Professional Documents
Culture Documents
Topic
Introduction
Competition analysis
Ratio analysis
Problem statements
Recommendations
Conclusion
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Introduction
Rogers is a premium chocolate company in Canada. It was founded by Charles
Candy Rogers in 1885, Rogers Chocolates based in Victoria, British Columbia.
The company has different category of products such as Victorias cream, nut, truffle,
almond, pure milk chocolate, white bars, dark chocolate and orange peels etc. it also
has no sugar added chocolate and ice-cream. Moreover, the company has
distributed its product widely in USA and Canada. Its website is also attractively
made to make enough sales. Since the products are hand wrapped and
technological equipment is used to produce, it charges high. Although its
extraordinary quality and large distribution, it lacks some factors in meeting customer
demand and keeping pace with its largest competitors Hershey, Godiva, Bernard and
Cadbury and so on. In the report, we highlighted some problems which restrict the
company in making sales and come up with strategic solutions.
Competitor Analysis
For analyzing the competitors of Rogers Chocolate, we need to perform SWOT
Analysis. The SWOT analysis shows the strengths, weakness, opportunities and
threats of the company. The SWOT analysis of Rogers Chocolates reveals important
strengths, some weaknesses and threats, and many opportunities for growing. This
analysis shows that the company has a tremendous opportunity to improve and
expand its business. Below we show the SWOT analysis of Rogers Chocolate:
We discuss the main elements of the SWOT analysis of Rogers Chocolate below:
Strengths
Loyalty and repeat purchase- Customers at Rogers Chocolates have a high index
of loyalty and repeat purchase. People who has taste the quality of the product have
experimented the chocolate experience that Rogers offers.
Quality and Tradition- Rogers has a strict control of the quality of the raw materials;
the use of natural ingredients in their products attentive to the concerns of today. In
addition, most chocolates are handmade, then hand-packed and assorted in fine art
tins.
Award Winning Recognition- For classy, refined and elegant quality and taste of
their chocolate line Rogers Chocolate was identified and rewarded a prestigious
Superior Taste Award from the International Taste & Quality Institute (ITQI) in 2006.
Social Involvement- Rogers has built strong community connections; it has been
part of its history to be truly caring about the community. Thus, Rogers supports over
700 not for profit organizations with chocolate donations to help them raise monies in
their area across Canada and the U.S. for worthwhile causes.
Weaknesses
Passion- Rogers employees are passionate but their passion sometimes means a
strong resistance to change.
Market- Tourism is a very important market for Rogers and it has introduced some
weaknesses since sales have slowed considerably since 2001, in part for the decline
in American tourism after the 911 attach, and in part for the weak US dollar. In
addition, Rogers is focusing mainly in the western Canada; this gives to national
competitors some advantages.
Opportunities
New product development- The emerging of new generations requires effort to
attract these new customers. The current increase in demanding of natural,
sugarless products offer new opportunities to the premium chocolate market.
Web sales- The targeted segments have a huge rate of internet use and on-line
purchases. Rogers has an opportunity to expand its online sales by improving and
promoting its web site. This could help Rogers to attract new and young customers.
Very high
High price
as
their
product
quality is
high
Packaging Handmade
and
not
gorgeous
Outlets
Callebaut Lindt
Purdy
Similar
90% of Rogers
price
pricing
points to
Godiva
Price point
significantly
lowers than
Rogers.
Glitzy
packaging
Superior
mid range
Are
very
with
good
copper
and gold
boxes
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retail Widespread 32 stores Distributed in 50 outlets
outlets of distributions
mass
their own
among
merchandisers,
retailer
drug
and
grocery stores
products are not standardized, buyers cannot easily switch to another manufacturer
and get the same product.
Another condition that affects the power of buyers is product differentiation. If
the product is undifferentiated, the buyer has the power to play competitors against
each other and reduce the cost. The premium chocolate has a differentiated product,
which reduces the power of buyers. Rogers have brand identification and customer
loyalty, which makes it hard for buyers especially the loyal ones not to consume
Rogers for their premium chocolate consumption.
Today, buyers demanding chocolate more than just a taste, they becoming more
health conscious therefore the demand for organic chocolate and dark chocolate are
growing.
3. Threat From Substitutes
Some substitute products for premium chocolate could be traditional chocolate and
other confectionary products customers could use to satisfy their sweet tooth. Other
snack food items may also be considered substitute products. The chocolate
industry must compete with numerous substitute products ranging from candies and
cookies. Many non-chocolate snacks, such as peanut butter, fruits, yogurt and ice
cream are also available.
So there is a good variety of substitutes available for the customers that make the
threat of substitute products high in the chocolate confectionary industry, especially
in the premium segment. Rogerss chocolate is often used as gift during numerous
seasons and celebrations including Christmas, Easter, Halloween, Valentines Day,
anniversaries and birthdays. Other types of gifts during these seasons are viewed as
substitute products.
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Many chocolate brands and a wide variety of seasonal gifts make the threat of
substitute products is considered low to moderate in this industry. However, if Rogers
Chocolates can maintain its local heritage especially in its traditional area like
Victoria and British Colombia then the threat for Rogers can be minimized.
4. Intensity of Rivalry
The intensity of rivalry among competitors in an industry can create price wars,
advertising battles, new product lines, and higher quality of customer service
.Competition in the premium chocolate market consists of strong regional brands
with a few larger competitors, such as Godiva and Lindt. The market is growing at
20% annually which suggests less intense rivalry among competitors. Premium
chocolates may be more perishable than traditional chocolate, however, with a 6month shelf life, there is less urgency to sell off products. With high levels of product
differentiation, customers are often loyal to a brand which decreases rivalry. That
situation considers less intense rivalry among competitors; moreover every area has
their own local king like Rogers in Victoria.
Nevertheless, in 2008, Global economy was severely hit by the crisis that originated
from the United States and quickly spread to the whole world including Canada.
Premium chocolate majority consumers in Canada come from tourists especially
Americans as bordering neighbour. When the tourists number drops and the
demand for premium chocolate also falls, the fierce rivalry will increase
5. Threats of New Entrants
Entry into the premium chocolate market would require a large capital investment for
branding and production facilities. Traditional manufacturers have been moving into
the premium chocolate category because of the high category growth and because
they have the financial and capital resources. Customers value brand and quality so
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these can both be seen as barriers to entry for newcomers to the premium chocolate
market.
Furthermore,
the
USFDA redefinition
of
chocolate
makes it
easier
for
manufacturers to call their product chocolate. So the threats of new entrants in the
chocolate industry are low. The market is difficult for new players to enter, as it is
dominated by major international players with a long and established history and
success and a huge amount of capital is required to start the business, such as
Nestls, Hersheys and Cadburys have been moving into the premium chocolate
market through acquisitions or up market launches since this segment still posses
high percentage of growth.
Ratio Analysis
Profitability ratio:
Gross profit margin
2006 =
= 0.546=54.6%
2005 =
= 0.551=55.1%
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Gross profit margin tells how much profit is earned on your products without
considering indirect costs. Small changes in gross margin can significantly affect
profitability.IN 2006 and 2005 the gross profit margin of Rogers are almost same.
Operating profit margin
2006 =
= 0.097=9.7%
2005 =
= 0.127=12.7%
This ratio is the measure of the operating income generated by each dollar of sales.
In 2006 the operating income under 1 dollar is .097 dollar and in 2005 it was .127
dollar. So in 2005 it was better
Net profit margin
2006 =
= 0.0752=7.52%
2005 =
= 0.0891=8.91%
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This ratio says that how much money are you making per every $ of sales. This ratio
measures your ability to cover all operating costs including indirect costs. After
analyzing the net profit margin of 2006 and 2005 we can say that the result is not so
differ. it is almost same.
Return on total asset
2006 =
= 0.1062=10.62%
2005 =
= 0.126=12.6%
It is the ratio to measures your ability to turn assets into profit. This is a very useful
measure of comparison within an industry. The return on total asset of Rogers
chocolate in 2005 is better than 2006
2006 =
= 0.157=15.7%
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2005 =
= 0.2236=22.36%
2006 =
= 0.1332=13.32%
2005 =
=0.1727=17.27%
This ratio measures the income earned on the invested capital. Here the return on
invested capital of roger in 2055 is also better than 2006.
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Liquidity Ratio :
Current ratio
2006 =
2005 =
= 1.367
= 1.245
This ratio reveals Rogers Chocolates ability to pay off its short terms debts
obligations. Although, having a current ratio over 1 is normally acceptable, however,
current ratio would overestimate a company's short term financial strength. This ratio
tells how much dollar you have to pay per dollar debt. So here the ability to pay its
liabilities in 2006 is better than 2005.
Quick ratio
2006 =
2005 =
= 0.4612
= 0.5785
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Quick ratio that excludes inventories has been calculated. It tells us that most part of
the assumed liquidity of Rogers belongs to inventory. As we know, most of times it is
difficult to turn inventories to cash.Here 2005 was better than 2006.
Leverage Ratio:
Debt to asset ratio
2006 =
= 0.324
2005 =
= 0.4388
Debt to asset ratio provides information about the company's ability to absorb asset
reductions arising from losses without jeopardizing the interest of creditors.This ratio
also provides information about how much debt against per dollar.So after
calculating this ratio the roger was in better position in 2006 compared to 2005.
Long term debt to capital ratio
2006 =
= 0.152
2005 =
= 0.1535
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This ratio indicates long-term debt usage. This ratio in 2006 and 2005 are almost
same.
Debt to equity ratio
2006 =
= 0.4799
2005 =
= 0.7818
This ratio Compares capital invested by owners/funders (including grants) and funds
provided by lenders.IN this situation we can say that roger was in better situation in
2006.
2006 =
= 0.1794
2005 =
= 0.2951
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This ratio indicates how well creditors are protected in case of the company's
insolvency. Here Rogers were also in better position in 2006.
Times-Interest earned ratio
2006 =
= 12.60
2005 =
= 17.493
This ratio indicates a companys ability to meet the interest payment on its debt. In
2006 the company is earning 12.6 times the amount it is required to pay its lenders
for interest. And in 2005 it was 17.493 times.
Activity Ratio:
Days of Inventory
2006 =
= 104.639=105 days
2005 =
= 105.236=105 days
This ratio measures the number of days a company takes to sell its average balance
of inventory.So in 2006 and 2005 Roger had the same ability.
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2006 =
= 3.488
2005 =
= 3.468
2006 =
2005 =
= 14.056=14 days
The Average Collection Period (ACP) is another litmus test for the quality of your
receivables business; giving you the average length of the collection period. In this
situation Roger had better ability in 2006.
Total asset turnover
20
2006 =
= 1.411
2005 =
= 1.407
This ratio tells how efficiently your business generates sales on each dollar of
assets. An increasing ratio indicates you are using your assets more productively.
The total asset turnover of Rogers chocolate in 2006 and 2005 are almost same.
Problem Statement
There are many factors responsible for the recent downfall of Rogers Chocolate.
Few of them can be categorized below:
Supply Chain Management: There is a dearth in the supply of raw materials. The
raw materials imported are not delivered as per the scheduled time.
Operations: The flow of operation is not very smooth. The production chain is very
long and time consuming. This increases the cost of production as compared to their
Competitors.
Price: Rogers being a premium chocolate company has priced their products higher
than other chocolate brands in the Market. Due to many factors like hand wrapped
chocolate, packaging process, ingredient and quality Rogers Chocolate had to price
their product much higher as compared to their competitors.
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Distribution: Rogers Chocolates only distributed their product to USA and Canada.
They should distribute their product to other geographic areas in order to meet
customers demand and draw more sales.
Sales and Marketing: Out-of-stock is the major problem for the company. It cannot
often meet the market demand. There have a many cases where their products were
not available in the market. This generated in loss of sales and reduced their
opportunity for growth. Customer retention and acquiring new customer becomes a
threat due to this factor. Again the wholesalers work on filling shortage of products
and face over-stock problem. So the inventory management system needs to be
improved.
Advertising: For packaging art tins for chocolate assortment from China but China
couldnt supply the tins in scheduled time because of their shortage of electricity.
Again, the company had old fashioned packaging and traditional image of the brand.
To make profit, the company needs to attract old generation as well as young
generation. The taste and choices of people changes with the passage of time. But
the suppliers were unable to find source organic trade capabilities to capture young
generation.
Service: The website had links to resellers but the sales agents failed to understand
the value of providing links of their top accounts. It helped to customers to find the
nearest store of Rogers and the company can also make higher sales.
Recommendations
Here we give some recommendations for solving the problem of Rogers Chocolate.
Strategic Recommendation:
In this part we try to mention and explain the strategic recommendations based on
the problem statements which are gained from the case study. Now in Roger's
Chocolate we found some major problematic issues as well as some minor problems
which are also associated with major problematic findings and other factors. So we
will divide the recommendations, into 2 parts. First we will provide strategic
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recommendation for the main problems form a general view after that we will focus
on other associated problems with more precision.
Major Problems' Recommendation:
1. Here, Roger chocolates strategy is Focused Differentiation". But they focused
market cannot generate a high profit margin which is the main obstacles for their
business. They are only serving a particular segment of market which is Baby
Boomers. So the number of customers is lower. So to earn more they have to enter
in a broader market without any compromising in their product quality for a huge
number of customers who are willing to pay more based on the quality. So to charge
a higher premium they have to look for "Broad Differentiation" strategy to fulfill their
targeted higher profit margin. In this situation, they have to attract young generation.
Because the red alarm is "Baby Boomers" are at the verge of their lifer-line so that
after their death of the baby boomers; the young generation will become their main
customer base. As a result the company needs to attract by implementing different
tactics. In a word the more number of customers are willing to pay high premium for
the product the more profitable the organization is.
2. The company has also faced some problems in their Value chain. They are
facing problems in both forward and backward integration.
a) First we will focus on backward integration; the "Suppliers issues". The suppliers
are not providing the raw material in time for the production of chocolate. Moreover,
for packaging the "TIN" raw materials come from China there is also problems in
maintaining time of receiving the raw material in due time. So to maintain the proper
flow of the raw materials which also ensure the utilization of 100% of production
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capacity, the company should make pressure on the suppliers for urgent or on time
delivery or try to find more efficient suppliers.
b) Now the company has also problems in Distribution of its Wholesales part."
Most of the time the company faces back order problems which reduce the profit
margin greatly. The special orders comes from the wholesalers are larger in size and
due to the lack in inventory the company fails to deliver the orders in due time. So
the company should maintain the inventory in the optimal level so that they can fulfill
the special orders and individual orders. They also have to look after that they have
to maintain the inventory in a way that would not let them face the unnecessary and
cost bearing surplus quantity. As a result the proper determination of the amount of
inventory to support the wholesalers orders and transpiration mobility needs to be
maintained efficiently.
search for more efficient suppliers both for their production raw material and "TIN" for
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market condition. And they have to reduce the cost of production as the wage and
salary is competitive.
11. To be a successful organization; the company should strengthen internal
communication through the mutual understanding of the internal capabilities and
competencies which will be linked to the proper training program for employees.
Because when the employees actually recognize the objective, vision, mission,
cultural, value, ethics based on the Rogers' business perspective only then all the
effort, strength, capabilities and competencies will be integrated and the company
will become a mustang in the race of the earning profit by reducing their weakness
12. The company should reduce the cost of operation by reducing discount over
surplus time, opportunity cost due to the shortage, wastage reduction, and value
analysis. In one word, efficient utilization of all resources will help them to reduce the
cost of operation.
13. Lastly, in the end of the day every organization main focus is to earn profit more
than any competitors. From the case study we find the Roger's company is not
implementing debt-equity ratio efficiently because they have more weight on the
equity portion. But if they use the debt portion more in the operation and investment
it will intensify the return; as for all organization more financing from debt will work as
leverage. Yes it is true that the risk will be then more. But in business perception
without taking risk the company cannot earn more profit. Optimization of risk is here
associated with also financial objective and implementation strategy. So, whether the
overall equation works or not actually depends on the trial-error approach of strategy.
But key point is the less trial they need to perform the more the opportunity to be a
market leader.
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Conclusion
After analyzing this case we try to focus on the organization internal and external problems.
In this aspect the company's CEO should focus on both problems in production and operation
of the firms.
By analyzing different ratio and market competition the company actually find a hard time
because of the size, demand for new strategy implementation, old fashion packaging and
product, distribution channel, suppliers inefficiency and to fulfill aging customers demand.
So to overcome the problems the company should focus on their internal weaknesses as well
as external opportunities to retain revenue and intensify the growth. They have to increase the
retail sales system within the region after that they need to focus on the broader market which
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is outside the current business area. However, in the quest of growth they have to maintain
the lower cost but easier access to the market.
To continue the operation of the company in a successful way the company should implement
a successful strategy that helps them to earn a sustainable competitive edge which will ensure
conducting the business with above average profitability of the market average.
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