The following case study has been developed to provide you with a realistic business scenario from which you can develop the necessary decision-making skills to meet the learning outcomes of this subject. The case study follows on from the research project where you investigated the chocolate industry and will form the basis for Assessment Items 2 and 3

Background

Pandora Chocolates is a medium-sized business created by Dottie and Lottie, two sisters, who both started their professional careers in the catering industry. Dottie and Lottie saw an opportunity to manufacture boutique artisan chocolates to supply to restaurants and selected shops. Pandora Chocolates hand crafts and packages boxes of chocolates in a variety of sizes to suit restaurants and individual customers. Pandora Chocolate also owns and operates 5 stores around Melbourne and is looking to expand into the Sydney area. The shop design and layout are simple but very effective. Most people who enter will purchase a minimum of $10 worth of product, with the average amount spent being $12.33

The company's mission is 'to create a more beautiful and memorable chocolate experience

Competition

Historically Pandora Chocolates was one of the first chocolate producers to sell to an online market and as such they had a 24% market share in the artisan chocolate market up until 2021 when they experienced a sudden decline due to COVID lockdowns. As a result of COVID, Pandora Chocolates had to close its doors for a total of 20 weeks in 2021. This was then followed by a shortage of staff and now the higher cost of living severely impacting the chocolate market.

Pandora Chocolates' biggest competition comes directly from 2 other specialty chocolate manufacturers who currently hold 20% and 36% of the market share respectively. They are further challenged by the well-known supermarket-supplied chocolate (Cadbury, Nestle, Whitlams).

Business Context

Pandora Chocolate prides itself on making everything from whole foods/plants. Through trial and error over numerous years, Pandora Chocolates believe they have perfected the fermenting and roasting of the cacao seeds to give their chocolate the unique taste that keeps customers coming back and restaurants consistently placing orders.

Pandora Chocolates is, however, facing supply chain issues due to a recent investigation into child labour and illegal cocoa production in protected forest reserves. As a result, the price of cocoa has increased significantly along with supply shortages. This has also been exacerbated by flooding in Queensland impacting the supply of sugar cane.

Finally, the business has been significantly influenced by changing health and safety standards. Specifically, consumers are becoming more conscious about what they eat and where their food has come from. This issue has been magnified by the increased regulation of safe work practices and food handling processes. These pressures have generated significant additional costs for Pandora Chocolates as its factory and warehouse are located in an industrial estate that is dominated by producing chemical sprays for agricultural spraying.

Operations

Pandora Chocolate's core operation is the production and distribution of bite-size chocolates of varying flavours.

The business does not currently have any new product development and has only sought to implement new products on an ad-hoc basis. For example, for Easter 2021 Pandora Chocolate produced vegetable-coated chocolates. This product however proved extremely unsuccessful and was quickly removed from shelves. In 2022 the business imported an all-inclusive chocolate machine that cuts down the production time by 50%. Sales of these cheaper products have been very successful and Pandora Chocolate wants to continue investing in other machines that will reduce labour requirements.

Marketing is conducted through two sales representatives, both are relatives of Dottie's husband. These sales staff have had little formal training in marketing with all reports coming back that they are 'gruff' and difficult to work with.

Operations are managed by Al Dente. He has been the plant manager for over 17 years. In recent years, he has not been as motivated. Staff turnover in the organisation is very high, with the average length of employment only 3 months. Family disputes and conflicting instructions are constantly interrupting production.

Pandora Chocolates operates 3 refrigerated distribution trucks to deliver the chocolates to stores and restaurants. These trucks are maintained and serviced in-house by Anna Prentice who is a qualified mechanic. During busy times, Pandora Chocolates will use a local delivery service but try to avoid this as they found that the chocolates were not kept at the correct temperature resulting in melting.

Pandora Chocolate has set some aspirational goals they hope to achieve by the year 2028:

We will be the leading supplier of artisan chocolates to restaurants.

Sales will increase to 55% of the total chocolate artisan market share.

Our reputation will be built on delivering a quality service to our customers where they will be delighted in the products they consume.

We will be recognised as an employer of choice.

We will be identified by our ethical and environmental standards.

However, in 2023 Pandora Chocolates has the following issues to contend with:

The factory is in desperate need of renovations. Floors have become uneven with numerous staff falling. Workstations are being contaminated with a greasy film due to chemical production occurring next door.

Quality has become an issue. In October 2022 there was a major product recall of chocolates delivered to the annual World Leaders Summit held in Melbourne.

The majority of management are members of the owner/founder's family. Family feuding and personal disputes has plagued any attempt at conducting strategic management discussions. These personal family issues have divided company management and distracted them from focussing on growing the business.

Pandora Chocolates have lost a lot of loyal customers as they have been unable to supply products.

Lottie and Dottie have appointed you to the role of Management Accountant. You have been tasked with resolving the issues identified and advising the business on ways it can grow to meet its 2028 aspirational objectives.

Case Study - Part 1

Question 1 - Strategic Management (15 marks)

You have been asked to prepare a report for Lottie and Dottie on the strategic position Pandora Chocolates should pursue given the information provided. The business's main goal is to increase its market share. You need to provide a report no longer than 3 pages.

Areas you need to address include:

a) Identifying Pandora Chocolate's competitive advantage

b) Identifying four threats and four opportunities available to Pandora Chocolate

c) Identify four strengths and four weaknesses of Pandora Chocolates

d) Evaluate Pandora Chocolate's objectives for its strategic plan.

e) Using Porter's generic strategies, what strategy would you recommend for Pandora Chocolates?

Note: Where applicable, tables are encouraged.

Question 2 - Decision making under uncertainty (15 marks)

Pandora Chocolates is investigating supplying boxed chocolates to independent supermarkets. The marketing team is unable to come to an agreement on how many chocolates should be included in the boxes and how receptive customers will be in purchasing the chocolates. Based on limited research, the marketing team has provided you with the following information.

Decision	Market demand
Number of chocolates	Positive ($)	Average ($)	Weak ($)
6 pieces	100	50	-45
10 pieces	120	40	-25
15 pieces	60	30	-15
20 pieces	40	20	-10

make a decision table that can advise the marketing team on what best course of action to take. The table needs to include the following decisions:

1. Maximax
2. Maximin
3. Equally likely
4. Criterion of realism, use and of 0.8
5. The opportunity loss
6. Minimax regret

Based on the results above, make a recommendation to Pandora Chocolates on the best course of action to take. Include a brief explanation of the different methods justifying the recommendation. (