Kalistas Fine Chocolates Case Solution

Out of the three alternatives identified, it is recommended that Kalista’s Fine chocolates continues producing chocolates within its basement but instead hire an additional worker to share the workload and cater the rising demand. This would ensure stable inflow of salaries of both the owners, would still mean lower costs of $300 against the option of leasing new property which would have costed $1000 per month. Some portion of the money saved could thus be used in hiring the services of a marketing agency to promote the business effectively and boost demand.

The action plan required to implement this option will be to post a job advertisement and hire the right candidate within a month by setting his salary and contract terms. Then the candidate will be trained to work as per the business’s operations. Lastly, the increased revenue generated in the next two or three months could be used for advertising and marketing the business brand. 

2. Overview

Graham and Doris Beam found Kalista’s Fine Chocolate in 1999. Their business is located at the basement of their homes, in the city of Brantford. Kalista’s Fine Chocolates is a manufacturer and retailer of high quality chocolates including 12 different varieties of truffles, seasonal chocolates, and custom products such as boxes and roses. This is its competitive advantage, which is why it has successfully developed a loyal customer base from the high-end market segment. The current financial situation of Kalista’s Fine Chocolates improved from 1999 to 2002 as its annual revenue more than doubled owing to increased sales through its kiosks in malls. The current decision faced by the business is whether to shift production to a new much larger property or continue production in their basement. 

3. SWOT Analysis

i. Strengths

A strength for the business is that it does not have many fixed costs associated due to which it can potentially secure large margins. However, the new property will increase the fixed costs in terms of rent and additional labor and equipment. Graham has a talent of creativity and he uses high quality truffle recipes, which distinguish Kalista’s Fine Chocolates from the chocolates manufactured by the competitors and sell its chocolates at a premium price to high-end segment. The decision to shift may require him to comprise on the creative craftiness in the chocolate making due to expanded operations.

ii. Weaknesses

Kalista’s Fine Chocolates weakness is that it only relies on word of mouth marketing and many new clients will be reluctant to buy from a home based producer. Furthermore, it is unable to meet its existing demand. In addition, due to small quantity of supplies being bought from the suppliers, the business faces high costs and fails to achieve economies of scale. 

iii. Opportunities

Kalista’s Fine Chocolates has an opportunity to expand its production to meet the increased demand and benefit from higher potential revenue and higher potential profitability. Expansion in its operations may give it power over its suppliers, as it will have to engage in bulk buying. It will therefore be able to reduce its costs. In Brantford, there is only Kalista’s Fine Chocolates, which provides with good quality chocolates as compared to its other two competitors in the region. To benefit from first mover advantage, it will have to expand its production.

An issue of concern for Kalista’s Fine Chocolates is that its failure to receive quality supplies or timely supplies may cause it to compromise on its competitive edge of high quality. Furthermore, by restricting its location to the home basement, Kalista’s Fine Chocolates may fail to reach larger consumers considering that it did not want the long delivery routes to affect the quality of the chocolates. Thus, it might lose its customers to the new or the existing competition. Having a central location in Brantford would allow it to cater to large number of consumers without compromising its core competency.

4. Problem Analysis

The main problem faced by Kalista’s fine chocolates was its inability to meet its increasing demand, which was growing at a speedy pace. The business had completed three years in operations including the home based sales and the retail mall sales. However, it was becoming difficult for Graham and Doris to manage the increasing demand. They were operating from their house basement, which would mean that they had limited production capacity. Secondly, both Doris and Graham were managing the business along with their full time jobs leaving them with little time to give to the business. As a result, the time pressure compelled them to work 3 hours per day in a week and the entire weekend. However, this position is not sustainable considering the rising demand trend, which may cause the business to lose customers in future. Therefore, Kalista’s Fine Chocolates needs to decide and evaluate the pros and cons of shifting to a new property to expand supply against continuing its existing manufacturing process. 

5. Alternative Identification

Three alternatives are proposed in response to the current problem of failure to meet increased demand and chances of Kalista’s Fine Chocolates to lose its potential demand. 

Firstly, both Doris and Graham can give up on their existing full time jobs and devote their entire time to the business. Kalista’s Fine Chocolates is at its growth stage, which is a crucial period for its success. Currently, both the owners face extreme time pressures to meet the existing demand. However, considering the long-term growth objective of the business it is necessary that the owners have sufficient resources in terms of time and money to meet the increased demand or else they would lose their customers to the competitors within Brantford or those in farther areas known for high quality chocolates.

Secondly, Kalista’s Fine Chocolates can rent the new property site where it can shift its production. By having more number of production lines and more labor, the supply of chocolates could be adjusted to meet the increased demand. The customers will also get confident about the business’s offering, which would help in increasing the pool of the customers.

Thirdly, Kalista’s Fine Chocolates can hire a new worker to share the workload of Doris and Graham. He can train under Graham, which would ensure that the quality of the chocolates would not be compromised. In addition, as the new worker will be working full time, the increased demand could be met easily, without requiring Doris and Graham to leave their full time jobs to work in the business. In fact, the saved costs from eliminating the option of renting a new property could be used for marketing Kalista’s Fine Chocolate widely to reach large number of consumers and help in developing a brand image of chocolates being of high quality.