Roger Chocolate Analaysis

Question 1

Michael Porter's Five Force Module can fully explain the competition like in the premium chocolate industry. Five Forces Module can be differentiated by

• Competitive Rivalry within an Industry.

• Bargaining power of customer

• Bargaining power of supplier

• Threaten of New Entrant

• Threat of substitute products

(Porter, M. E. (1985), Competitive Advantage, The Free Press, New York.)

(Porter, M. E. (1998), Competitive Advantage: Creating and Sustaining Superior Performance)

Competitive Rivalry within an Industry

In Canada, premium chocolates were growing at 20 percent annually and the Canadian market size for Chocolates was US$ 167 million in 2006.The rivalry between existing sellers in market is low because the market of premium chocolate still in growing and each competitor own their market share. They just need to think for the new strategy to expand their market share. Example: - attractive packaging, high quality of chocolate, high price point, wider spread distributor and etc.

Bargaining power of customer

From the case study, we knew that the 50 percent of the company sales is came from the Rogers'11 retail stores, 30 percent is from wholesales. As we know whoever can bring more profit to the company, stronger bargaining they can get. However, Roger Company is more concern on the wholesale market; it will definitely affect the power of buyers. On the other hand, the differentiated product and a batch of loyalty customer lower down the bargaining power of buyers. Therefore, the power exerted by customer is low.

Bargaining power of supplier

There are limited supplier can provide the premium quality of ingredient. In this case, supplier will have more bargaining power to Roger chocolate. Although they might be having more bargaining power, they can't easily to increase their pricing. Such these premium quality ingredient, no much of the buyer can afford so that they also have limited of customer. They will consider of the long term business partners relationship instead of one times profit.

Threaten of New Entrant

As what we knew, the premium market still in growing. Therefore, it will attract a lot of the new sellers (Hershey and Cadbury) join and share this market. As we see only some strong regional brands and larger player exist in the market, it means the new entries need have a strong economic as back group to support and high production output to do it. On the other hand, the new entries must have a differential product else it will hard to break the high barrier and into this market.

Threat of substitute products

The best sales for the chocolate are during the Christmas and valentine days. The potential substitute product might be flower, some luxury stuff, toys, candy or wine. The most people think that the chocolate is a thing they can afford than that luxury stuff, is a things it can be taste, is a things that can fully represent their wish to friend. On the other hand, during these special seasonal the market will have a lot attractive and representable packaging or different flavor of chocolate. It let the consumer have more multiple choices to choose as a gift to the other party.

Conclusion, the strongest forces among them is new entries. Although it is a high barrier into the premium chocolate market, as long as the new entries got strong capability and strong economic, they can overcome the barrier and join into it. As we know this market still in growing, the profit which they earn might be much than the cost they put in. The weakest will be the substitute product, they will not affect the sales of chocolate thus as long as people still love chocolates and the market is still big.

Question 2

The key factor determines success for producers of premium chocolate is because of using porters generic strategic which are cost leadership, differential, and focus. Each producer using different strategies to gain more market share.

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(Porter, M. E. (1980), Competitive Strategy, The Free Press, New York.)

Cost