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5th Avenue Chocolate

Executive Summary

5th Avenue chocolate is a start business in the United Arab Emirates headquartered in Dubai. The business started off when three friends began to experiment on making different types of chocolates and later shared with their friends and started selling off in schools and churches. Currently, they are a leading company in the UAE, and they are making money out of a simple experiment. The primary focus of the business is to manufacture dark and milk chocolates. Further, the range of flavors will be up to 25 flavors so as to offer the customers a variety of choices to select from. The chocolates will be produced seasonally in line with seasonality of the year. We will target some major products which are popular with the three major holidays, which include Valentine’s Day, Easter, and Christmas.

5th Avenue will also offer a unique line of chocolate postcards to complement the other products. The cards will be custom made to suit the buyer’s occasion and will include those words that the customer may desire. They will be offered in different designs created by renowned Artists. Our chocolate categories are fudges, bars, biscuits, and nuts. In 2007, the chocolate sales in the UAE were $130.3 and the subsequent year increased to $143.8 billion. The industry has had an increase over the years, and in 2013, it is expected to continue with the same trend (Sedik & Williams, 2011). In this paper, the product strategy will be discussed in detail as well as supporting marketing strategies. These will include the mentioning of new products and the different packaging and design that will be used.

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Current Situation

Competitors’ Definition

Mars Incorporated

Mars Incorporated deals with a variety of products that include information technology, snack food, electronics, main meals, pet care, and so on. This shows that it does not only deal with chocolates but with other products as well. The company is guided by five principles, that is quality, responsibility, maturity, efficiency, and freedom. These have made the company prosper against all odds.

Nestle Company

The firm has been around since the 1860s when it started off by producing baby food for infants. It has grown over the decades and expanded its products to produce chocolates (Ries, 1996). Their main strength so far has been maintaining the shareholders happy and coming up with a high-value product every time.

Cadburys

Cadburys is one of the most respected companies in the world, and its brand is synonymous with chocolate, thus a big customer base. It has a variety of products that suit different markets and needs. Cadbury’s success has been contributed by quality, advertising, and value for money. There is also the ingredient for the right partner, the right employees, and the promotional backup strategy.

Macro Environment

Economy

According to WAM press release (2012), the UAE was ranked position 33 out of 185 countries in relation to the ease of doing business (“International Finance Corporation”, 2012). The areas that they considered were: dealing with construction permits, getting credit, resolving insolvency, and protecting investors, among others. The United Arab Emirates is ranged the 6th richest country in the world by calculating the per capita income as $47,500, according to Forbes magazine. Economic Research Dept. 2012 indicates that the activities at the stock market show that the trends are weak and very slow in most of the countries, but the UAE situation is very vibrated (Sedik & Williams, 2011). The inflation rate has definitely affected the cost of production and high population growth has led to an increased demand for more luxuries and comforts. The high interest’s rate will definitely discourage the company from borrowing money and consequently reduce the expansion progress.

Technology

The overall cost of machinery is on the rise because of the rise of cost of raw materials and the complexity of the machine. The cost of maintenance is equally high in that one has to ensure that they pay either yearly or monthly for efficiency and reliability (Aaker, 1996). The company has adapted innovations such as web marketing, which has propelled the market growth and broken into markets that had not been foreseen.

Regulatory

The company has to register with the confectionary manufactures in order to enjoy price cuts on commodities such as sugar (Ries, 1996). This in turn will reduce the cost of production.

Ecological

The company has adapted operational methods that will contribute to the overall wastage reduction. This is their contribution to making the world a better place and going green, thus reduced amounts of waste into the environment.

Socio-cultural

The consumers are very conscious about their health. Therefore, it is crucial for the firm to advocate for the benefits of wellness so as to suit the customers’ needs and be sensitive to their overall health (Sedik &Williams, 2011).

Supply Chain

The 5th Avenue chocolates are being sold to consumers and to retailers directly. The company is still researching on the major quality and brands that are popular, thus being able to produce in bulk as well as sell to wholesalers.

Current Situation: Internal

Company Resources

Financial

The 5th Avenue chocolates have made considerable prfits; their profit margins have been going up considerably since they started off in the year 2001. The profit margins have been going up with an average of 5% per year (“International Finance Corporation”, 2012). The expenses are expected for both setup and daily operations for 5th Avenue Chocolates Company as well as long- term assets. Long-term assets include roasters, coolers, grinders, santha, conching, molds and other hardware and appliances. Other expenses are short–term assets and supplies.

Forecasted Budget in US$

Promotional Expense 32,675,423

Advertising 15, 870, 123

Sales promotions 2,643,345

Events and sponsorship 1,987,906

Agency Fees and development costs 6,256,843

Totals 59,433,640

People

The company has hired 39,000 employees in the different outlets in the UAE region, 65% of whom are the UAE nationals. The marketing and the sales team are significant in the company because they play an enormous role in the realization of the company’s mission and vision.

Time

The best time to do the marketing promotions is during the festive season, which include Easter, Diwali, Ramadan, and Christmas.

Objectives

· To produce quality products that will enrich people lives and lifestyle;

· To be the benchmark in the chocolate confectionary within the UAE region and eventually the world leader;

· To remain relevant to our customers by investing in research and valuing customers feedback.

Mission and Vision Statement

Mission Statement

· ‘5th Avenue Chocolates in everyone’s everyday to-do-list.’

· ‘To offer a unique experience to the customers and involve them in the production of 5th Avenue Chocolates.

Vision Statement

· 5th Avenue Chocolates to be the leading chocolates producers in the UAE and the world;

· To lead a dynamic team of professionals that will take the company to a higher level;

· Empower a system of self management through the top level management team.

Corporate Objectives

· To ensure a profitable growth in the markets;

· To ensure a positive market penetration and later product loyalty.

Marketing objectives

The company’s objective is to ensure an increase of market share by use of different marketing strategies suited for the different markets available and also by offering a variety of different products (Ries, 1996). Sustain the different markets and customers acquired over the years through effective customer relationship and loyalty programs.

Current Situation: Market Analysis

The firm is working on a project to come up with postcards that will have customized messages to go along with the chocolates that will suit the occasion.

Market Definition and Size

With over $150 billion of retail sales regionally in 2008, confectionary is a large market as well as the 4th largest industry in packaged foods (Sedik & Williams, 2011). The chocolate industry has had a consistent growth of 5% (compound annual growth rate). According to WAM press release (2012), this has been attributed to the willingness of customers to spend (International Finance Corporation, 2012). The UAE chocolate market share is getting bigger and better. The market has opened up in that the adults are becoming a bigger target market.

Market Segmentation

Demographic Variables

At this stage, we look at variables such as age groups, gender, average income, and so on. Below is an example of the different age groups.

Age Groups

The 5th Avenue Chocolates cater for different age groups, which are classified as below:

· 3 years to 18 years;

· 19 years to 25 years;

· 26 years to 36 years;

· 37 years and above.

Psychographic

It is evident that the 5th Avenue chocolates have been highly accepted in the UAE, and it has become a way of life and not fashion. It is a part of people’s lifestyle.

· Impulse segment- the products are normally purchased on impulse and they were never planned for;

· Take home segment- this category explores on consumers who purchase the products and later consume them at their homes;

· Break segment- this is a category of consumers who consume the chocolate when they take a break at work.

Industry Structure and Strategic Groupings

The chocolate industry has grown steadily over the year of 5% over the past five years.

Porter 5 Forces Analysis

Threat of New Entrants

The chocolate industry has no longer many barriers to entry, thus making it easy for new entrants. Chocolates are region affairs, thus attracting various people in relation to the different flavors and, hence, bringing in fragmentation in the market and also complexities in productions.

Bargaining Power of Suppliers

This is described as market inputs and the bargaining power of suppliers is quite low due to the numerous numbers of suppliers.

Bargaining Power of Buyers

The bargaining power of buyers is low to moderate because of different products in the market and reliance of products in the industry.

Pressure from Substitutes

In most instances, chocolates are bought as gifts or snacks. There are various items that are bought and serve the same purpose such as fresh fruits, alcoholic drinks, potato crisps, and other non-food items. On the other hand, things are fresh fruits and potato crisps have a short shelve life, thus making them not very competitive at retail shops. Looking at this factor, it makes the threat from substitutes moderate.

Competition and Market Share

There are three main competitors, namely: Mars, Nestle and Cadburys (Ries, 1996). They offer more or less the same products with 5th Avenue chocolates, and thus, they share the market.

Product Features Matrix

Product feature

5th Avenue chocolate

Mars

Nestles

Cadburys

Reliability

Style

5th Avenue is quite reliable. They ensure that their products are available at any retail shop or outlet.

5th Avenue has adapted different shapes and designs. They also have different flavors that are quite attractive to different target groups.

Reliable

Different styles and packaging.

Reliable

Different styles and packaging.

Reliable

Different styles and packaging.

Customization

Their products are customized according to the consumers taste and preference. The company is quite flexible and values the consumers’ feedback.

Customized

Customized

Customized

Competitor’s Strengths and Weaknesses

Competitors’ products are relatively high priced, and they lack consumer relationship. The competitors have been in the industry for a longer time, thus they have wide market presences, thus gaining grounds in new areas easily (Aaker, 1996).

Market Trends

· Most of the consumers are looking for a variety in flavors and personalization.

· The consumers are more health conscious and it is equally important to ensure that this need has been catered for.

· Consumer feedback should be really valued as consumers want their voices to be heard.

Marketing Strategies

· One of the marketing strategies is having conversation with consumers before launching a new product.

· The other one is having a well balanced pricing strategy that will penetrate all markets and attract masses. The prices should be also sustainable (Kotler, 2000).

· Maintaining a close watch on the market trends in all the regions present.

· Adaptation of low cost operations by being sensitive to the daily usage of supplies and recycling.

Current Situation: Consumer Analysis

Nature of the Buying Decision

The buying decision is majorly influenced by the taste/ flavor, followed by the customization, quality and image.

Participants

Young professionals and teens are the main consumers of the 5th Avenue Chocolates.

Demographics

The age ranges of the participants are between 3 and 55 years and above. In relation to gender, females are bigger lovers of chocolates as opposed to male population.

Psychographics

Most of the people buy the chocolates due to the buying impulse, especially when they are buying their groceries.

Buyer Motivation and Expectations

This is mostly influenced by peer pressure on the teenagers, and for the young professionals, it is one of the ways to release stress that come with the job.

Loyalty Segments

This has been lead by the levels of customization, constituency, and availability of the products in all the retail outlets. It is a small shop or a mega supermarket the 5th Avenue products will be available and the prices will just be the same (Aaker, 1996).

SWOT Analysis

External Threats

· There are new brands that are always coming up and existing brand that are changing their varieties, thus adding up products to already overcrowded industry.

· In most instances, consumers like new products as majority of them significantly lack product loyalty, thus easily shift from one product to another.

External Opportunities

· There is a large population that does not consume chocolate – these people can be converted and become new users.

· The chocolate sector has experienced a tremendous growth in the recent years (an increase of up to 30%).

· Growing middle class and urban population.

Internal Strengths

· The company’s products have been received well by consumers in terms of the quality.

· The products are well customized to suit everyone’s needs and to suit the occasion.

· The brand stands out from the rest, and it is easily identified and it can be easily picked out.

· A lower cost of production as a result of economics of scale will improve the profit margins significantly.

Internal Weaknesses

· Some consumers avoid eating chocolate when think about the egg content.

· It lacks market penetration in the rural areas because it is perceived as a high end product. It can be majorly found in the urban and semi-urban areas.

· Globalization will attract better brands into the region.

Critical Success Factors in the Industry

The chocolate industry growth is increasing each year. There is a healthy competition in that the players in the industry are not using price cuts to gain a competitive advantage, but they use quality products, which raises the bar. There is also the identification of untapped markets within the country. The employment of the local community will significantly raise confidence as well as leverage countrywide goodwill.

Sustainable Competitive Advantage

5th Avenue Chocolates has adapted the production of quality products to their customer’s needs and feedback.

Market Research

A market research assists in establishing knowledge and attitudes of consumers in the region. The company will endeavor to invest in this area because it provides clear insights into the issues that have to do with health and consumer wellness.

Information Requirements

The information needed when carrying out the research for the 5th Avenue Chocolates would be gained from asking questions like these:

Market

1. Who are your customers?

2. What are the age brackets of your customers?

3. What is the customer profession?

4. What is the customers’ gender?

5. What is the educational background?

6. What is the level of income?

7. What are the factors influencing customers to purchase the company’s products?

8. What are your customers’ personalities?

9. Is there anything unique about the customer?

Distribution

This sections deals with some of the ways in which our products and services can reach to the customers in the targeted markets. Some of the important questions to ask include: the use of internet in our business, ways of informing customers on premiums, trails among other offers, and the ease of getting to the potential customers, etc.

Direct and Indirect Competition

1. Identification of competitors through product line, divisions, and markets.

2. Comparison of marketing techniques with competitors.

Pricing

1. A review of services or products costs for accuracy, including fixed and variable expenses, to ensure all products or services have their share of overhead expenses as well as offer for profit (Segoviano & Goodhart, 2009).

3. Comparison of prices for products or services having similar products or services in the industry (Merton, 1974).

Research Methodology

The research methodology will use the below sources:

· Marketing metrics from external sources, which include measuring customer loyalty, the quantity of products been bought and measuring customer satisfaction.

· Marketing metrics from internal sources, which will use quantification of market penetration and market share.

· Secondary data from internal sources, which include accounting records, distribution dates, stock records, sales records, and sales persons’ opinion.

· Secondary data from external sources, which include specialist business organization, government statistics, and customer database.

· Primary data sources, which include observation, experiments, and face-to-face.

Marketing Strategy

Marketing Mix

Product

The chocolates produced by our company are among the best in the market as they are produced from dark chocolate and have enough milk and different flavors. Thus, we offer more variety than our competitors and it enables us to cater for a large population. The chocolate categories are fudges, bars, biscuits, and nuts.

Place

The 5th Avenue Chocolates are present in the UAE markets but has not yet ventured to other major regions. This area is being researched by the company in order to establish the best market to penetrate first, thus higher sales revenues.

Price

The price for our products is quite affordable, and the quality and quantity is reasonable.

Promotion

The products are advertised on the TV using emotional appeal, over the internet, radios, and outdoor campaigns (Aaker, 1991). The internet social media has been one of the biggest platforms for the company’s advertisement. The social media provides a platform where customers are able to get immediate responses to their questions. These feedbacks eventually help in the improvement of the company’s products, thus foster customer satisfaction.

Market Share Objectives

The 5th Avenue chocolates will ensure that they have increased customer loyalty to raise its sales turnovers, which will be done by starting up loyalty program. The company will also ensure that they maximize customer relationship by ensuring that they continue offering customized chocolate solutions that fit the customers’ occasions.

Product Strategies

Customer Target

Company’s products are various and are suited for all family members, which means that they attract people of all ages. Another attractive factor about 5th Avenue Chocolates is that the management and staff cater for customer needs first before any other requirement.

Product Features

The main focus is on packaging, innovation, and product development.

Competitor’s Targets

The company will have their products at affordable prices and the placing of their products will be very convenient for consumers.

Core Strategies will be the leading Value Proposition

This indicates that 5th Avenue Chocolates are for everyone, they are affordable and come in variety of flavors. Product positioning will show that products are irresistible and all time favorite.

Support for Marketing Programs

Promotion

Objectives

To increase market share and brand loyalty as well as to encourage repeat business in order to promote sales, thus high profit margins.

Strategies

To gain trust from the consumers by offering free samples and engaging them into contests.

Sales

This should be implemented to foster growth within the company. The tactics that will be used are as follows: broadcasting through television and radio, packaging by adding graphics, placing flyers and posters in stores, and using print press for advertising (Kotler, 2000).

Channels

The channels of distributions are retail shops and supermarkets. Apart from these, the company will use vending machines to dispense chocolate bars at various public areas. This will greatly influence market presence and create confidence on the 5th Avenue Chocolates.

Customer Management Activities

To create a good customer base on interactions, the company has joined the social media groups such as Twitter and Facebook. These two major platforms will enable the company to interact freely with their customers and respond to question in a timely manner (Market survey and questionnaires).

Product Life Cycle

5th Avenue Chocolates is entering in its Maturity stage in the UAE with its revenue growth levels being static in the recent months.

Implementation

Personnel Requirements and Responsibilities

Directors

They deal with formulation of strategic plans and the overall goals for the company. They give the company a sense of direction.

Management team

They ensure that the business operations are flowing and that all is running smoothly.

Marketing team

They ensure that 5th Avenues chocolates have gained grounds and the UAE population is well aware of the products and that the channels of communications are well suited to the right target market.

Sales Team

They ensure that they understand their products, thus excellent communication and negotiation skills.

Production Team

This team will ensure that a high standard quality is maintained at all times. Without this, all the efforts by the rest of the team are in vain.

Procurement Team

This team will ensure that their purchase is of high quality and timely. This ensures efficiency in all areas in the 5th Avenue Chocolates Company.

Incentives

The sales team has an incentive scheme that is based on the sales target per month. According to Kotler (2000), when a sales agent hits the set target, he/she receives a particular commission for the sales. This in turn encourages the sales team to work harder and the company enjoys the set profitability per month. The principle is: the more one sales and hits the targets, the more the commission is.

Training Required

Employees will need a lot of training in customer care as well as in dealing with people from various regions. Training will be done on marketing and adaption of different trends to enhance marketing campaigns. The issues that have to do with consumer behavior are equally important and all staff should be in a position to analyze the consumers and give feedback and their perspective on the company.

Financial Requirements

The company is mainly depended on loans for financial enhancement. With the growth of the company in the future, there are plans to generate more money for growth through share holding. The company will then go public.

Information System Requirements (Marketing/Management)

There will be an introduction of an information system that will be used for storage of customer’s data. This system will store all the relevant details, and it will be used for marketing purposes. The loyalty program will also use the same information to communicate to the customers and enhance the relationship.

Monitoring Results and Benchmarks

The information that will facilitate monitoring and benchmarking will be derived as follows:

Marketing Metrics from External Sources

They include measuring of customer loyalty and customer satisfaction as well as the quantity of products being bought.

Marketing Metrics from Internal Sources

They will use the quantification of market penetration and market share (Kotler, 2000).

Contingency Plans

· If the company spreads to other regions and the reception is not good, then we will change our focus and deal with one country at a time.

· If the company receives negative feedback, then it will work on the issue and get feedback from the customer to see if the product is improved.

· If we receive feedback from our consumers in relation to their health, we will come up with a sustainable wellness strategy.

Scenarios

Prediction of Future Scenarios

· An increased demand for products which are health conscious;

· Presence of different chocolate flavors that are in line with the market (the country) where products are been sold.

A Plan of Action for Each Scenario

· To produce chocolates that will cater for health-conscious people;

· To carry out research and find out which flavors dominate a particular market (country) and capitalize on it.

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