Lesley Chocolate Situation Analysis - Case Study Example

Lesley Chocolate Situation analysis Student: Institutional Affiliation: Date: This situation analysis will be concerned with analysing the chocolate beverages and desserts industry in the Canberra area of Australia with a view of employing the right marketing and operational strategies for the launch of Lesley Chocolate Café. The analysis will specifically be focused on chocolate cafés and entire café industry in extension. The analysis will particularly be concerned with identifying and examining factors of uncontrollable environment such as politics, economy and technology. The Australian specialty chocolate cafés industry is relatively underdeveloped given the fact that most cafes and restaurants have mainly been focused on items such as coffee, Ice-cream and fast foods. However, Australian consumers have in the recent past shown great appetite for premium chocolate products, hence the growing demand for specialty chocolate products in the Australia café industry [IBI161]. Lesley Chocolate will focus on offering high-quality chocolate beverages and desserts with the aim of gaining a loyal customer base. In addition, Lesley will commit to using creativity and science to improve the café’s products. Industry analysis As of December 2015, the industry generated $308 million and employed 2381 persons. The industry is highly fragmented with no dominant player among the slightly over two hundred chocolate cafés spread across Australia [IBI161]. This means that Lesley Chocolate has a higher possibility of achieving success if the products and the brand positioning meet the expectations of the target market. Lesley chocolate may find it relatively challenging to compete against well established players such as Chocolateria San Churro, Koko Black and Max Brenner, given that the established players have loyal customers and solid reputation. However, lack of a dominant player will allow a new player such as Lesley Chocolate to enter the market and possibly gain a share of it. The specialty chocolate industry in Australia has recorded a compounded annual growth rate of 4.6% since 2011. The compounded industry growth rate between 2016 and 2020 is expected to be at 2.7%. The revenue in 2017/2018 may reach $320 million judging from the current 2.6% annual revenue growth [IBI161]. New players may experience high operating costs due to high rental expenses and lack of economies of scale. Established players with efficient operations and loyal customer base stand a greater chance of benefiting from the increasing demand for specialty chocolate products in the Australian market. Factors of the uncontrollable environment facing Lesley Chocolate Political and legal Australia is a peaceful democracy that generally pursues a policy of encouraging capitalism and fair competition [Wor16]. This means that businesses such as Lesley Chocolate can only expect support from the government in form of fair taxation, laws and protection from unfair competition. Lesley will focus on offering chocolate based desserts and beverages that are not likely to attract negative publicity or unfavourable government action. However, it is important to note that Lesley will have to abide by the Australia New Zealand Food Standards Act 1991 that seeks to ensure that Australians only access quality and safe food products [Foo15]. Economic According to Organization for Economic Co-operation and Development (OECD), the Australian economy recorded a GDP growth rate of 2.5% in 2015. The economy is expected to grow at 2.6% in 2016. The unemployment rate stands at 5.7% of the population. The average weekly earnings per Australian is $1,146. The Australian economy shows great signs of recovery from the global financial crisis and the effects of a strong Australian dollar that has reduced export volumes [Res16]. Such positive economic outlook means that Australians will have more disposable income that can be spent on consumption of luxury items such as premium chocolate products. The depreciation in value of Australian dollar in the first half of 2016 has led to increase in tourists visiting the country [Res16]. If the trend is sustained, Specialty Chocolate cafés such as Lesley chocolate will benefit since tourists are likely to sample their offering. However, Lesley chocolate may be affected by high cost of raw materials due to rising prices of cocoa from West Africa where climate change has adversely affected production of the cocoa beans [Tho16]. Social According to the Australian Institute of Health and Welfare, 63% of adults in Australia are obese [Aus162]. This means that Lesley Chocolate will have to explore different confectionary methods that minimize the amount of calories in the drinks and desserts. It will be even more effective if the menu offers several options for health-conscious consumers who prefer less sugar and more natural alternatives such as nuts in their serving. Lesley will also need to incorporate value chain sustainability into the operational plan. Consumers are more willing to buy from a business that buys from suppliers who pay farmers fairly [Ndo14]. Raw materials sourced from regions that practice slave labour may taint a company’s brand. In addition, Lesley can boost its public reputation by supporting Australian farmers through buying their milk and fresh produce will Technological Small firms such as Lesley may experience higher operating costs due to expensive labour required to produce specialty Chocolate products. However, established firms have a competitive advantage stemming from their heavy investment in technology and equipment used in producing chocolate products efficiently. Lesley Chocolate may experience low operational and production efficiency in the short-run due to capital and technological constraint. Environmental Lesley Chocolate operations may be directly affected by environmental challenges such as harmful waste disposal. However, Lesley must ensure its value chain is environmentally sustainable by consuming resources such as water sustainably and recycling waste. This will enhance Lesley brand strength. Competitor analysis The Australian Specialty Chocolate industry is highly fragmented with more than 200 firms engaging in pure competition for market share [IBI161]. Although there are established firms such as Chocolateria San Churro, Koko Black and Max Brenner, there is no outright dominant brand in the market. Firms in pure competition markets have low competitive advantage due to low product differentiation. However, Lesley will dedicate significant effort and resources towards differentiating its customer service, product quality and uniqueness. Lesley will focus on developing a few signature items in its portfolio that will differentiate its brand in the market. Some of the major competitors are listed below. Max Brenner Through its carefully crafted chocolate desserts and beverages, Max Brenner has built a strong reputation and brand salience in Canberra. Some of its products include chocolate pizza and season-themed chocolate bars. Max Brenner has incorporated online retailing into its business model [Hir16]. Koko Black Koko black offers a premium line of chocolate desserts and beverages at its stylish cafes. The business also offers coffee and sandwiches to customers [Wat15]. Lesley can compete against Koko Black by offering exceptional customer service and running a loyalty program to gain a loyal customer base. Chocolateria San Churro Chocolateria San Churro offers a range of specialty chocolate desserts, beverages at its over 50 franchised locations across Australia. Chocolateria San Churro has developed unique competitive advantage over its rivals in terms of operational and production efficiency, a strong brand and a loyal customer base. Apart from chocolate-based desserts and beverages, Chocolateria San Churro also sells coffee, smoothies and cakes at its cafes [Fit14]. Lesley Chocolate can compete against these players by focusing on exceptional customer service, product and service differentiation and a creative menu to attract and retain customers. Customer analysis Lesley will target both genders aged between 5 and 65 in Canberra. This demographic group is likely to enjoy carefully crafted chocolate products at a stylish cafe during birthday events, meetings and while dining away from home. Compared to other regions in Australia, Canberra’s population of more than 350,000 has the highest average weekly wage at $1702 [Aus15]. Lesley will focus on offering the highest quality of chocolate to appeal to this target market that is willing to pay a premium price for premium quality. SWOT Analysis Strengths The owner manager is a qualified chocolatier who will use his skills and expertise in establishing the business and developing unique menu items. Lesley Chocolate is a small business that is capable of responding effectively and timely to market dynamics and competitive pressure Lesley has inherited seed capital that will sustain the business in the short run. Opportunities Lesley chocolate can focus on offering organic juices and food in its cafe to compliment chocolate sales. Lesley can focus on ensuring its value chain sources only fair-trade raw materials to promote the brand as a sustainable player in the market. Lesley can capitalise on growing online trade in Australia to boost its sales. Weaknesses Lesley Chocolate is a small business with high operating costs arising from fixed expenses such as rent and salary for permanent employees. Lesley may be technically qualified but lacks expertise and experience since he has not worked in the industry before. Threats Intense competition from established players may lower Lesley’s profit margin leading to high costs of promotion and customer retention strategies. Consumer preference for healthy snacks may increase production costs related to cafe businesses. References IBI161: , (IBIS World, 2016), Wor16: , (World Bank, 2016), Foo15: , (Food Safety Australia and New Zealand, 2015), Res16: , (Reserve Bank of Australia, 2016), Tho16: , (Thompson, 2016), Aus162: , (Australian Institute of Health and Welfare, 2016), Ndo14: , (Sylla, 2014), Hir16: , (Hirsch, 2016), Wat15: , (Waters, 2015), Fit14: , (FitzGerald, 2014), Aus15: , (Australian Bureau of Statistics, 2015), Read More