Managing Strategy: Case Study of Thornton plc Essay

1.0 Thornton Plc an OverviewOccupying 8 per centum market packet of the UK in typesetters case in(p) umber market in the family 2002 the play along Thornton had witnessed a decline in its profits even from the social class 1998. The turnover of the alliance and the operating profits of the follow for the years 1994 to 2003 argon presented belowThe follow was largely depending on its in house manufacturing facility and as well as pick out the trade dodge of distributing the returns with its consume sell units established end-to-end the country. To some extent the federation as well as adopted the franchising route alike. though the society was rich in its internal resources and good in the naked as a jaybird product farmments, the manufacturing and merchandising dodge adopted by the phoner represent difficulties in shock the seasonal worker guides which constituted a major component lot of the gross gross sales of the company. This part of the paper analyses the strength of the internal resources of the company.1.1 Internal ResourcesThe succeeder of any business depends on the strength of its internal resources which greatly facilitates sustaining the suppuration accomplishd by the warm. It is equally master(prenominal) for the company non only to achieve reasonable outgrowth in the profits and sales but also to sustain the growth established by it. The internal resources of the company arrest in handy to help the company to prevent the level of growth be achieved by the company. The internal resources of the company Thornton Plc gutter be littler as belowA Complete Value ChainThe strategy of the company in having in house manufacturing facility coupled with its have retail outlets represented a complete value chain which is a distinguishable internal resource the company possess. Even though the company resorted to external sources for non- load products and the basic liquid chocolate, the company stoped the c ore manufacturing use and the recipes. This enabled the company to interpret the quality of the ingredients to the chocolates and not icing its exclusivity in the market.Assets and Competencies of the Company The manifest good the company was carrying was its capability to even out its requirements with its knowl butt facilities. This had enabled the company to go along the freshness of its chocolates which became a distinguishing feature for Thorntons products. This represents the internal resources of the company in the traffic pattern of its physical assets.The other physical assets that helped the company in maintain its market military unit is the weigh of the companys take retail stigmatizes spread throughout the country. A graphical representation of the total yield of retail outlets avowed and franchised by the company is produced belowIntangible AssetsThe gracility earned by the company by maintaining the quality of its products and the quality of its swea r out to the customers account for the intangible asset the company holding as an important internal resource of the company. harvest-tide specialisationanother(prenominal) feature that wondrous the chocolates of Thornton is the finishing. While competitors comparable Cadburys products be moulded, Thornton used a handmake appearance to the products by enrobing them in chocolates. In this way Thornton could make a pronounced product take issueentiation that can be counted as a important internal resource that the company could use for improving its brand image. spirit of Service to the CustomersBy having some of its sales done by its hold shops, the company was able to provide a quality emolument to the customers. done services comparable writing individualize messages on chocolates by meth on the top on important occasions, providing specialised gift wrappers etc the company could get to the fifth place by customers choice in the juicy-street vendors.Product Innovat ionsDeveloping natural products was a passion for Thornton. This is evident from the fact that in the year the company could add 27 refreshful countlines and 132 natural and updated products in the year 1998.Unique 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. even with the on tap(predicate) manufacturing facility the company was unable to meet the peak seasonal demand which represented the doorsill limit with respect to this unique asset. alike the core qualification represented the companys ability to introduce as many number of bracing products to cater to the market. But the threshold limit for this competency was the failure of the company to concentrate on the retail 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 abstract of the firms relative strengths and 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 in that locationby ensure the quality of its products. It was also viable to maintain the freshness f the products. cause retail outlets The establishment of the companys own retails shops gave the strength of meeting a higher level of customer service and also an impressive distribution of the products among own retail units.Capability to innovate new products The distinct capability of the company to involve itself in innovative products with new recipes had leave aloneed in increasing its sales at some point of time. Several attempts by the company to promote the sales on this strength had be successful. well-set brand image The quality of the Thorntons products coupled with its freshness had created a set of loyal customers to the company and resulted in the mental home of a genuinely strong brand image for the companySound technical association 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 selling strength through franchisee stores In addition to the own retail units, the company also adopted the policy of giving franchise goods to more retailers which proved a distinct strength for the company in terms of trade of its products.Unique product differentiation The Company had clearly excelled itself in the surgical incision of boxed-in(a) chocolates which has proved to be the companys core strength. wholesome market front end in the boxed chocolate instalment Having specialized in the boxed chocolate component the company made its presence felt in the segment.WeaknessesHeavy Seasonal Demand More than 50 per centum of the sales of the company resulted from the sales during Christmas, easterly, Valentines Day and Easter Sunday. This led to pressure on sales at shorter periods and at clock poor sales if there were disturbances in the seasonal sales delinquent to some reason.Dependence on one key product extravagant dependence on a single product like boxed chocolates had always proved a cause for the failure in sales. withal the company depended on the sale of innovative Easter Eggs for the year 2000 that proved an expensive littleon in that more than 300,000 chocolate eggs were go forth in stock unsold, making the company to sell at fractional the scathe.Low quality products and service from franchisee and fellow travelerd companies Many a times the associate companies with whom the company had selling exhibitions sold products of lower quality. The franchisees, their core product not being chocolates could not provide a quality service to the custome rs little automation capabilities leading 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 additional 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 set about failures successively which made the company change in the marketing strategies. besides changes in the Chief Executives also brought new strategies into practice.Being impulsive leveraging unpredictable demand The chocolate being an impulsive purchase made the demand for the products unpredictable leading to manufacture of the products without a planned approach. support conditions affecting seasonal demands Since the sales of the company were heavily seasonal, any put up conditions that affect the festivals also affected the sales of the company. This was evidenced in the C hristmas for the year 1998, when the sales went down by 3.8 percent for the same period blend year due to extended summer that affected the buying of customers.Shorter shelf invigoration of the products One of the major weaknesses of the company was the short shelf life of the products. As a achievest 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 only. On a research the charge of Thornton identified that at least(prenominal) 70 percent of their products need their own manufacturing facility.Higher manufacturing personifys Since most of the products are being manufactured by its own facilities the company could not have a closer control in the manufacturing speak to s. unless the habit of additional workers on peak seasons also increases the manufacturing follow.1.3 Product commercialise interrogationThe Companys core product range included the boxed chocolates, where it has to meet the arguing from major players like Cadburys and approach. The company had to compete with high street specialist retailers such as Body Shop in 5-10 impairment range. The percentage of market address of different companies in the boxed chocolate market is graphically represented belowIt whitethorn be noted 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 ambition of not only other chocolate retailers but also counterfeit 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 an d teenage customers lowering the middling 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, 100 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 Competitive AdvantageThe matched position of a firm is determined by its product transcendency and the relative market position. These aspects are enhanced by the internal resources and capabilities possessed by the company that adds the agonistic 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 come apart quality of its products that could be achieved as a result of its own manufacturing facilities is a distinc t 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 capabilities had contributed such(prenominal) to the forward motion in the marketing ability of the company.Question 2 Marketing system of Thornton PlcThe marketing strategy of Thornton can be analysed on the basis of the unattached marketing strategy models.2.1 porters generic Strategies As perceive by Michael Porter in his book Competitive dodge Techniques for Analysing Industries and Competitors the competition in any business can be reduced to ternary broad strategies. These strategies are known as Porters generic Strategies and areCost LeadershipProduct Differentiation andMarket sectionalizationThe competitive strategy of Thornton can be identified with Product differentiation and market segmentation but not with the greet leadership as the company was never able to have a comfortable cost posit ion because of its high packing costs and heavy seasonal demand for the products.2.2 Bowmans ClockAs compared to the Porters Generic Strategies Cliff Bowman had developed competitive advantages in relation to cost advantage 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 Option 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/ ensample higher margins if competitors do not value follow/risk of losing market share. Marketing teacher Increased Price/Low Values This option can be exerc ised only in a monopoly situationLow Value/Standard Price This strategy will result in a outrage of market share.Out of these eight strategic options developed by Bowman, Thornton had been pursuit the Product differentiation strategy originally and later on shifted to concentrate differentiation to capitalize on their product strength. In the case of encase chocolates the firm had adopted the product differentiation with a price premium.2.3 Ansoffs ground substance Developed by Igor Ansoff, this model uses two basic components of marketing namely Products and markets to identify four generic growth strategies namely Market Penetration, Market developing, Product evolution and Diversification. Ansoffs Matrix is a modeling for identifying the corporate growth opportunities (Tutor2u) Market Penetration involves more of the same product to the same customersMarket Development uses new customers for alert productsProduct Development uses new products for existing customers andD iversification 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 chocolate business at the expense of Sainsbury and Asda.Market Development sweat into more distribution impart like joint venture shops with Birthdays free radical a 500 strong chain of greetings cards and novelties outlets exclusive come out arrangement with Tesco expansion in to France, Belgium and USAProduct Development Thornton essay 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 cinque Forces Model Thorntons position with respect to the fabrication can be analysed on the basis of Mic hael Porters Five Force analysis. Porter provided a framework that models an industry as being influenced by five forces. 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 advert and promotional expenses. This acts as a barrier to the new entrant to the industry. The strength of this force is negligible.Threat of Substitutethither are a number of backup man 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 oftentimes pose a paradox of substitute products available in the market. permutation to substitute products for the customers is inexpensive and easy as every brand is available in plenty in the various outlets like petrol bunks, transmutation stores, greetings cards stores, super markets and specialized shops. The strength of this force is to be reckoned with. vendee 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 switch their the true 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 power act as a strong force.Supplier PowerThe seasonably 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 whitethorn take some time to establish the mandatory level of quality and reliance o n the timely deliveries. But the provider 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.Competitive RivalryAs such the industry is highly competitive with four major players occupying 72 percent of the market share. Any small downwardly 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 Marks & SpencerThe case study of Marks & Spencer also indicates the different strategies adopted by the firm to sustain its growth deliver the goods over a period. The basic weaknesses in the company that led to the downward trend of the company wereExcessive dependence on the suppliers in spite of appearance UK which increase 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 to various reasonsExpansion and refurbishment of own retail units in the UK which increased the capital cost of the firmDevelopment of new product lines like food when there was so much to be done in the existing clothing business.Thus the experiences of twain 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 twain the firms in the same direction it is quite possible that the business of the both the firms can be combine to take advantage of the advantage of the combiner synergy. However while combing the businesses by selling t he chocolates through Marks & Spence r the following points need to be taken into account.3.1 product of NetworkThough Thornton had a long standing supply arrangement with Marks & Spencer with a renewal of such supply arrangement whitethorn pose the problem of the overlapping 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 suffered by Marks & Spencer whitethorn 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 real made by Thornton. The authenticity of the products may not be in full realized in the perspective of the customers. This is one aspect that needs esteem when a decision to renew the contacts with Marks & Spencer is to be ever impression of by Thornton.Another issue that Thornton needs to consider i s 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 stocked 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 entered 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 the 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 early(a) 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 by and by 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 unification of both the companies for an agreed consideration to be pay to the shareholders of Thornton. This was what was tried 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 constrictders for meeting the required price and the talk of a bid for Thornton disappeared in early 2004. Unlike this a workable mer ger 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 distinct 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 corporate 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 Options http//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