Strategic Management of Haigh’s Chocolate
Executive Summary
The following marketing plan forms the basis for achieving Haigh’s company vision of becoming a successful top quality chocolate confectionary provider. The recommendations based on the analysis contained in this report allows us to outline the best strategies to follow for the achievement of the company’s strategic goals. The confectionary industry in Australia is dominated by few large players with fiercely high competition.
Whilst the target market Haighs plays – targeting consumers seeking high quality premium chocolate, Haighs is one of very few providers, but the quality of chocolate provided for substitutable brands are also reasonably high.
Haighs would need to ensure differentiation in their product quality; brand image, brand loyalty and brand awareness to be competitive within the market place. Haighs being a family owned and operated business, their consistent management style ensures its operational control in all areas of business are strategically aligned.
In analysing Haigh’s external and internal strengths and weaknesses, operational efficiency and consistency such as efficiency in production process and stringent quality control process are found to be the main strengths whilst risk of easily being substituted with cheaper chocolate confectionary products and lack of diversified management experience due to being family operated business, are stated to be the main determinant in realizing further success for Haighs.
Through having staff cross trained, Haighs can enjoy use of less employees and savings will arise from it. Active marketing activities are also encouraged.
Haighs can look into wholesale supply into large hotels or exclusive dining places to create economies of scale. Through innovation, it would need to further develop its product in accordance with today’s consumer preference. Low fat, low sugar with high quality chocolate is recommended and opening of Haighs branded cafes that will bring new experience to its consumers are suggested.
Haighs being the exclusive chocolate brand with high risk of being substituted into other brand, brand loyalty is the key in Haigh’s success. Launching of loyalty program, discount for seniors, and connecting its customers via social network sites are examples of building brand loyalty for Haighs.
The report concludes by providing implementation plan to adopt the above recommendation that will help Haighs to remain competitive, sustainable and successful within its chosen market.
Current Situation
Haigh’s was founded in 1915 in Adelaide, South Australia by Alfred E Haigh and has been successfully run by his son, grandson, and great-grandsons, Alister Haigh who is current CEO. It is the oldest family-owned chocolate manufacturing retailer in Australia and one of the very few manufacturing retailers in the world still making chocolates from raw cooa beans and more than half of their chocolates are handmade, using artisan skills that require many years of experience to perfect. Haigh’s vision is delivering a world-class chocolate experience every time.
Its value is that they will be caring and considerate of their employees, customers, suppliers, shareholders, the community and the environment by showing respect to each other and valuing diversity, working together to achieve a safe, friendly and positive working environment, setting clear expectations, recognising contribution and developing their people, leading by example and taking responsibility for their actions, communicating clearly, inclusively, honestly and in a timely manner, having pride in their product and passion for the business, its heritage and its future and contributing to the community through corporate benevolence and environmentally sustainable practices. Haigh’s chocolate currently has over 300 employees and 13 retail stores; six in Adelaide, six in Melbourne and one in Sydney.
They manufacture 200 different products and also produce a number of products whose sales supports various charities.
Haigh’s Chocolate provides quality products and service throughout Australia and make sure to produce only the best raw materials from start to finish, and stationing agents in Europe for first pick of the finest imported cocoa beans is only the beginning. They are fairly well vertically integrated. They make chocolates and then transport or arrange for them to be transported to their own retail shops, which mean that they control the whole process to ensure that their customers get the highest quality and freshest products.
External Environment
External environment is an uncontrollable element that effects an operation.
However, by carefully analyzing external factors that relate to the company’s industry, a company would deal with uncertainty in the market and be able to take appropriate actions to any upcoming events.
Macro Environment Political/Legal
Confectionery manufacturers are required to follow significant regulatory restraints especially in relation to food safety, product labeling, occupational health and safety, competition and consumer law, employment law as well as taxation policies. The regulatory requirements are sources of cost increase to manufactures. However, the regulations are necessary in order to guarantee the right for consumers, employees, competition and the quality of products. Failure to follow regulations might lead to significant negative publicity that can damage the reputation and brand of the company.
Product safety regulations: Chocolate and confectionery manufacturers must strictly follow food and health regulations. The regulations are aimed at maintaining high levels of food hygiene and protecting the consumers against health threats related to unsafe food. Confectionery manufactures are currently regulated by Food Standards Australia New Zealand. This regulatory organization is responsible for the implementation of the Australia New Zealand Joint Food Standards Code.
The Code also requires industry manufactures to comply with labeling requirements and serving size restrictions.
In particularly, agreement with the Code demands manufacturers to supply information on the percentage share of ingredients used, nutritional information or any materials that might cause allergy like nuts. These requirements have been broadly censured for putting extra costs on manufacturers in the industry. However, with consumer groups reinforcing their demands for more nutritional instruction on product labels, the industry is required to put more attention in implementing the regulation. Besides regulations relating to health and safety or employment, confectionery manufacturers also must conform to environmental regulations set out by the Federal and State governments. These regulations include water usage, energy usage; wastewater disposal and the treatment of waste resulting from manufacture process.
Economic At a difficult time of the economic uncertainty in Europe and the USA, Australia continues to have stable and favorable economic growth. The real GDP, which grew by 1.3% in the first quarter of 2012 over the previous quarter, demonstrates the stability of household consumption expenditure.
The increase in consumer spending might reinforce sales revenue of the industry. Given that, consumers of Haigh’s chocolate might not need to concern about cutting their spending on premium chocolate products and going for cheaper brands in the market.
Raw materials including cocoa, sugar, milk, flavorings, sweeteners and oils represent primary inputs in the production process and any changes in their price affects industry supply. In confectionery industry, sugar is a primary input in the manufacturing process and an increase in the price of sugar will significantly impact production costs. Higher sugar prices recently will reduce manufacturing profitability unless firms can pass these costs on consumers. However, the trading environments in Australia and overseas are highly competitive, there is usually limited opportunity for manufacturers to raise selling price for their products. Moreover, the increases of post-production expenses in advertising and marketing campaigns will also unfavorably affect company’s profitability.
As can be seen, the confectionery industry in Australia is highly competitive with a large number of new product lines introduced by various industry players; therefore existing manufactures in the industry need to create more extensive promotions and marketing programs. Socio-cultural Two key factors affect domestic demand and consequently determine future consumption structures is lifestyle change especially health consciousness and changing demographic form of the Australian population. The trend of public awareness about health and nutrition for food products is having an adverse effect on demand for sugar-based confectionery products like chocolate. Australians have become more attentive to their consuming food and account for factors such as sugar and fat content, quality of ingredients before deciding on a brand or product. Nutritional factors can affect sales revenue therefore companies in the industry are forced to be more innovative in producing low-sugar products and using organic material to meet the demand of health conscious consumers. Changing demographics of the Australian population also may affect the industry.
Ageing population is growing dramatically in Australia as can be seen proportion of young people will fall drastically while senior citizens will increase by up to 1% per year. Typically, young people tend to consume more confectionery products compared to the elderly, as people tend to develop a preference for savory food with age.
The result of ageing population’s raising might lead to lower total sales of the confectionery products. In general, an increase in disposable income will force spending on discretionary goods such as confectionery. According to Australian Bureau of Statistics, in the March 2012, national disposable income increased 3.5% compared to the same period of last year.
However, a growth in income may also encourage consumers to change to more expensive and premium chocolates rather than increase the volume of confectionery purchased. Technology The introduction and the adoption of new technology have improved cost and operating efficiencies as well as reduced the need for labor for manufacturing, storing, delivery and distribution. Keeping the basic production process, chocolate manufactures are using new technology to develop their recipe. Automation and computer directed controls also have been used widely in the production process to be more time efficiency and greater quality control.
The introduction of quality assurance systems such as Hazard Analysis Critical Control Point has helped the food industry in improving safety standard.
Product safety plays an essential role in preserving the industry’s reputation as a healthy and reliable food manufacturer. In regard to marketing and distribution systems, E-commerce is used by manufacturers to improve customer and supplier arrangements and networks, leading to cost savings through better inventory and production planning. The widespread of social network also creates a new way for manufactures in marketing, building brand and reinforcing relationship with consumers. Environmental Raw materials of chocolate production including cocoa, sugar, and milk are natural sources; therefore a change in climate will considerably impact on the industry. Natural disasters like flood, drought might result in scarcity of a resource and force its price to an unfavorable level to manufactures.
Moreover, consumers nowadays are more aware of environmental sustainability. They likely prefer to use environment friendly brands or products in order to reduce the negative impacts on the environment. As a result, confectionery manufacturers have been attempting to “go green” by using recyclable or reusable packages for their products. In particularly, Haigh’s chocolate has committed not to use any plastic bags to reduce the environmental effects of packaging on the environment.
The company also stated that in order to be energy efficiency, rainwater is collected and stored in large underground tanks, then filtered and converted into steam providing indirect heat for cooking processes.
In addition, their recent factory upgrade was designed to consider energy and water conservation. The major sources of food industry waste include packaging, fats, oils, syrups, nuts, candied fruits, dusts and powders. Manufactures need to reduce environmental impacts associated with waste disposal and consumption of resources by waste management programs. Furthermore, the effort in saving energy also help manufactures in reducing energy costs and minimizing energy-related greenhouse gas emissions.
Porter’s Five Forces Model of Competition
Power of Buyers: Medium
Australian confectionery producers sell their products to two major purchasing groups: large retail outfits and wholesalers including large supermarket chains, convenience stores, petrol stations, and department stores.
However, instead of selling products to large retail stores, Haigh’s chocolate has integrated forward in the market and have its own retail stores. The main purchasers of the company are individual buyers who have noticed Haigh’s unique quality products and exclusive taste. By having good awareness of the brand and finding it is hard to get this quality products from others, the buyers would not easily switch to other brands therefore it lowers their bargaining power. Low switching cost due to the buyers can easily switch to other substitutes such as cookies, ice cream, and snack foods. As consumers are more aware of health and nutrition for food products, demand for sweets and chocolate, which have high level of cholesterol and sugar–contained, would reduce.
Healthier food might be preferred in consumers’ choices. Large retailers like Coles and Woolworth would be potential threats if they implemented backward integration.
Power of Suppliers: Low
The primary materials in manufacturing of chocolate are cocoa, sugar and milk. Referring to sugar and milk, there are various suppliers of these sources available in the region or country; therefore supplier concentration and differentiation of inputs are low. There are also various cocoa farms around the world especially in the developing countries; therefore the chocolate manufactures are important purchasers of these suppliers. As a result, the chocolate suppliers’ bargaining power is typically low.
Nonetheless, as Haigh’s chocolate requires premium quality of cocoa, which is only produced by a small part of suppliers in the world, the bargaining power of high-quality cocoa beans suppliers will be stronger. Moreover, chocolate manufacturers might not avoid the threat of suppliers could vertically integrate forward to take part manufactures’ role.
Threats of New Entrants: Low
The threats of new entrants are low due to the barriers to entry are high. Entry into the premium chocolate market would require new entrants a large capital investment for branding and product facilities. Furthermore, new entrants also have to face with major players in the market with a long history and success.
These dominant companies enjoy high brand and customer loyalty and have significant resources to invest in advertising and promotions to protect and grow their market share. In addition, these companies also have built strong relationship with main suppliers in the industry including grocery stores and supermarkets that would be challenging for new entrants to secure. Government regulations and policies about food safety and quality of products might be costly and difficult for new entrants to enter in the industry.
Competitive Rivalry: High
The intensity of rivalry among competitors in an industry can create price wars, advertising battles, new product lines, and higher quality of customer service. The Chocolate manufacturing industry is extremely competitive, with the major players aggressively competing for market share.
Haigh’s chocolate has potential competitors including large-scale or international companies like Nestle, Kraft Foods, Mars, Lindt chocolate, Cadbury as well as several imported brands. In a competitive environment, there is usually limited opportunity for manufacturers to implement selling price increases for their products due to price sensitivity of consumers. Consumers can easily switch their preferences for a premium brand to a lower-priced substitute. Furthermore, it is also hard for Haigh’s chocolate to compete with these huge companies who have distributed their products widely in large supermarkets with cheaper price range for similar products.
Substitutes: High
The chocolate industry must compete with different ranges of substitute products including snack foods, cakes, cereal, and biscuits as well as substitute brands. The large number of substitutes makes manufacturers feel hard to increase their products’ price as consumer can easily switch to cheaper substitutes. In addition, the change in lifestyle of being more health consciousness would switch the spending of consumers in sweet or chocolate products to healthier substitutes. The External Factor Analysis Summary is included in Appendix 1.4.
Internal Analysis
The internal analysis process is aimed to point out the sustainable competitive advantages of the company. The advantages can be achieved when a firm has the ability to undertake value-creating activities and use its unique resources and capabilities to create new core competencies. Haigh’s has a long-standing history and has strong resources that create its competitive advantages. Haigh’s resources including tangible and intangible which are analysed to define its capabilities and core competencies in the chocolate market. Strength History ‘Haigh’s chocolates is an Australian brand associated with fine chocolate, premium gifts and outstanding retail experiences.
Haigh’s chocolates are predominantly retailed through their own retail network’. Haigh’s prides itself on a long history of premium quality, consistency over its 87 years of operation. It is a privately owned family business.
This history of quality and consistency aids to a competitive advantage over a number of other chocolate manufacturers and distributors, and assist in high customer loyalty and increasing profits. Quality Haigh’s targets itself as a premium and quality brand.
Their major strength in their market is the quality and consistency of their production and their ability to maintain the level of outstanding quality over the course of its long history. Haigh’s manufacturers their chocolate as a premium chocolate brand. They manufacture their chocolate as a traditional small batch manufacture; therefore it is not mass-produced and has a greater quality and level of control over all products.
The ingredients are all high quality local produce including cocoa beans, sugar and milk, which are then manufacturer into premium chocolate. It is an Australian made product with entirely Australian ingredients and packaging, which is another strength to increase customer loyalty and satisfaction.
Customer Service Haigh’s promotes itself through great customer service, training is provided to all staff members with focus on customer service and product knowledge. Throughout Australia they employ 120 staff members and each staff member is provided with a high level of training upon employment and throughout the duration of their employment in the company. On purchasing a product, customers are handed a chocolate they have not tried with a white glove.
This gesture adds to the premium brand image and creates an atmosphere, which customers want to return. Having customers try a chocolate they haven’t tasted increases repeat customers and high customer loyalty. Haigh’s does have limited marketing, its main focus is on in-store marketing, and therefore this extra service does provide great in-store marketing and creates customers to be aware of products they have known about, and therefore repeat purchases.
Control of production and distribution process Haigh’s being a private family run business gives them the strength of having the ability to control the whole production and distribution process.
They control the production right through from purchasing raw materials, manufacturing, distribution, and retail to the final end consumer without any other distribution involved. Therefore if Haigh’s chose to outsource some production and distribution services they would loose total control over their products. Having total control and ownership allows them to ensure total quality and consistency over every product manufactured and distributed. Diversification of products and prices Haigh’s product range, ranges from very small packages retailing for a few dollars to large premium packages costing over a hundred dollars.
It does have products to suit all price ranges.
Having this large product range allows them to target a large number of consumer groups. Although they do have a large product range, their primary focus has been on the expensive premium products in previous years. As a result of the global financial crisis sales dropped in the smaller items, however they weren’t greatly affected by the premium products. During this time consumers were still spending on luxury chocolate products. Economic factors During times of economic decline, consumer spending does decrease.
However with Haigh’s large product list, it does allow them to focus on products that consumers want to purchase during a period of decline.
During the global financial crisis consumers were not spending money the lower cost products, however they were still spending on luxury products and gifts. Therefore during this time a high focus was put on the premium luxury products to maintain profit levels. During a time of economic decline Haigh’s does not reduce its prices. This is done to retain their reputable brand image of high quality premium products. Environmental Today consumers are becoming more environmentally aware and trends are rising in this field.
Haigh’s understands that they can make a change in the practices. Haigh’s is highly focused on environmental factors and a lot of consideration is involved with the production, distribution and production of their products.
Haigh’s has a strong commitment to several environmental issues including sponsorship and financial support for the bilby, a threatened marsupial native to Australia. They were the first ones to produce the bilby for Easter, it is now a continued tradition, and has created extreme awareness about the endangered marsupial. They have a policy of using recycled or recyclable packaging material and have their own internal recycling program, they carefully consider the impact it’s packaging and distribution methods have on the environment and on the community.
‘Haigh’s chocolates has long been concerned about the minimization and sustainability of packaging choices. The principles reflected in the Sustainable packaging guideline have been incorporated in the design, selection and planning of their packaging for many years Therefore their action are designed not around changing the processes but more around formalizing the recording and reporting behind these processes.
Packaging Haigh’s packages their products in a very cost effective manner however still enhancing their premium product model. The majority of products are packaged in white boxes, with brown tissue paper with a Haigh’s sticker. During Christmas and Easter and other major holidays, thick colorful foil is used for eggs and other products, this creates a premium look, it cuts costs from using boxes and they can distribute more for less. For premium products and gifts, tins are used.
This is costly however these are used for the high end products.
Online store
Haigh’s online store is a key strength for their consumer base and their distribution; they currently operate in 3 states with 6 stores. This is highly limiting for consumers in outside regions. The website offers consumers all the facts on their chocolate including company history, the chocolate, and the current products available. It also allows them to purchase the products therefore highly increasing their distribution levels. Brand image Haigh’s focus on quality, consistency and customer service has lead to a very highly trusted and recognized brand in Australia.
This has been a major aid in sales increase and customer relationship solidification. Haigh’s marketing and promotion is through in-store and word of mouth marketing.
The company does not focus on mass media campaigns and yet the brand has still managed to grow very consistently. It is the quality of customer experience and product quality, which accelerates the companies growth. It is unsure as to whether increased advertising and promotion would support the brand or whether it would get rid of the exclusivity and luxurious image the brand currently represents.
Weaknesses Market Entry To enter into the market it is relatively easy for competitors. It has low costs to set up a retail store, however competing can be difficult and they are up against the high brand image, quality, history, taste and the consistency of competitors’ products.
No outside executive team Haigh’s is a private family owned business; therefore there is no outside executive team. The family is in total control, there is no external chief executive that can come and make changes if required, and an outside perspective could possibly enhance and develop the business further. Raising capital As it is a private company, in order to raise extra capital can be very difficult.
One Product Company Haigh’s is a one-product company selling chocolate, which therefore reduces their target market significantly. Through expanding their product range their could therefore expand their target market thus increasing profits.
This extension could be done through related product such as cookbooks, utensils and serving plates. Shop Locations Haigh’s currently operates in Victoria, New South Wales and South Australia with 6 stores, therefore they are not a majorly well-known brand in the chocolate industry, and based on industry data they represent only 1.1% of the total Australian chocolate market. Through expansion of their stores in more states and territories in malls and up market suburbs within Australia could significantly enhance and develop the business, and create greater brand awareness.
Marketing Haigh’s marketing is virtually exclusive through the shops, not a well-known advertiser on television, radio or print media generally.
This as a result saves a lot in marketing costs, however does not highly promote the brand. The cost of not having outside marketing may be overridden through the increase of profits they may receive if they were to further promote the brand. Haigh’s could focus on low cost marketing to support an expansion in the stores, getting their products to the consumers would greatly increase profits. Haigh’s competitive advantages Haigh’s has a number of advantages over competing organization.
The main advantages being consistency of product/ their long history and the overall brand image. The brand image is one of premium and luxury products. It portrays to consumers a sense of profit compared to other companies.
Seasonal products and collectors items are very expensive, however due to Haigh’s brand name, specific consumers want to purchase the deluxe items offered, which other chocolate companies do not offer. Lindt chocolate used to have a very expensive and premium brand name.
However now that they have expanded and is readily available and predominantly on sale, the quality theme has disappeared whereas Haigh’s has retained their premium image. Core competencies Haigh’s competencies are that of production and good quality chocolate products. Their major competency is their quality and consistency of production, which has remained at the same level for many decades.
The core products remain the same over time; seasonal items such as during Christmas and Easter can change from year to year. At the retail end, their high quality packaging, shop design and product design is a major expertise of Haigh’s, whish high quality and reliability. Their product presentation is consistent; when new products are available there is an expectation that it will match the high quality range.
Their tours in Adelaide highly promote the skills and capabilities of Haigh’s, the public see how they make the product range for free, revealing to the public how good its product capabilities are, especially in Adelaide which is highly competitive and hard to compete. Tangible and Intangible resources and capabilities
Haigh’s primary activity is the manufacturer, retailer and distributor of high quality chocolates, with retail outlets and distribution across Australia and online. Tangible resources Haigh’s has to majorly rely on their own ability to raise funds though their own capital, which is a pitfall, as if they wanted to expand in order to build their brand it is quite difficult. Their organic and local sourced ingredients are the most important resource to continue the quality and consistency of their products. These ingredients are the core resource for Haigh’s as they are a one-product company. Ensuring the same quality and consistency throughout their products relies heavily on their raw ingredients.
Recipes are provided through the shop, highly builds the brand.
Recipes for different chocolate desserts are complementary for customers. All manufacturing equipment is of high standard to produce the high quality and consistent chocolate. Intangible Haigh’s has a team of experienced chocolate makers and retail staff that bring their knowledge and skills together to build a dynamic company and retail know how. Their innovation towards sustainable packaging and creating awareness about Australia’s endangered animal the Bilby has been a significant resource. Both the tangible and intangible resources all result in helping to promote value adding activities and an overall profitable company with a strong brand image.
Current strategic
Business-level strategic
When the company has determined its mission and vision, analysed the external environment and recognised internal strengths and weaknesses, management has to select appropriate strategies. To choose strategies should generate a competitive advantage in order to maximise the market value of the existing owners’ equity.
Business-level strategies, functional-level strategies and corporate strategies are the component in the strategy management. The main focus of Business-Level strategy is deciding which product or service to offer and how to distribute it. It is clear that Haigh’s chocolate focuses primarily on differentiation as its Business-Level Strategy. Own production line Australia does not have a viable cocoa growing industry so the beans are imported from overseas.
Haigh’s is a family business that is small enough to take delicate care in each process to ensure that they deliver the best quality chocolate. They protect their production line from getting the best cocoa from Europe and using their own chocolate manufacturing before distributing to their own retail stores, making this a good example of product differentiation, hence the higher price. At Haigh’s chocolate store, the differentiated product is the entire service, the quality chocolate and the experience in the store, not just the product directly purchased. Product Differentiation Unlike cost leadership strategies, product differentiation aims to produce goods and services that customers perceive as being different in important ways. To build a successful product differentiation strategy, it is key to be able to continuously and consistently upgrade the differentiated features. Haigh’s has approximately 250 different product lines that rotate throughout the year.
The different stores in different regions have their own preferences and are able to produce their own chocolate flavour according to the differing demands on their customers. Delivery system Haigh’s chocolate also offers delivery, costing an additional amount determinate upon the weight of the chocolate. This can be very convenient for customers as although the cost is quite high, customers are able to choose the Haigh’s product as a gift for others due to the high quality of the chocolate. Haigh’s should look to implement more control over this delivery system with the potential to include dry ice or other temperature controlled delivery vehicles to ensure the chocolate is kept at its high quality during the delivery process. Differentiated customer service To build up customer loyalty to the company, Haigh’s chocolate is able to create a differentiated service for them.
We treat everyone with respect whether they are coming in for a $1.20 chocolate frog or a $100 box of chocolate. We give a world class experience.
In addition, around 40,000 customers visited Haigh’s chocolate every year, Haigh’s is able to give a different customer experience centred around the quality of the chocolate and encourage many customers to experience new or different chocolates but offering a free chocolate factory tour with samples.
Functional-level Strategies
Functional-level strategies consider a company’s ability to attain “superior efficiency, quality, innovation, and customer responsiveness”.
Haigh’s chocolate also implements lean thinking process for the manufacturing strategy which enables to minimise non-productive activity and doing it right the first time.
This strategy has been credited as a significant reason behind the recent success.
Production
Considering the production and due to the large number of products, they are able to spread high fixed costs of warehousing and delivery to the retail stores around Australia. Moreover, learning effects are stable due to a consistent management, considering the order processing, Haigh’s chocolate is working very efficiently, too. High-quality automated chocolate factory increase the functionality of bringing the product to the end-user immensely Marketing From a marketing perspective, Haigh’s chocolate is the family company but applies a very efficient branding strategy. Good branding strategies are important for a business, because brands represent “consumers” perceptions and feelings about a product”.
The company was able to build trust in Australia. Haigh’s chocolate is updated online often and efficiently, on the other hand due to the small number of the retail stores available around different area in Australia, they are given different advertising camping to keep customer loyal and engaged. Furthermore, Haigh’s chocolate also focuses on improving the brand awareness. Customer Responsiveness Customer responsiveness includes knowledge and acknowledgement about what the customer needs.
Furthermore, it is important not to compromise long-term profitability.
Superior customer responsiveness will be achieved through superior efficiency, superior quality and superior innovation.
Through Haigh’s website, the design enhances their focus on customer needs and assists the company to detect better ways to satisfy them. Haigh’s chocolate is always looking for a new flavour of chocolate to fill up customer needs, making a variety of chocolate is the way to keep customer keeping coming back. Haigh’s chocolate store is also focused on providing a different theme at different periods to impress the customer in-store experience. Haigh’s chocolate is doing amazing job on their window display to attract customers, such as Sydney CBD store always has an eye-catching display to customer who walk past the store.
Corporate Level strategies
Concentration on a single business
The corporate strategy of Haigh’s chocolate is concentrated on a Single Business. Haigh’s chocolate focuses on its new technology, managerial and customer demand to stay in the strong competitive environment has made the company famous throughout Australia. Haigh’s chocolate makes quality chocolate through new technology introduced in their chocolate factory. The use of only the highest quality ingredients make sure the customer enjoys the best quality chocolate. Haigh’s believes in quality from start to finish. Haigh’s chocolate comes from the first pick of best cocoa beans in Europe and deliver the best raw material from the start.
Haigh’s has a large variety of chocolate ranging from small chocolate frogs up to $100 gift hampers, there is a huge range of different chocolate varieties with a great price range to suit all customers budgets. There’s something for everyone in our shops.
Haigh’s produces their own chocolate in their factory located in Adelaide. Through only producing one product it allows the company to heavily focus on its managerial, financial, technological and physical resources in producing only chocolate. Tapered integration Haigh’s chocolate is considered as Tapered integration, for example Haigh’s chocolate imports the raw cocoa beans from overseas. Comprised of a chocolate maker and a transport company to arrange for the transportation to either individual customers in the case of online purchases or to retail shops, therefore the company has control of the whole process to ensure that their customers get the highest quality and freshest products.
Using their own company supplier gives better control over the inputs and outputs in the operation. This control ensures that the Haigh’s chocolate family brand maintains a level of quality that it would not be able to guarantee if it were using suppliers that were not owned by the company. A strong level of quality control, and as such they can be certain that every part of the production process is line up to the aspect of Haigh’s chocolate. Its vertical integration has built strong barriers to entry, which enables to protect its product quality and make it costly for a company to enter the industry. International strategy Haigh’s chocolate has no international market so far since they have failed get into the Japanese market due to the certain issues such as pricing and developing new products for a different market. A further push from the company is expected in the next few years; however the Japanese mistake did cost the company a lot of money.
A push into the Asian market, most likely to China or India, is expected in the next few years due to the high potential of growth in these markets with the potential recovery of the Asian markets.
Recommended strategies
Business-level strategy
The business level strategy is ‘an integrated and coordinated set of commitments and actions design to gain a competitive advantage by exploiting core competencies in specific, individual and product markets’. The following recommendations for Haigh’s will effectively exploit their core competencies.
The key issues include what products and services to offer consumers, how to manufacture their product and how they are going to distribute their product’.
These areas have been effectively obtained by Haigh’s however needs further enhancement and development to improve and grow the brand.
From analysing Haigh’s current business level strategies it has been identified that Haigh’s is strongly focused on differentiated products. This has been a major strength for Haigh’s focusing solely on this model, and targeting a specific target market. It is strength however in order to further expand the brand, broadening their selected target market would be highly beneficial and profitable. The implementation of the differentiation strategy has lead to a sustainable competitive advantage. They are one of the highest quality chocolate companies in Australia and need to continue with this strategy in the future to continue with the growing success and profitability of the company. Introduce new cost competitive product line Haigh’s is a one-product business, therefore making it difficult to expand their target market and reach different groups of customers.
Through implementing a larger product range it would be highly beneficial and profitable for the company. The brand image that Haigh’s currently has is one of very high quality. Therefore products need to be introduced that are related and at the same standard. Products that could be introduced into the business would include. Cook books, chocolate cooking utensils and serving plates.
Chocolate cook books should be sold which would inspire customers to cook using Haigh’s chocolate. Haigh’s could also release their own cookbook from using the hundreds of recipes they have offered in store over the years. Cooking utensils such as chocolate molds, tempering machines, chocolate kits etc. Through adding these extra products to their product range it would highly boost sales and create a higher consumer interest for the brand. The implementation of these extra products to the line would not be a difficult task as they have most established areas such as distribution, retail outlets and staff. Haigh’s would just need to find suppliers for the products.
Differentiated customer service Haigh’s customer service is an area that is highly successful and profitable to the company. Haigh’s creates a differentiated service for customers that is very unique to their company.
This area within the company is recommended to remain at that same level of quality. Customers are treated with extreme respect no matter what you are spending within the store. They provide a ‘world-class experience’.
Upon purchase they are handed a chocolate in a white glove. This encourages customers to experience new or different chocolates. Haigh’s does need to focus on this area as they must ensure the quality and consistency of their customer service remains the same over time, and throughout all stores. It is highly important as this may determine weather or not customers return to a Haigh’s store. Delivery system Haigh’s chocolate does offer delivery, which does cost extra determined by the weight of the chocolate. This is convenient for customers who live outside the region where Haigh’s does not have a store.
The additional price of delivery is quite expensive. As Haigh’s chocolate is expensive this extra cost means that it is not a preferred method for consumers and is not a highly profitable area for Haigh’s. It is also hard to transport packaged chocolate, due to temperature requirements. Haigh’s currently operates in 3 states in Australia. Victoria, South Australia and New South Wales.
In the future Haigh’s should look at expanding their retail stores to other states and territories including, Western Australia, Northern Territory, Queensland and Australian capital territory. Through having retail stores across every state and territory across Australia it would be highly beneficial. It would expand their brand and customers. In order to become a more profitable business, Haigh’s needs to expand their store locations and introduce a large number of new consumers to the company. This process would initially be very expensive, however upon establishment it would be highly profitable to the company. Their main core competency is that of production and good quality chocolate products.
Their quality and consistency of production, which has remained at the same level for many decades. At the retail end, their high quality packaging, shop design and product design is a major expertise of Haighs. Haighs needs to focus on their core competencies and effectively advertise to their selected target market to create more awareness about their brand and products. The recommended strategies will exploit Haighs core competencies and will help develop a stronger brand.
Functional Strategy
Efficiency Keep practising the lean production Haigh’s chocolate so far has applied well significant strategies to maintain their efficiency in the manufacturing process. As can be seen, Haigh’s has adopted the lean production with the attempt to eliminate waste and to cut down non-productive activity and errors of products.
The lean production also assists the company in using efficiently resources of labor, materials, space and time. It is recommended that besides continuing to practice the lean production, Haigh’s should start to analyze and focus on what they can do best or what product lines have more interest from consumers in order to maximize productivity. Strengthen relationship with supplier of key inputs The price of raw inputs like sugar and cocoa can be highly volatile due to uncertainties in the external environment such as weather, season, industry competitors or global economy. Contracts with suppliers will help the company to guarantee the price and availability of raw materials if any unpredictability events might occur in the market. Start applying the learning effects to improve labor productivity Learning effect will help the company in diminishing the cost of production per unit as more output will be produced per labour unit over the same amount of labour hours’ input.
The learning effect not only requires labours but also managers to be involved in the production process. Managers will get used to with the process and be able to use the resources and arrange the production process more efficiently thus leading to more output for the same amount of input. In order to carry out the learning effect, the company needs to start with comprehensive training program that enables their employees to perform multi tasks within each store such as cashiering, stocking and sales presentation. When staffs are flexible with the tasks they can do, the retail store could reduce the cost of labour. Being more incentive in marketing plans Effective marketing will help the company to seize larger market share. Haigh’s has been carrying out their marketing strategy based on in-store promotion and word of mouth.
This strategy assists Haigh’s in saving cost; however, the company has not represented a remarkable market share in the industry. For example, with consumers who live in suburbs of NSW where Haigh’s stores do not exist, they properly are not aware of the brand and are not willing to travel too far to purchase the products that they would get conveniently from local supermarket. The common marketing tools would be applied to kindle new interest in existing product lines including social media and free gifts inside packaging, event sponsorship or taking part in food expos. For distribution channel, Haigh’s also can extend their supply to large purchasers such as up-scale hotels that require high quality products rather than just focus on individual buyers. Haigh’s premium products will be suitable for five-star hotel market.
With this channel, Haigh’s will be able to sell larger amount, which would create economic of scale for the company.
Innovation Catch the consumers’ trend Failure to seize the consumers’ trends might lead to failure of the business. Consumers nowadays are having more awareness of health and nutrition in consumption decisions. In order to satisfy that need, Haigh’s need to be more innovative about the low-fat and low-sugar chocolate segment. Furthermore, Haigh’s also can reduce the portion size of their product lines by producing “a small version” of original products in order to lessen the calories intake of consumers.
It is also necessary for Haigh’s to promote the benefits of cocoa and dark chocolate to health in particularly for heart disease and antioxidant protection. Organic and free trading are also necessary movements for Haigh’s to raise consumers’ interest in the company. Extend into cafes The expansion into cafes might help Haigh’s to create a new product range. The innovation of cafes based on chocolate beverages and desserts will remark a turning point for the business. It not only helps Haigh’s to boost the sales of chocolate but also gives Haigh’s customers a new experience.
Customer responsiveness Building a strong brand loyalty Haigh’s chocolate has created a great customer service by training staff and offering to them an intensive knowledge about products and branding. However, Haigh’s has not strongly focused on building brand loyalty. It is necessary for Haigh’s to engage and maintain the relationship with loyal customers by providing member cards, discount cards for large purchases. By implementing the loyalty programs, Haigh’s customers will feel they are valued. Moreover, with the discount promotions, customers might consider to buy with bigger amount in order to get more discount; as a result, Haigh’s could increase its sales revenue.
Being more conscious of baby boomers segment As aging population in Australia is occurring faster, Haigh’s is required to take more actions in meeting the demand of this segment. Discount for senior is one of the options that Haigh’s could apply to attract more elderly people. Getting connected with consumers through social network Haigh’s has been successful in using the widespread of Facebook to engage with their consumers. In their Facebook page, a wide range of products has been introduced and received variety comments and responses from consumers. It is also a great marketing tool for Haigh’s.
However, it is needed to exploit more the potential of social network and blogging community in strengthening the relationship with consumers. Haigh’s should set up more surveys and feedback pages in order to know what are best-seller products, what are their drawbacks, what consumers want and how to satisfy their needs. The creation of “make your own flavour” game would be applied in their Facebook page, which allows browser to create and mix own chocolate flavour. It would be a chance to let consumers knows that the company values their opinions and interests. Moreover, Haigh’s will also have more ideas in developing their product lines.
Corporate strategy
People always want new, innovative products.
There are plenty of similar products existing and new products developed every single day, which gives customers various options to choose. Therefore the company may easily experience change of consumer loyalty, especially for adolescents. Chocolate is an $83 billion a year business, which makes the industry’s value larger than the Gross Domestic Product of more than 130 nations on earth.
While they have expanded its business for almost a century, they only have 13 stores in Australia and have not expanded internationally. Their products are highly known in Australia as being of very high quality. However, Haigh’s Manufacturing represents only a small part of the Australian chocolate market.
The Australian chocolate category is clearly dominated by large international players like Kraft Foods, Mars, and Nestle. Haigh’s best estimate based on industry data is 1.0 % of the total Australian chocolate market by turnover, a smaller portion by volume.
In order to expand and grow the company some strategies are suggested: Tapered vertical Integration Vertical integration is commonly used in the firm’s core business to gain market power over rivals. Market power is gained as the firm develops the ability to save on its operations, avoid market costs, improve product quality and, possibly, protect its technology from imitation by rivals.
Since 1915, Haigh’s Chocolate carries out tapered vertical integration as they have controlled the whole process from raw materials to the consumer value chain. This has enabled the business to create the highest quality for its products and enabled them to protect the product quality. The company has built its own outstanding retail network. This strategy needs to keep up to protect its product quality and its long history. However, it will not be able to make continues growth in the long term as new international competitors keep entering into the market and strong international competitors have occupied the markets.
Related diversification Haigh’s chocolate does not use related diversification. It is suggested to use related diversification in opening chocolate cafes in Australia, which allows them to grow their market share and reputation faster. Related diversification allows a company to swap complementary skills and create value through economise of scope. Haigh’s Chocolate has considered it but decided against it for now as they believe that is not their strength.
There are some international chocolate cafes in Australia including Max Brenner, Lindt, Guylian and The Chocolate Room. One of Haigh’s strengths is breadth of its product range available to customers and it is even wider range than those international competitors which run chocolate cafes in Australia as well as worldwide.
All products can be used at Haigh’s Chocolate cafe like the competitors. To differentiate, one of its current product, dark chocolate coffee beans which 100% Australian grown, for coffee lovers can be used for its coffee at the cafe and the cafe can be operated as a chocolate bar which combines a bar and a shop allowing cusomter to experience purchasing some their products at the chocolate cafe. In addition to this, buidling a solid training system for employees and developing of chocolate products such as chocolate brownie, chocolate cake can be implemented for a long term strategy of chocolate cafes. Moreover, this related diversification helps find out the latest consumer trends and behavior much more easier and also enables to advertise its new products or promotions at lower cost.
International Strategy
International strategy has been suggested as a possibility for further growth of the company. Asia market Europeans account for nearly half of all the chocolate the world eats, according to the International Cocoa Organization.
However, barriers to entry are too high in Europe as there are diverse strong competitors. Although the Asia market is smaller compared to Europe, Asian markets are expected to hold a 20 percent share of the global market by 2016. Chocolate sales in China are expected to rise 19 percent to $1.2 billion, India expects to see a 7 percent jump to $633 million dollars, and in Indonesia are expected to rise 25 percent to $1.0 billion dollars, ballooning to nearly 2 billion dollars by 2015.
Japan is Asia’s largest consumer market for chocolate confectionery with per capita consumption rate of about 1.8 kilos.
Therefore the Asian market is a sutiable entry for Haigh’s Chocolates. The first entry for Haigh’s Chocolate can be Japan. Transnational strategy A transnational strategy is most suitable strategy for Haigh’s Chocolate as it helps to achieve both global efficiency and local responsiveness. They have not entered international markets since they had failed entering into Japan market due to pricing and developing new products for new market.
Therefore, Haigh’s Chocolate needs new products for different markets. For instance, Japanese consumers prefer softer and less sweet products and prefer low-priced individually wrapped products are increasing.
Green tea, sesame flavours, individual wrapped products can be developed for Japanese markets. Haigh’s Chocolate’s are rated ‘green’ in Greenpeace True Food Guide, Signifying a clear policy on excluding GE-derived ingredients, including oils derived from GE crops, and animal products from animals fed on GE crops while other competitors such as Nestles have been rated much lower due to some criticism.
Consumer awareness of environment-friendly products is expected to grow dramatically in the next five years.
The company’s products are considered to be in a higher price range with diverse scale of products in the global market.
The company can enter into international market with its clear policy as consumers seek healthier, higher quality of ingredient for health while providing different types of products for different markets for both global standardisation as well as localisation Entry mode: Strategic Alliance Strategic alliances allow companies to share the risks and the resources required to enter international markets. Furthermore, it can facilitate the development of new core competencies that contribute to the company’s future strategic competitiveness.
