consider chocolate as being unhealthy, so the amount of chocolate consumed in the uk is unlikely to grow. A way they may have to combat this is through cutting costs or increasing their prices to go further into the luxury market. Which leads to my next point that according to market research firm ‘canadean’, more than a third of British chocolate buyers do splash out either ‘regularly’ or ‘all the time’ on premium products. Meaning there is still a market and consumers still willing to buy a product like Thorntons chocolates. (Canadean, 2014)
- My task was to analyse organisational resources and capabilities and how they contribute to the organisational competitive advantage. I have used various different frameworks to see how competitive advantage is achieved at Thornton’s.
- Both resources and competences are integral to a businesses success. Resources are split into 2 sub categories tangible which are fixed assets and intangible which are non fixed. They can be split into 4 groups, Physical, financial, human resources and intellectual capital. Competences are the ways in which those assets are used or deployed effectively. One of the most distinctive resources that Thornton's has at it’s disposal is the companies knowledge and experience all 104 years of it. One of the most effective competences Thornton’s currently hold is their plant management skills, they have a intricate management structure which promotes support on every level.
- Threshold Capabilities are made up from both threshold resources and threshold competences as. These are both minimum requirements that a business needs to function. They are not what makes a business great but what makes a business exist. Here you can see in my table both basic resources and competences.
- Distinctive Capabilities are what gives a business it’s competitive edge over it’s competitors. Distinctive capabilities are made from unique resources and core competences. Added together they then become distinctive capabilities. I think the most important dynamic capability here is how Thornton's effectively manage their Marketing strategy of ‘gifting’ it becomes a dynamic capability when it is able to change with the times.
- Bench marking is a important technique when a business is looking to gain a competitive edge over it’s competitors. Here I have compared Thornton’s to 3 of it’s competitors to identify area’s where Thornton’s differ to others competing in the same market. We can see here that Thornton’s has one strength that it’s other competitors does not hold which is having one manufacturing site for all it’s products, this gives all products continuity. On the other hand Thornton’s has one weakness which all it’s other competitors already posses this is that Thornton's only currently target a UK market- the rest of it’s competitors are known as worldwide brands. Although this may change in the future as Ferro Roche are a worldwide brand and may elevate Thornton’s strategy to reach a wider audience.
- The value chain (M porter’s model) is a sure fire way to see where value is being added and lost in a business. You can see here 5 primary activities, which are critical to the sustainability of a business which are then supported by the 4 support activities which (the key is in the name) they support the primary. The value chain helps managers to see what areas to they should be focusing on in the business to increase it’s competitive advantage. Here I have found whilst analysing Thornton's performance the main place value is being lost in the business is through marketing and sales department, their branding is not competitive in todays market and can be described as dated. Value is also lost through some areas of the firm infrastructure and some area’s of operations. Although value can be seen to be added in the human resources area of the business through it’s focus on their people- Thornton’s state in their values that “ We also want to bring all of our customers together by making sure that, through our chocolate and our people, we help our customers say important things to those they care about.” Other areas that value is added is in some areas of production and some areas of the firm infrastructure.
- When applying Barney’s VRIN framework I can establish where value is added, and also which activities are rare, inimitable and non substitutable. We have already established what areas value is added in the business mentioned in my previous slide. We can see than Thornton’s rare capabilities are found in their: brand awareness, quality/variety of it’s products and it’s gifting strategy- These capabilities are those possessed uniquely by one or a few other organisations. Inimitable capabilities in relation to Thornton’s can be found, in their great respect for corporate social responsibility, their organisational culture and their excellent R&D framework these capabilities are those that competitors would find difficult to imitate or obtain. Finally Non substitutability capabilities (which means something with no substitutions) these can be found in their family recipes, their knowledge and experience and their excellent supply chain history and development. “Applying Barney's (1991) VRIN framework can determine if a resource is a source of sustainable competitive advantage. To serve as a basis for sustainable competitive advantage, resources must: http://createadvantage.com/glossary/vrin-framework , no date)”
- Thornton's direction will no doubt introduce strategy changes at a corporate level, being concerned with the overall scope of the organisation and how value can be added to the company. Thornton's needs to increase its geographic scope on a global scale if it wants to sell more products, whilst it currently extends throughout the UK, it could sell in Europe and around the continents. This would be an example of international strategy as a form of diversification. Promoting its products abroad as ‘Made in Britain’. Which does attract a growing consumer market of a love for British products and the British image, this can be seen through growing success with British brands in markets such as china through Jaguar Land Rover and Burberry. China is also the biggest consumer of UK online goods, so Thorntons could aim to increase its online presence. (Telegraph, 2014) http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11242945/Chinese-shoppers-choose-to-buy-British-online.html One advantage of being acquired by Ferrero is that Thorntons could utilise Ferrero’s suppliers and distribution network to get their products in more locations, giving Thorntons a possible competitive advantage through increasing their strategic capability. The introduction of new products will keep the brand fresh and also attract new customers with new products such as the introduction of biscuits. Lastly, Thorntons should definitely carry on focusing on its Fast moving consumer goods distribution plan, as this seems the most profitable route for its products to continue in the future. It should use its current resources and competencies to achieve this.
- Identifying the strengths, weaknesses, opportunities and threats of a business is extremely important when establishing where competitive advantage lies. Here I have established both the most relevant strength & weakness in accordance to their 3 year strategy strength being their well known brand and reputation and their weakness being their confusing product focus online. There most influential opportunity and threat according to the strategy are: opportunity- to expand into foreign markets and their biggest threat is seen as their competitors.
- This has then lead me on to suggest strategic ways of managing their “SWOT” using a TOW’s matrix. A TOW’s matrix involves systematic and comprehensive assessment of external and internal factors of our SWOT to give strategic suggestions again this has 4 areas SO strengths and opportunities ST strength and weaknesses WO weaknesses and opportunities and WT Weaknesses and Threats. I have taken the 3 most important in each category from my SWOT and used them against each other to form a strategic suggestion in line with their 3 year strategy I have used pictures to show my suggestions. SO Globe using Ferro knowledge and Thornton's brand to expand into new markets. WO Flowers remove the flowers and cards from online store and focus on accessing new food markets. ST Chocolate bars Using their FMCG presence against their competitors, for example hotel chocolate does not supply to supermarkets. WT Paint when rebranding make sure packaging is colourful and current so stands out over a supermarket own brand focus on the quality of the brand.
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