This is because America’s chocolate industry is fast approaching the maturity phase, meaning that firms which are able to compete on the basis of price will sustain a larger market share in the long run. Since the company’s key competency is its distribution channel and the firm has access to a reliable supply of high quality cocoa beans, this particular strategy would seem to be a feasible option. The strategy is also plausible considering America’s economic meltdown.
However, the strategy also calls for high capital requirements which the company may not realize in the short term, and also requires unrivalled production skills. The strategy also demands efficiency in production processes and the company may be hard pressed to attain this as it has manual production processes. A solution in this regard would be for the company to invest in automated and top-notch technology. However, the rapid change of technology mentioned previously would mean that its competitors would almost certainly acquire better technology and wipe out any advantages enjoyed by the Real Chocolate Company.
Besides, the industry leaders are more efficient producers and can sustain a long drawn out price war. A more feasible strategy for the company is thus needed. A differentiation strategy whose target scope is industry wide seems to be the best strategic choice the company can adopt. This strategy is suitable because the company has a good reputation for high quality products and its trademark is well renowned. Moreover, the firm has a powerful sales team which can ably communicate the differentiated products’ strengths.
Besides, the company has a rich tradition of research and innovation as evidenced by its existing products. These skills and innovative strength make the differentiation strategy to be highly likely to succeed. The threat of imitation by competitors would be very low because of the company’s IP policy which safeguards its top-secret recipes. Through this strategy, the Real Chocolate Company will be able to diversify into other market segments and thus expand its market share and revenue base.
It will also be able to build customer loyalty, weather the current economic crisis, substantially reduce the threat of substitutes, and take advantage of the emergent market segments. Description of Selected Strategy The differentiation strategy requires that companies originate novel products which provide its customers with unique features and which are seen to be superior to other existing products. Due to their unique features and superior value, the products are able to command a premium price (Porter, 1998).
Since the selected strategy is industry wide, it means that the company will create products targeted at all market segments. Using this strategy, the Real Chocolate Company would produce differentiated organic chocolate products. The company would also produce a diverse range of flavoured products with both ethnic and exotic flavours as well as products with unique tastes. The strategy would additionally see the company tap into the healthy segment market with highly differentiated products that give its customers a number of health benefits.
For instance, the company could develop chocolate with omega 3 fatty acids and calcium to compete with products from Nestle, Ghirardelli and Botticelli. The company would also come up with chocolates fortified with vitamins, flavoured skin enhancing ingredients and branded sugar free sweets. According to statistics, dark chocolate sales rose by almost 50 percent from 2003 to 2006 and provide a viable segment for companies in this industry (BUSI000, p. 83).
By producing differentiated dark chocolate, the Real Chocolate Company would challenge for market leadership in this category. The company can also produce differentiated products which are targeted at other market segments such as baking chocolate. Production of dutch chocolate products would enable the company to target bakeries, ice cream manufacturers, beverage companies and households. On the other hand, differentiated products with chocolate flavoured coating would be tailored at the lower end market.
Other differentiated products would include white chocolate. To further tap into the market formed by ethically conscious individuals, the Real Chocolate Company could have its products certified as fair trade brands. Resources required to ensure that the strategy is well executed are listed as follows investment in research and development Investment in fair deal certification. The company will also need to contract only the suppliers who meet the minimum fair trade standards investment in skilled personnel investment in technology promotional budget.