Strategic Plan for Real Chocolate Industries Essay

Strategic Plan for Real Chocolate Industries - Essay Example At the moment the company is comfortably placed in terms of overall performance. However, the company has to ensure maintaining levels of profits and growth in the long term, through a strategy that will give it a sustainable competitive advantage. The chocolate industry is highly fragmented industry with about four hundred companies accounting for 90% sales. Retail chocolate sales reached $16.3 billion for the year ended December 2006, out of which the Gourmet segment is about $ 1 billion. Real chocolate has about 10% of the market share in this segment. 1) From Porters five force analyses it emerges that Rivalry among existing players will be the chief competitive force in the industry. The decline in profitability which often is the result of this will come from an increase in promotion and branding cost. 2) Even though the analysis reveals that entry barriers for new players to enter are not very high, new entrants may not find it attractive to enter. Entry may occur by players creating a separate niche which may affect demand for the product in which Real chocolate operates. (e.g. of artisan chocolate entry which has already happened) 4) Sellers bargaining power is not a significant factor in the industry, as there are many producers and raw material is a commodity item. Industry incumbents do not have much threat from suppliers, buyers or new substitutes. Similarly, there are no barriers to entry for new players because of suppliers.5) Five forces analysis also reveals that buyers bargaining power is a significant factor. Buyer's loyalty has to be constantly maintained through branding, promotion and maintaining quality. Price is not a significant factor in which buyer will switch to other products. On this account, this will be a significant barrier to entry for new entrants, which reiterates point no. 1, that rivalry is the chief force in the industry.