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Solution Id Length Case Author Case Publisher
913 5009 Words (15 Pages) Terjun Rustia Harvard Business School
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Roger’s Chocolate is the manufacturer of chocolates and associated confectionary products in Canada. Roger’s Chocolate is one of the oldest chocolate companies in Canada and operates in high-end chocolate offerings comprising of chocolate bars, chocolate candies, chocolate confectionery, fancy chocolates and chocolate-coated nuts. The business of to Roger’s Chocolate also comprises of sales of ice cream and operating a restaurant. The strategic goal of the company is to increase its revenue by three to four times in the next years. The paper carries out strategic evaluation of Roger’s Chocolate employing various tools of strategic management to derive a set of recommendations for the company. 

Following questions are answered in this case study solution:

  1. Introduction

  2. Internal Analysis

  3. External Analysis

  4. Strategic Approach & Competitive Advantage

  5. Problem & Issues

  6. Recommendations

  7. Conclusions

  8. References

  9. Appendices

  • SWOT Analysis for Roger’s Chocolate

  • PESTLE Analysis for Roger’s Chocolate

  • Porter’s Five Force Analysis for Roger’s Chocolate


Internal Analysis

For internal analysis of Roger’s Chocolate, two fundamental models of strategic management have been adopted; namely, SWOT analysis and financial analysis.

1. SWOT Analysis

SWOT Analysis is a method of strategic planning which is used to evaluate the factors and phenomena affecting an organization. All the factors pertaining to the organization are divided into four categories: namely, strengths, weaknesses, opportunities and threats (Amason, 2010). The method includes defining project goals and identifying the internal and external factors that contribute to achieving or hindering it.

Strengths of Roger’s Chocolate mainly comprises of an established brand name and loyal clientele of the organization which ensures sustained revenues and repeat sales. According to the information given in the case, Roger’s Chocolate sells a wide variety of high-end products including chocolate bars, chocolate candies, various forms of chocolate confectionery, fancy chocolates, chocolate-coated nuts, granola bars coated with chocolate instant drink chocolate, ice cream and even chocolate syrups. With such a diversified set of revenue sources – comprising of wholesales, exports, online and store retail sales, the riskiness of business of Roger’s Chocolate is very low.

Since product offering of Roger’s Chocolate mainly consists of high-end chocolates, the company is well positioned in high-end niche, where quality, as well as, variety of products and packaging formats gives the company a distinctive competitive edge. The flexibility of Roger’s Chocolate’s workforce allows them to respond to the needs of their clients and have flexible operations. Whether it is large wholesale orders or order of small batches, the operations of Roger’s Chocolate are well suited to the needs of customers for products with high added value and regional markets. The quality of the workforce is also an undeniable strength of Roger’s Chocolate. Labor is a very important asset for Roger’s Chocolate because the manufacture of premium confectionery requires expertise, rigor and passion.

Presence in Canadian market is also an strength of Roger’s Chocolate since the cost of inputs (materials and supplies) is slightly lower in Canada as compared to US and other neighboring countries. Roger’s Chocolate has access to a supply of first level industrial chocolate and refined sugar), raw materials (cocoa beans and cane sugar) coming from abroad. The price of refined sugar is 35% to 50% cheaper in Canada and United States. Although this price represents only 5% of the total cost of raw materials used in the production of confectionery from purchased chocolate, their importance is increased due to large volumes of purchases making this difference an important competitive advantage. Another strength for export market of Roger’s Chocolate is the exchange rate of the Canadian dollar in comparison U.S. dollar is favorable.

Weaknesses A major weakness of Roger’s Chocolate is serving a very small premium market which is getting highly competitive. Also, Canada is a much smaller market than adjoining regions. The Canadian market potential is very small compared to the U.S. market. The companies seeking to substantially increase their sales have no choice but to start exporting especially to United States (Mitchell, 2001). Due to its smaller size, Roger’s Chocolate has limited budgets than larger firms in terms of investment in capital assets and exploiting economies of scale.

Roger’s Chocolate has less equipment and low performance in terms of productivity and often obsolete equipment than other larger companies like Cadbury and Hershey. Unlike them, Roger’s Chocolate cannot benefit from economies of scale or mechanization of production. Roger’s Chocolate use more workforce for production then companies with larger production capacity, and whose infrastructure and equipment are modern and optimized.

The research and development at Roger’s Chocolate is very limited, and in certain product segments is almost non-existent. The company is not operating under any standard quality assurance, and there is adherence to a quality assurance system. This is a weakness for the company in terms of exporting (Alkhafaji, 2003). Operating without a standard of quality can be a major disadvantage in Roger’s Chocolate’s efforts to penetrate new markets. High reliance on workers is also a weakness because it increases the dependency of the company on availability of labor and scalability of operations is low. A major weakness of Roger’s Chocolate is the lack of demand forecasting mechanism which generally results in over production or stock outs. Inefficiencies in production and high inventory cost is a cost disadvantage for the company. Frequent stock outs and delays in order shipments impact customer loyalty of the organization.

Opportunities there are a number of opportunities for Roger’s Chocolate in the external environment. The market for high-end chocolates is increasing steadily. Even at the global level, the consumption of confectionery chocolate is growing steadily among all industrialized countries. The export market for United States is another opportunity estimated at U.S. $ 38.2 billion. There has been, especially in the last ten years, an emphasis on the concentration of chocolate manufacturing industry worldwide. Therefore, merger and acquisition is a potential opportunity for the company. This is due to movement of the globalization of the economy, which favors acquisitions and mergers companies of medium and small to attain economies of scale, and seize market share around the world. In addition, the aging of the population, as well as, higher disposable income in aged population in many Western countries are important elements in creating new opportunities. These factors have prompted further growth in high-end chocolate market in which Roger’s Chocolate operates.

Emergence of new digital marketing media is an important opportunity for Roger’s Chocolate since it needs to target a consumer base diversified over a large geographical region. Emerging trend of tourism in the region is a positive avenue for Roger’s Chocolate since it products are very popular among tourists. Emergence of improved method of demand forecast is an opportunity to increase profitability of the operations of the company.

Threat the major threat to Roger’s Chocolate is growing competition in the premium chocolate category. Several world leaders in the manufacture of chocolate confectioneries are eyeing 20% growth in this segment including Nestlé, Mars, Kraft Foods, Cadbury and Hershey. The demand for this product category is also very much dependent on economic conditions since confectionery products generally fall into the category of non-shopping essential and relates to very impulsive purchase. Promotion plays a crucial role in the establishment of a brand in various markets around the world, while promotional budget of Roger’s Chocolate is very small in comparison to multinationals like Kraft Foods, Cadbury and Hershey. These large companies spend huge sums to position their brands and acquire fractions of market shares to operate at large-scale gaining substantial revenues.

The weak supply chain the Roger’s Chocolate represents a constant threat given the fact that selling prices are almost identical for products comparable and that increases in raw material prices can hardly be carried over to the wholesale price of transformers without causing loss of a portion of their market share. For this reason, competitor companies work in advance to buy their ingredients based on expected sales, while Roger’s Chocolate faces the threat of losing its supply of raw materials during tough economic times.

Changes in commodity prices represent a threat to Roger’s Chocolate since the purchase prices of raw materials are based on cocoa crop yield at the global level. Large multinational buyers generally get hold of raw materials (cocoa, sugar, nuts and fruits) on the futures market. This formula allows them to protect against frequent price changes while Roger’s Chocolate faces the threat of having to purchase at higher prices. Competition for Roger’s Chocolate is also growing at the international level. Brazil is becoming more competitive on the world stage. Brazilian producers have a competitive advantage because it benefits from getting good prices of cocoa and sugar, as well as, low-cost labor. This is a threat for Roger’s Chocolate in foreign markets like US.

2. Financial Analysis

for Roger’s Chocolate is carried out through financial ratio calculations for the organization (for the year 2005 and 2006). The objective of financial analysis is to identify positive and negatives aspects of different functions within the organization. Financial ratios are

Profitability Ratios



Gross margin



Operating margin



Return on equity



Return on assets



Liquidity Ratios



Current ratio



Quick ratio



Efficiency Ratios



Average collection period

26 days

33 days

Asset turnover



Stock turnover ratio



Receivables Turnover Ratio



Inventory conversion period 

17 days

18 days

Receivables conversion period

14 days

11 days

Payables conversion period

37 days

33 days

Debt Ratios



Debt to equity ratio



Times interest earned ratio



calculated for a wide variety of figures to have a holistic perspective of the operations of Roger’s Chocolate and to identify year-on-year changes taking place within the organization. 

Foremost among the ratios are the profitability ratios since they are the benchmark for the bottom-line of the organization, which is the most important measure for any business. Profitability analysis for Roger’s Chocolate shows that the Gross Margin for the company is very healthy exceeding 50%. There has only been a marginal drop in the gross margin between the years 2005-06, yet gross profit earned by the organization on its product is very impressive for any industry. Yet, the operating margin of Roger’s Chocolate is very low dropping to 7.5% for the year 2006. The inference derived from the comparison of two figures is that administrative, overhead and selling expenses of the business are two high. This is a very significant finding because it shows that the key to increasing profitability of the organization – which is the strategic goal – lies within the organization rather than in the market place.

It is imperative for Roger’s Chocolate to seek to optimize its manufacturing and selling functions because they are majorly responsible for decreasing the profitability of the business. Before devising competitive strategies to beat competition in the market place, Roger’s Chocolate should improve standardization of operations within the organization to reduce cost of production as a function of sales volume. Another potential cost saving indication from this comparison of profitability is that Roger’s Chocolate should engage in mass production of products to improve operating margin of its operations rather than seeking hand-made production of its chocolates. The company needs to plan its distribution network to avoid duplication of efforts and reduce sales costs associated with reaching the same segments of market through more than one distribution network.

Comparison of profitability ratio between the year 2005 and 2006 shows worsening profitability of the products of the overall company. Return on equity fell by more than seven percent in one year. A return on asset of mere 10.6% would be considered as a very low figure for any industry. The shareholders of this private company make only 15.7% return on their investment, which is a very modest rate of return.

The liquidity ratios of the company has indicated an improvement between 2005 and 2006, which his very significant. Prior to 2006, liquidity of the company has been very poor. It is indicated that the company was at a high risk of insolvency because the liquid resources of Roger’s Chocolate were very less in comparison to the current liabilities of the company. Current ratio of 0.66 is highly risky for any industry and Roger’s Chocolate’s procurement is also very unstable enhancing the degree of risk for the organization even more. The current ratio of 0.9, reached in the year 2006 appears to be an optimum figure since it implies that the business has not maintained a large stock of resources as idle liquid assets.

Efficiency ratios are highly important for Roger’s Chocolate because earlier analysis of profitability ratio has pointed towards inefficiencies in production and distribution. The average collection period of 33 days confirms issues with the efficiency of operations of the business. The cash of the business is stuck for a long period of more than one month to be recovered by the business. Similarly, the asset turnover of 1.4 registers only a minor improvement over the period of one year. Confectionary business is a fast moving consumer industry and asset turnover ratio of 1.4 confirms problems with efficiency of production both as a measure of human resource and as a function of time. It is imperative for the organization to define policies for the minimum output per unit of labor, set production targets and standardized processes to improve the situation.

Financing of the business venture has room for increased leverage through debt financing. Since, the shareholders of the business require the profitability of the business to growth more than hundred percent over the course of ten years, Roger’s Chocolate will need to make sizeable investments to enhance the scale of operations of the business. Debt financing would be an appropriate choice for growth initiatives since the ‘time-interest-earned’ measure is 9.8x. Financial ratio analysis of Roger’s Chocolate has helped in identifying causes from the symptoms which indicated low performance of the business and to find core reasons for the underlying issues.                                                            

External Analysis

The external analysis for Roger’s Chocolate is carried out through PESTLE analysis model and Porter’s Five Forces model. Both the models carried out a holistic view of the strategic situation of an organization.  

1. PESTLE Analysis

PESTLE analysis is a strategic tool designed to identify impact of key external variables; namely, Political, Economic, Social, Technological, Legal and Economic aspects of the environment that affect the company's business (Amason, 2010). They are part of a comprehensive analysis of the environment, and each one has its own relevance.

Political Factors Various legislative factors may influence the external environment of a company producing chocolate products. Political factors are generally positive for Roger’s Chocolate since the company is a employment generator and even attempts to hire disabled form society. Canadian governments for a number of organizations is the key regulator of their activities by imposing employment laws and competitive practices This means that for Canadian organizations assessment of the political situation is perhaps the most important aspect of the analysis of the external environment. Such an assessment is carried out through the details of political and legal factors affecting the organization. No regulation has been passed by the government which is adversely affecting Roger’s Chocolate’s business. In fact, the government’s policy of keeping a low exchange rate for Canadian dollar is conducive for exports of Roger’s Chocolate. In terms of changes in tax laws, the relationship between business and government, patent legislation, environmental legislation and antitrust laws, political factors are neutral for Roger’s Chocolate.

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