Introduction

Performance Summary

Fudge Cottage is a relatively poor performer. Sales have flat lined at around $200,000 in recent years and show no signs of improving. The main problems for The Fudge Cottage are low net income and sales. While profits are declining, expenses are skyrocketing. Christine North, the owner, has had no formal education in management. The only things she knows about store management, she has learned from her parents. In addition, north have no clear objectives for the business. The Overhiser's have tried different marketing and operations strategies to grow their business. However, nothing has been so successful in taking their business to another level.

Strategic Posture

Although the Fudge Cottage has no formal mission statement or list of objectives, its main goal is to establish itself as the dominant fudge store in Michigan. Some objectives are to:

Raise profits by increasing market share, Attract corporate clients, And strengthen customer loyalty.

Strategies: Offer outstanding customer service and free services (gift wrap, etc), Emphasize freshness and natural Ingredients,Compare the fudge's quality to other retailers' more inferior fudge, sell non-fudge candy, and introduce new foods seasonally ("unique line of handmade chocolates, Including a dietetic version"), and develop new distribution channels. Concentration (current corporate strategy) based on differentiation (current generic strategy). Policies: Provide excellent customer service, Maintain its high reputation in the community, and apply the highest standards of excellence to its fudge. Strategic Managers North, the current strategic manager, is performing poorly. Mr. and Mrs. Fred Overhiser previously owned the Fudge Cottage in 1981. Both of them made, packaged, and sold the fudge to local drugstores and supermarkets. Soon afterwards, the whole family was involved in producing the store's goods. Due to the Overhiser’s' health problems, North took over most of the store's responsibilities. Although she is a dedicated worker, she lacks the necessary skills to expand the company's operations. She feels unmotivated working at the store and seeing no improvement. On the other hand, she has been there since the beginning. She knows both the daily operational issues and the customer service culture intimately.

Analysis of the External EnvironmentOpportunities

1. Tourism2. Corporate and wholesale accounts3. Local customers who are attracted to coupons4. Holidays that emphasize gift giving (increase of Valentine's Day marketing)5. Consumers getting tired of bad tasting health products6. Downtown Development Authority planning renovation

Threats1. Consumer movement toward healthier products2. Historic district attracts more out-of-town shoppers than downtown3. Poor quality of surrounding suppliers4. Increasing costs of supplies

Porter's Competitive Factors1. Threat of substitution: high. Consumers have many other choices of sweets, ranging from brittle, taffy, chocolate, candy,And ice cream. Fudge is a specialized item, but there are a variety of different brands to choose from.2. Threat of new entrants: high. Mrs. Overhiser’s remarked there is always someone to take the place of people who are leaving the business. The economies of scale for a starting chocolate store is low, and it will likely have a significant impact On the Fudge Cottage's sales.3. Rivalry among competitors: medium. It has to be innovative and come up with unique foods to keep its customers interested.4. Power of other players: high. The Fudge Cottage's market is very price-sensitive. The store can lose its business to other retailers that offer lower prices for their fudge. To maintain a competitive advantage, it needs to differentiate itself by focusing on service and quality.

Analysis of the Internal EnvironmentStrengths1. Experience and expertise in making premium quality fudge2. Rapport with customers3. Owns a small parking lot that is more convenient than parallel parking4. Competent sales staff with a good working relationship5. Offers complimentary services, such as gift wrap6. Well-known in the Ridgefield area and receive support from local organizations7. Natural ingredients

Weaknesses1. Low volume of foot traffic2. Owner lacks motivation and management skills3. Lack of funds limit level of investment to undertake4. Higher priced goods not attractive to many current customers5. Difficulty in finding additional helpers6. Lack of preservatives results in short shelf life7. Limited facilities and staff8. No formal production schedule9. Dependence on a single supplier who was planning to retire soon

10. Small client base

Strategic AnalysisAnalysis of Strategic Factors1. Rapport with customers (strength)--Customers will visit the Fudge Cottage more often if it offers excellent customer Service (even if it is more expensive). Stacy, an employee at the store, works hard to find the perfect present for customers.2. Natural ingredients (strength)--A long shelf life can be a strength, but many consumers are looking for products with lessPreservatives and more natural ingredients . The health food craze will continue, and the Fudge Cottage should keep riding that wave.3. Lack of funds limit level of investment to undertake (weakness)--It is hard to expand store operations when there is no Money to invest. North must come up with an inexpensive way to promote store and increase profit.4. Owner lacks motivation and management skills (weakness)--North hates the long hours at the store. She also does not have the time to take care of the behind-the-scenes activities and think of the long-term goals for the Fudge Cottage.5. Higher priced goods not attractive to many current customers (weakness)--The Fudge Cottage should decide whether to sell either discount chocolate or premium chocolate, but not both. By continuing to sell premium quality sweets, it will continue to maintain its high status similar to Godiva.

Alternatives1. Continue present course2. Retrenchment (reduce prices, hire another manager)3. Divestiture (sell store to interested buyer)4. Market development (sell fudge to corporate and wholesale markets)5. Product development (sell ice cream and other gourmet candies, add preservatives to fudge)6. Joint venture (another firm can supply capital and help the Fudge Cottage pay off its debts)

RecommendationThe Fudge Cottage should pursue a market development strategy and divest the retail store. By selling her retail location, she has enough funds to explore the wholesale business while supplying fudge to the new owner of the retail location. She can hire more people to make the fudge, thereby reducing her time spent on day- to-day operations. Selling her fudge to retail stores and by mail order would expand her sales to a national level rather than not raising her prices to please bargain shoppers in Michigan. This strategy will allow her to open up to a new client base. Also, the Internet would be a great way to market her products. It would require less time from her and would allow her to increase her revenues while allowing consumers easier ways to buy the products and have it delivered to their home. This would decrease the stress placed on North and motivate her to increase efficiency.