Thorntons final presentation
-
Upload
alicevhart -
Category
Business
-
view
3.430 -
download
0
Transcript of Thorntons final presentation
‘If you don’t have a smile, we’ll give you one of ours’
Business Strategy AnalysisLuke Dexter
Liz Wilson
Alice Hart
Gillian Day
History Of The Business• Founded in 1911, in Sheffield, by William
Thornton. Alfreton Factory.
• Steady growth throughout the decades and became publically listed on the London stock exchange at the end of the 1980s
• Present Day: 247 Stores + 186 Franchise Shops (UK & Ireland)
• Acquired by Ferrero for £112m in June 2015 –Change of strategy/direction?
(Im
age:
Wo
rld
Ch
oco
late
Gu
ide,
20
10
)
The Nature Of The Business
• Premium chocolate industry but in recent years has branched into a new market sectors with cafés, biscuits and ice cream.
• Seasonal sales have big effect on profits. 13% of global confectionary sales happen during holidays. UK Market share during Easter (2013) grew to 4.7% from 4%. [1]
• Ferrero acquisition likely to lead to a change in market sectors and additional products – will want a return on their investment.
(Image: Chocolate Hearts, 2014) [1] Just Food, 2013
Key Performance Indicators
07/012011
13/012012
11/012013
10/012014
09/012015
95.5p 9.875p 45p 135.5p 83p
THT Share Price
http://www.iii.co.uk/research/LSE:THT
Data obtained from Thornton’s Annual Statements 2011-14
Strategic Direction Of The Company
• Can be seen to be a focused Differentiation Strategy on strategy clock.
• Subject to change since acquisition - Will be concerned to meet Ferrero’s expectations.
• Aims to increase market share.
• To market chocolate as a gift.
• Transition period between CEO’s.
• Strategy in the past few years has been to reduce number of stores which were loss-making. 296 Stores in 2013 – 247 January 2015. [2]
• Aims to also sell wholesale to supermarket groups to get their products in more locations.
[2] Thorntons, 2015
‘The strategy clock represents different positions in a market where customers have different requirements in terms of value for money’ Johnson, Whittington & Scholes (2012, Pg. 150.
Scope Of Distribution
2011 2012 2013 2014
Business Model & Operating profit data obtained from Thornton’s Annual Statements 2011-2014
Luxury own-brand chocolate, toffee
and fudge. Seasonal & Themed chocolate shapes.
Selection trays
OnlineOwn Stores
Supermarkets
Luxury Biscuits
New as of October 2015
OnlineOwn Stores
Supermarkets
Gifts
Personalisation through icing
service. Introduced Hampers,
Flowers and Cards
OnlineOwn Stores
Café Thorntons
Sells hot drinks (Tea, Coffee, Hot Chocolate) cakes and Thornton’s
chocolates
Online (Hot Drink Products)
Own Stores
Ice Creams
Sells Tubs and Cones of Ice Creams in a variety of
flavours – not just chocolate
Own StoresSupermarkets
Extent Of Product Diversity
Scope Of Market & Competition
• Competition from ‘value’ chocolate companies such as Cadburys, as well as luxury brands such as Lindt & Hotel Chocolat.
• Hotel Chocolat – Established 1988. £8.3m pre-tax profit for the six months until 28 December 2014, whereas Thorntons raised £6.6m profit for the same period. Hotel Chocolat 81 Stores, Thorntons 242. [3]
• UK chocolate sales grew by 1.6% in 2014 = £4.1bn, however, chocolate sold fell 1% to 437 million kg. [4]
• Cocoa and raw ingredient prices rising. Alongside a more health conscious society is likely to halt a increase in chocolate consumed.
• 1/3rd of British chocolate buyers buy premium products either "regularly" or "all the time“. [5]
[3] Independent, 2015[4] Mintel, 2014[5] Canadean, 2014
Task 2 Critically evaluate external environment of your chosen organisation and how it impacts organisational strategy. Please consider how your organisation responds to the environmental
pressures.
PESTLE Analysis
POLITICAL Cocoa Supplies Sugar European Union
ECONOMIC Unemployment Bank rate increases Increased VAT
SOCIAL Gifts Treats Healthy Eating
TECHNOLOGICAL Online Shopping ManufacturingDevelopments
Advertising
LEGAL Employment Law EU Regulations
ENVIRONMENTAL Global Warming Waste/Energy Reduction
Sustainability
• Low, Lack of Experience• Limited access to Suppliers/Distributers
• Strong, can switch to a competitor
• Low, alternative suppliers available
• High, other products available
• Strong competitive rivalry in shops and high street
Porter’s Five Forces
Low Price
High Price
Low Quality High Quality
Price information correct 01.11.2015
Positioning Map
Mintel Report
FIGURE 18: Leading brands’ sales in the UK retail chocolate assortments market, by
value, 2013/14 and 2014/15
2013/14* Share 2014/15* Share % change
£m % £m %
Celebrations (Mars) 95 10 102 10 +7.4
Quality Street (Nestlé) 97 10 97 10 -
Lindt (Lindt & Sprüngli) 81 9 97 10 +19.8
Thorntons (Thorntons) 100 11 96 10 -4.0
Ferrero (Ferrero) 72 8 87 9 +20.8
Source: Mintel Report Chocolate Confectionery - UK - May 2015
Mintel Report
Source: confectionarynews.com
Market Share
Task 3 Analyse organisational resources and capabilities and how they contribute to the organisational competitive
advantage.
Resources & Competences
Resources Competences
-Tangible Resources• Plant (Derby)• Technology, such as machinery or equipment • Retail outlets/ Cafes• FMCG channels• 3868 Employees• Suppliers/Customers
-Intangible Resources• Family Culture • Corporate Culture • R&D Frame work• Brand awareness• Marketing Strategy (Gifting) • Company knowledge and experience• Cash flow• Budgets
• Communication• Budgeting and planning knowledge • Capacity to recruit and train staff• Management, and people skills• Effective management ( In all area: structure
people, financial, production/manufactural)• Attention to communication • Establishing focus• Motivational support and performance
management • Team work• Managing change • Developing and empowering others• Culture and style• Effect service • Flexibility • Safety • Leadership
“Resources are the assets that organisations have or can call upon. Competences are the ways those assets are used or deployed effectively” Johnson, Whittington & Scholes (2012. P. 51.)
Key:• Physical resources• Financial resources• Human resources• Intellectual capital
Threshold Capabilities
Threshold Resources • Plant (Derby)• Technology, such as machinery or equipment • Retail outlets/ Cafes• FMCG channels• 3868 Employees
Threshold Competences • Communication• Budgeting and planning knowledge • Capacity to recruit and train staff• Management, and people skills
“Threshold Capabilities are those needed for a an organisation to meet the necessary requirements to compete in a given market and achieve parity with competitors in that market.” Johnson, Whittington & Scholes (2012. P. 53.)
Table 3.2 Johnson, Whittington & Scholes (2012. P. 53.)
Distinctive/Dynamic Capabilities
Unique Resources • Family Culture • Corporate Culture • R&D Frame work• Brand awareness• Marketing Strategy (Gifting)
Core Competences • Effective management ( In all area: structure people, money, production)• Attention to communication • Establishing focus• Motivational support and performance management • Team work• Managing change • Developing and empowering others• Culture and style• Effect service • Flexibility • Safety • Leadership• Ethos
“A basis for superior performance depends on a company having distinctive or unique capabilities that are of value to customers and which competitors find difficult to imitate. Johnson, Whittington & Scholes (2012. P. 53.) ”
Table 3.2 Johnson, Whittington & Scholes (2012. P. 53.)
Competitor Benchmarking
Strengths Weaknesses
Thornton’s • High quality product• One manufacturing site• Gifting marketing
• Ageing packaging • High price• Only targets UK markets
Cadbury • World wide brand• High brand loyalty • Price
• Quality of product• Limited products• Seasonal sales
Hotel Chocolat • High quality product• Offers more than 1 area of
products (hotel)• World wide brand
• Highly priced• Relatively new brand• Bland marketing
Lindt • Highly regarded world wide brand• High quality product• Excellent brand reputation
• Highly priced product• Realises mostly on seasonal sales• Not as easily available as other
brands
“Benchmarking is a way of discovering what is the best performance being achieved – whether in a particular company, by a competitor or by an entirely different industry. This information can then be used to identify gaps in an organization’s processes in order to achieve a competitive advantage” Stroud (No date)
The Value Chain (M.Porter 1985)
“If organisations are to achieve competitive advantage by delivering value to customers, managers need to understand which activities they undertake are especially important in creating that value and which are not,” (Johnson, Scholes, & Whittington, 2009, p. 74)
Customer serviceComplaints/ product help
Branding pricing and promotion Online & Instore both own retail outlets and FMCG
Order handling/Logistical planning,Delivery, dispatch
Manufacturing, Packing,Production control, Labour control, quality control, Maintenances
Quality control, Raw material planning/control, Supply receipt
Plant, Retail outlet, Franchise, FMCG channels
Training, Recruitment, personnel development and retention
Sophisticated hybrid plant (Robotics)
Purchasing/accounts, sourcing
VRIN (Barney 1991)
Value
Rarity
Inimitability
Non-Substitutability
“The criteria of the VRIN Framework clearly rules out best practices as a source of competitive advantage. If other firms can easily understand and copy a capability, it is not a source of advantage.” (http://createadvantage.com/glossary/vrin-framework, no date)
Value adding services: • Firm infrastructure – aspects of both retail, franchise and focus on FMCG • Human resource management- Focus on their people• Operations- One manufacturing site = One result
Rare activities:• Brand awareness• Quality of different products produced (for more than one market)• ‘Gift’ Marketing
Qualities difficult to intimate:• Great respect for corporate social responsibility • Organisational culture • Excellent R&D framework
Resource or competences which can not be substituted:• Family recipe• Knowledge and experience• Excellent supply chain history and development
Task 4 Evaluate how your chosen organisation manages stakeholders and through what mechanisms and initiatives.
Thornton's
Employees of Thornton's
Supermarkets
Governments
Suppliers
Ferrero Rocher
Employee of Suppliers
FarmersCustomers
Smile Train Charity
BRCGS
DHL
HP –IT Solutions
Local Community
Stakeholders
Adapted from R E Freeman Strategic Management A Shareholder Approach Pitman 1984
Employees of Cocoa and
Palm oil suppliers
Loyal Customers,
Suppliers and all employees
Governments, Large retailers
and supermarkets
Owners
Stakeholder Mapping The power & Interest Matrix
Power
Low
Low
High
High
Adapted from A . Medlow 1986
Level of Interest
Influences on Strategic Purpose
Governance
structure
Strategic
purpose
Social
responsibility
and ethics
Stakeholder
expectations
• Invest in learning• Sponsor sporting
events• Committed
reducing there carbon foot print with DHL
• There main charity is smile train
• Developing the farmers businesses
• Rebalance and Grow
• Revitalise• Restore
• Strong growth in the FMCG division
• Growth of the business profitability
• Long-term success
• The owners• CEO• Management team
Thornton's Chain of Governance
Board
Audit CommitteeNomination Committee
Remuneration Committee
Chief Executive Officer
Strategic Governance
First line of defence
Operational and Financial Governance
Senior Management Team
Operational Management
Central Support Functions
Risk Management Functions (Including internal audits and
external advisors)
Second line of defence
Third line of defence
The Chain of Corporate Governance
CEO
Senior Management
Operational Management
Central Support
Functions
Risk Management
Board
Audit Committee
Remuneration Committee
Nomination Committee
Ferrero
Giovanni Ferrero new owner of Thornton's
Thornton's is no longer a PLC it was removed from the stock market 20/08/2015
Ferrero Acquisition
• Ferrero brought Thornton's because it’s the leading premium brand in the uk
• Statement made by Mr Ferrero
“We have long admired Thornton's and what they have achieved in the UK, as demonstrated by their tremendous customer loyalty, and we look forward to working with their experienced team,” Mr Ferrero said.
The group has sought to build its UK presence over the past three years, targeting the family confectionery segment with its Kinder Egg brands.
After the death of Mr Ferrero his son Giovanni Ferrero now chief executive of Ferrero International inherited the Ferrero company and his strategy is to seek to make acquisitions.
Task 5 Conclude whether business strategy of your chosen organisation is sustainable or not. Justify your opinion.
3 year strategy
Revitalise
Providing refreshed products
Branding/packaging
Restore
Providing the market with competitive
products with overall profitability
Gifting focus on food products (expand to
larger market)
Rebalance and grow
Ensure our products are available where people want to buy
them
FMCG
Information taken from: Thornton’s annual statement (2014 p.04)
Adapted from: H.I. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6
[6] Telegraph, 2014
Strategic Directions – Ansoff’s Matrix
SWOT
Strengths• Well known brand & Reputation• High quality products• Operations in lucrative markets• Quality of service• Uniqueness• No outsourcing manufacturing or distribution • lean combination of robotics and human hand
decoration• Positive future with larger parent company • Entry into new product markets
Weaknesses• Franchise weakness• In-house manufacturing unable to meet
demand due to seasonal peaks• Location• Outlets of shop• Most money made through seasonal sales• Confusing product focus (especially online)
Opportunities• Developing Strategy under new takeout• More opportunities for automation• Expansion into foreign markets• Internal/organic development
Threats• Competitors• Supermarket own brands• Other small and specialist chocolate
companies
“SWOT summarises the strengths, weaknesses, opportunities and threats likely to impact on strategy development” Johnson, Whittington & Scholes (2012. P. 65.)
TOW’S Matrix
Source: Adapted from D. Faulkner and C. Bowman, The Essence of Competitive Rivalry, Prentice Hall 1995.
The Strategy Clock
Hybrid Strategies (3)
Non-Competitive Strategies (4)
Low-Price Strategies (2)
Differentiation Strategies (1)
References
Task 1 - Just Food, (2013) ‘Thorntons sales propelled by share gains’: http://www.just-food.com/news/thorntons-sales-propelled-by-share-gains_id122935.aspx (Last Accessed 03.11.2015)
Task 1 - iii, (2015) ‘LSE:THT Data’ http://www.iii.co.uk/research/LSE:THT (Last Accessed 03/11/2015)
All Tasks - Thorntons Corporate Website , (2015): http://www.thorntons.co.uk (Last accessed 03.11.2015)
All Tasks - Johnson, G., Whittington, R and Scholes, K. (2012) Fundamentals of Strategy. 2nd edn. Essex: Pearson Education Limited
Task 3 - Stroud, J.D Understanding the purpose of benchmarking http://www.isixsigma.com/methodology/benchmarking/understanding-purpose-and-use-benchmarking/ (no date) (Accessed 04.11.2015)
Task 3 - Creating Advantage, VRIN Framework, http://createadvantage.com/glossary/vrin-framework, (no date) (Accessed 04.11.2015)
Task 1 & 2 - Canadean, (2015) ‘Chocolate Consumption report in the UK’: http://canadeanreportstore.industryreportstore.com/packaged-food/confectionery.html?region=169 (Last accessed 03.11.2015)
Task 1 & 2- Mintel, (2015) ‘Confectionary Chocolate Report May 2015: https://courseresources.derby.ac.uk/courses/1/2015-AUT-OC-KED-5LO501/groups/_21818_1//_966225_1/Mintel%20Report%20Sep%202015.rtf (Last accessed 03.11.20015)
Task 1 The Independent, (2015) ‘Hotel Chocolat Profits Surge’: http://www.independent.co.uk/news/business/news/hotel-chocolat-in-profits-surge-as-thorntons-struggles-10131652.html (Last accessed 03.11.2015)
Task 5 – Telegraph, (2015) ‘Chinese Shoppers and British Products’ http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11242945/Chinese-shoppers-choose-to-buy-British-online.html (Last accessed 03.11.2015
Task 4 - Strategy http://www.foodmanufacture.co.uk/People/Thorntons-restructures-board-to-boost-performance
Task 4 - Ferrero Rocher buys Thornton’shttp://www.chicagotribune.com/news/sns-wp-blm-europe-rich-4be78028-65d2-11e5-bdb6-6861f4521205-20151003-story.html
Task 4 - Thornton’s' chief executive quits after a torrid yearhttp://www.telegraph.co.uk/finance/11612064/Thorntons-chief-executive-quits-after-a-torrid-year.html
Task 4- Ferrero says take-up of offer on Thornton’s at 75 percenthttp://uk.reuters.com/article/2015/07/10/uk-ferrero-thorntons-idUKKCN0PK0F320150710
Task 4 - Chocolate Makers Unite as Ferrero to Buy Britain’s Thornton’shttp://www.bloomberg.com/news/articles/2015-06-22/chocolate-makers-unite-as-ferrero-to-buy-britain-s-thorntons
Task 4 - Corporate Social Responsibilityhttp://www.thorntons.co.uk/content.jsp?pageName=corporate_social_responsibility
References
Task 4 - Corporate Social Responsibility 2http://www.thorntons.co.uk/assets/category_files/pdf/Thorntons%20CSR%202014.pdf
Task 2 – Reuters UKhttp://uk.reuters.com/article/2015/07/10/ferrero-thorntons-idUKL8N0ZQ0DC20150710
Task 2 – Gov UKhttps://www.gov.uk/government/news/new-evidence-review-of-measures-to-reduce-sugar-consumption
Task 2 – Confectionary Newshttp://www.confectionerynews.com/Manufacturers/Ferrero-signals-intent-to-raise-retail-game-with-Thorntons-buy
Task 2 - D. Faulkner and C. Bowman, The Essence of Competitive Rivalry, Prentice Hall 1995.