1. Rocky Mountain Chocolate Factory
MGMT 436 Group 3
Karla Schaapveld, Jeremy Smith, Mark Bourgoin, Matt Misitano, Diego Elizalde, Jeff Stanton, and Reilly Kindred

2. I. Current situation
Jeremy Smith

3. Current situation Jeremy smith
I. CURRENT SITUATION
A. Current Performance
329 Franchised and 5 Company owned stores
Increasing revenues year to year with $16.7 Million in 2008
Sales have slowed due to economic downturn but the company is in an excellent financial position to withstand the recession

4. Current situation Jeremy Smith
B. Strategic Posture
1. Mission
Quality, Taste, Value, and Variety of products
Quality of the product is the number one factor

5. Current Situation Jeremy Smith
B. Strategic Posture
2. Objectives
Manage money carefully during economic downturn
Slowed expansion and elimination of debt
Maintain a good relationship with employees as well as franchisees

6. Current Situation Jeremy Smith
B. Strategic Posture
3. Strategies
Adding stores in resort, tourist, street front, and entertainment-oriented locations
RMCF is repurchasing stock as it felt it was undervalued
Owns 8 refrigerated trucks to move products from factory to stores
New line of sugar free candies for the health conscious and those with special dietary requirements
Each store is setup to make product where customers can view and smell the end result

7. Current Situation Jeremy Smith
B. Strategic Posture
4. Policies
Trucks are sent out from the factories with product for stores but return with ingredients to make more product making the trips more cost effective
Franchisees are held to a high standard of excellence
Company ensures that store locations are spaced apart well and offer the best probability for success
Free samples of fresh products made in stores

8. II. Corporate Governance
Mark bourgoin

9. Rocky Mountain Chocolate Factory Inc. Board of Directors
Franklin Crail
Chairman
CEO
President
Bryan Merryman
Director VP
CFO
COO
Treasurer
Lee Mortenson
Gerald Kien
Clyde Engle
Scott Capdevielle

10. Rocky Mountain Chocolate Factory Inc. Top Management
Franklin Crail
Chief Executive Officer
President
Director
Bryan Merryman
Vice President
Chief Financial Officer
Chief Operating Officer
Treasurer
Edward Dudley
Senior Vice President –
Sales and Marketing
Gregory Pope
Franchise Development
and Operations
Jeremy Kinney
Vice President –
Finance
Jay Haws
Creative Services
Donna Coupe
Franchise Support
and Training
Virginia Perez
Corporate Secretary
Willian Jobson
Chief Informations Officer

11. III. External Environment : Opportunities and Threats (SWOT)
Matt Misitano

12. External Environment A. Natural Environment B. Societal Environment
C. Task Environment
D. Summary of External Factors
The External Environment consists of many different forces, these forces are (read slide)

13. Natural Environment
1. Extreme heat, Rain, Snow, Hurricanes, and Earthquakes negatively affect foot traffic and tourism. Weather conditions also affect crop production. 2. Severe weather conditions exist in all regions of the world and at different times depending on the season and geographic location.
The Natural environment takes into account forces from the natural physical environment that either currently do or in the future will affect the corporation and the industry it is in, some of the natural environmental forces in this case are (.Read Slide)

14. Societal Environment
1. Economic 2. Technological 3. Political-Legal 4. Sociocultural
The societal environment includes 4 main forces, these forces are: Read slide.

15. Economic forces
a. Unstable economic conditions locally and globally are in a recession cycle but there are signs locally that show the economy is trending into the recovery stage which will increase consumer spending. (O)
b. Low cost marketing strategy . (O)
c. Company owned trucks. (O)
d. Hershey and Mars allocating financial resources to increase the premium chocolate products locally and globally. (T)
e. Experts forecast that the Gourmet and Organic Chocolate industry will grow to become a $ 2 billion industry by (O)
f. Fixed pricing contracts with vendors for ingredients. (O)
Economic forces include (read a. and then come back to notes for b) (includes in store demonstrations, free samples, new packaging, charitable events, sponsorships, coupons, flyers, and mail order catalogs produced by its in house creative services department). Read c. then expand (c. reduces transportation costs, increases company assets, quicker delivery of products, and more cost effective). Read d. Read e. Read f. then expand (f. fixed prices allow RMCF to receive their ingredients at the same price regardless of market price fluctuations which allows RMCF to continually make profits and be competitive with their product pricing).

16. Technological Forces
a. Increased Internet functionality and security increasing online consumption. (O) b. Dynamic manufacturing processes implemented using advanced planning and scheduling systems with lean processes to reduce and quickly turn over inventory reducing costs and storage space (O). c. Automated machine processes eliminating work previously done by hand increasing the speed, capacity, and efficiency of manufacturing processes. (O) d. New manufacturing process called NETZSCH’s ChocoEasy along with purchased automated factory equipment allowing the development of any size or variety of candy to be cost effectively manufactured using their own proprietary brand. (O) e. Small chocolate manufacturing companies are being bought by huge companies with automated machinery and processes in place to mass produce gourmet chocolate (T). f. Airport’s constructing more motorized walkways decreasing foot traffic and moving potential consumers through terminals faster (T).
Technological Forces are read slide

17. Political-Legal Forces
a. Fair trade regulations and the use of child labor. (T) b. Licensing costs and regulation compliance with health, safety, sanitation, building, and fire agencies from each state where stores are located along with federal regulations for the manufacturing and distribution of food products. (T) c. Trucking regulations from federal, state, and Canadian provinces. (T) d. Import and Export regulations (T). e. Potential for striking labor forces like the 5 day strike by laborers on the Ivory Coast in 2006 due to unbearable working conditions. (T)
Political and Legal forces are read slide.

18. Sociocultural Forces
a. Trends show consumers are supporting chocolate companies that implement ethical practices and follow fair trade regulations. (T) b. Economic recovery leads to an increase in consumer’s disposable income increasing the consumer’s ability to purchase premium goods. (O) c. Research indicates Dark chocolate has health benefits. (O) d. Trends indicate consumers are willing to pay higher prices for organic and gourmet chocolates that they feel are healthier for them. (O)
Sociocultural forces are read a. then expand (a. RMCF gets the majority of their ingredients from Western Africa were ethical labor practices are questionable, this is a threat. Read b. Read c. then expand (c. such as reducing the risk of dementia, diabetes, heart attacks, and strokes. Also research shows Dark chocolate can decrease blood pressure, lower cholesterol, and improve sugar metabolism). Read d.

19. Task Environment
The task environment forces that drive industry competition for Rocky Mountain Chocolate factory are: ingredient pricing, geographic locations, regulatory and licensing policies, large corporations entering the gourmet and organic market sectors, the ability to purchase optimal retail locations, and efficient manufacturing and distribution processes. These forces are broken down in the Task Environment and are rated as High, Medium, or Low forces depending on their impact.
Read slide.

20. Task Environment Forces and Ratings
a. Threat of new entrants High: Large corporations like Mars and Hershey have positioned themselves to enter the market globally, and there are low entry barriers. (T) b. Bargaining power of buyers Medium: Gourmet chocolate is a leisure product and there are many alternate products and competitors. (T) c. Threat of substitute products or services High: Economic strength and consumer’s disposable income greatly affect gourmet product consumption and lower priced chocolate is very accessible to consumers. (T) d. Bargaining power of suppliers Low: Fixed pricing and alternative supplier options give RMCF leverage. (O) e. Rivalry among competing firms High: Industry growth and increasing entrants into the market pose a threat to RMCF. (T) f. Relative power of unions, governments, and special interest groups Medium: Consumer demand for fair trade and good ethical practices, union demands being met, and government regulations present challenges for RMCF. (T)
Read slide.

21. Task Environment
Key factors in the immediate and future task environment for Rocky Mountain Chocolate Factory Inc.
Consumers demand for quality and healthy products as well as adherence to ethical labor practices.
Big name competitors like Mars and Hershey entering the market locally and globally.
Supplier’s willingness to provide ingredients at a fixed cost.
Creditors ability to provide potential franchise owners with loanable funds. Labor unions and employers ability to work together to produce raw materials at a low cost while operating under regulated guidelines.
Government and trade regulations dictate operating guidelines and entrance barriers in the industry.
Interest groups and local communities will support corporations that display ethical business practices and protest against businesses that do not follow those guidelines.
Shareholders will support and invest in profitable business activities and growth as long as profits are realized.
Read Slide.

22. Summary of External Factors (EFAS Table)
Read Slide. Pass to next group member!

23. IV. Internal Environment: Strengths & Weaknesses
Diego Elizalde

24. CORPORATE STRUCTURE
Incorporated company, operates franchises nationally and internationally.
The company operates as a highly cohesive unit, even though it has an active franchising program.
Some decision making, such as pricing, is left to local stores. However, more important decisions, such as store placement, have to be approved by senior management.
Corporate structure is clear to all company members. Training manual and operating specifications insure that this information is divulged to everyone.
The Corporation’s structure is instrumental to effectively manage its large geographical footprint of franchises.
Read Slide.

25. CORPORATE culture
The company values clear objectives and well defined goals.
A review of the case study materials, plus a visit to their company website revealed no considerable sustainability efforts.
Company culture is to adapt quickly and efficiently to challenges, such as establishing its own fleet of refrigerated shipping trucks after finding no suitable 3rd party provider.
Internationalization is an important element of the corporate culture, as evidenced by its international franchising program.
Read Slide.

26. Resources
Marketing
Utilizes low cost marketing tactics, such as participation at local events.
Store locations utilize existing customer bases to reduce marketing costs.
National advertising is not a part of the firm’s marketing strategy.
Company utilizes in-store advertising to stimulate impulse purchasing.
Read Slide.

27. resources Company consistently making a profit.
 Finance
Company consistently making a profit.
Operating expenses (led by fuel costs) increasing.
Multiple income sources (sales to franchised stores, sales from company stores, and setup fees and royalties from franchises).
Overall financial health is strong with excellent long term prospect.
Research and Development
Substantial R&D investment goes into store concept, market research for store placement, and developing inviting spaces to promote sales.
Over 300 recipes created by its Master Candy Maker.
Utilizes company store as testing grounds for new products.
Read Slide.

28. resources Operations & Logistics Strong areas for this firm.
Entrepreneurship has led to extremely streamlined operations.
Perfect blend of in-store production and external purchasing.
Efficient transportation solution by using own truck fleet.
Human Resource Management
Most employees are hourly.
Utilizes temporary labor during peak times.
Company emphasizes respect, commitment and professionalism.
Company states wages and benefits are competitive and fair within the industry.
Read Slide.

29. Resources Information Technology Not stated in case study.
Stores operate independently from main corporate structure.
Some aspects of its operation must entail a certain level of Information Technology utilization, such as shipping, and company sales performance, inventory control, and accounting. However, Information technology does not appear to be a critical aspect of the operation.
Read Slide.

30. Summary of internal factors (ifas table)
Read Slide.

31. V. ANALYSIS OF STRATEGIC FACTORS
Jeff Stanton

32. SITUATIONAL ANALYSIS (SWOT)
Strengths
High Quality Product (won the 3 heart rating in a blind taste test)
Highly cohesive corporate culture
Strong brand recognition
Careful selection of store sites
Strong Franchise Program (#1 in 2008, Entrepreneur magazine)

33. SITUATIONAL ANALYSIS (SWOT)
Weaknesses
Global presence

34. SITUATIONAL ANALYSIS (SWOT)
Opportunities
New environments for success
-Airport locations
-Sport Arenas
-Kiosks
Low cost marketing
Fixed price contracts
Company owned trucks

35. SITUATIONAL ANALYSIS (SWOT)
Threats
Weather (tourist areas, crop farming)
Competitors
-Hershey Foods
-Mars Inc.
-Godiva Chocolatier
-See’s Candies
-Fanny May

36. REVIEW OF MISSIONAND OBJECTIVES
Quality, taste, value and variety of products
Quality of the product is the number one factor
Objectives
Manage money carefully during economic downturn
Slowed expansion and elimination of debt
Maintain a good relationship with employees as well as franchisees

37. REVIEW OF MISSION AND OBJECTIVES
Rocky Mountain Chocolate Factory has continued to maintain its mission and objectives appropriately during times of expansion as well as recession.

38. VI. Strategic Alternatives and Recommended Strategy
Reilly Kindred

39. Strategy Development from SWOT-TOWS Matrix

40. TOWS- used to create New Strategies
Strengths: Weaknesses:
Opportunities: SO Strategies WO Strategies
-Focus on future Internal fixes &
growth improvement
Threats: ST Strategies WT Strategies
-External fixes for Survival

41. Main Strategy Alternatives:
Corporate Strategies
Stability, Growth and Retrenchment
Business Strategies
Cost Leadership and Differentiation

42. Corporate Strategies Growth Stability Retrenchment Concentration
Diversification
Vertical Growth
Horizontal Growth
Concentric
Conglomerate
Stability
Pause/Proceed with Caution
No Change
Profit
Retrenchment
Turnaround
Captive Company
Sell-out/Liquidation

43. Business Strategies
Cost Leadership- lower cost competitive strategy aimed at huge markets and requires efficient operation for general affordable product
Differentiation- aimed at the broad mass market moving a product perceived as unique charging a premium

44. Rocky Mountain Chocolate Factory
A. STABILITY ALTERNATIVES 1. Growth Strategy- (horizontal growth through franchising) Pro: Continue reaching and expanding to new markets as profits carry forward. Con: May not allow enough time for thorough planning. 2. Differentiation- (unique product and production process adds mystique) Pro: Viable for above-average earnings for exceptional product resulting in brand loyalty lowering customer’s sensitivity to price. Con: May see losses in hard times because of it being a luxury. 3. Stability Strategy- Pro: Allows for proper training of new franchisees. Con: May result in loss market share. B. RECOMMENDED STRATEGY Growth is the recommended strategy for the Rocky Mountain Chocolate Factory. The total U.S. candy market approximated $29.3 billion of retail sales in 2009, with chocolate generating sales of approximately $16.9 billion. That’s almost 60% of the candy game. RMCF as of March 31, 2010, there were 11 Company-owned, 29 franchisee/licensee owned and 305 franchised Rocky Mountain Chocolate Factory stores operating in 36 states, Canada, and the United Arab Emirates. Franchising, licensing and exporting will help short and long term goals of the company.

45. Discussion and/or Questions? Thank you for your attention!
conclusion
Discussion and/or Questions? Thank you for your attention!