Handbook Business Strategy

University of Greenwich
Business School

2008-2009

BUSI 0009
Business Strategy

Course Leaders:
Professor Will Hearne and Dr Jo Cullinane
BUSI0009 Business Strategy 2008-2009 2

Contents
CONTENTS........................................................................................................................................................... 2
1. INTRODUCTION....................................................................................................................................... 4
2. CONTACT DETAILS AND ROLES AND RESPONSIBILITIES......................................................... 5
2.1 YOUR ROLES AND RESPONSIBILITIES.................................................................................................... 5
3. COURSE DETAILS.................................................................................................................................... 5
3.1 AIMS..................................................................................................................................................... 5
3.2 LEARNING OUTCOMES.......................................................................................................................... 5
3.3 LEARNING AND TEACHING ACTIVITIES.................................................................................................. 6
4. ASSESSMENT DETAILS.......................................................................................................................... 7
4.1 SUMMARY OF ASSESSMENT................................................................................................................... 7
4.2 DETAILED DESCRIPTION OF ASSESSMENT.............................................................................................. 7
4.2.1 Individual report (on simulation exercise) ...................................................................................... 7
4.2.2 Individual Case Analysis report ...................................................................................................... 8
4.2.3 Three Hour Exam.......................................................................................................................... 12
4.3 RESIT ASSESSMENT ............................................................................................................................ 12
5. ELECTRONIC SUBMISSION................................................................................................................ 12
5.1 EXTENUATING CIRCUMSTANCES......................................................................................................... 12
5.1.1 How extenuating circumstances works ......................................................................................... 13
5.1.2 Failing to meet a deadline............................................................................................................. 13
5.2 PLAGIARISM ....................................................................................................................................... 14
5.3 PREPARING A FILE FOR ELECTRONIC SUBMISSION.............................................................................. 14
5.3.1 Preparing a File from Word or Similar ........................................................................................ 14
5.3.2 Generating and Inserting a Header Sheet for an Assignment ....................................................... 15
5.3.3 File Considerations....................................................................................................................... 15
5.3.4 Preparing a File for Submission from Other Software ................................................................. 15
5.3.5 Generating and Inserting a Header Sheet for an Assignment ....................................................... 17
6. SESSION DETAILS.................................................................................................................................. 20
7. READING.................................................................................................................................................. 22
8. TUTORIALS.................................................................................................................................................. 23
TUTORIAL 1: 29/09/08...................................................................................................................................... 24
TUTORIAL 2: 06/10/08...................................................................................................................................... 26
TUTORIAL 3 13/10/08........................................................................................................................................ 29
TUTORIAL 4 20.10.08........................................................................................................................................ 30
TUTORIAL 5 27/10/08........................................................................................................................................ 32
TUTORIAL 6 03/11/08........................................................................................................................................ 34
TUTORIAL 7 10/11/08........................................................................................................................................ 36
TUTORIAL 8 17/11/08........................................................................................................................................ 38
TUTORIAL 9 24/11/08........................................................................................................................................ 39
TUTORIAL 10 01/12/08...................................................................................................................................... 41
TUTORIAL 11 08/12/08...................................................................................................................................... 42
TUTORIAL 12 05/01/09...................................................................................................................................... 44
TUTORIAL 13 12/01/09...................................................................................................................................... 45
TUTORIAL 14 19/01/09...................................................................................................................................... 46
TUTORIAL 15 26/01/09...................................................................................................................................... 48
TUTORIAL 16 02/02/09...................................................................................................................................... 50
TUTORIAL 17 09/02/09...................................................................................................................................... 52
TUTORIAL 18 16/02/09...................................................................................................................................... 53
TUTORIAL 19 23/02/09...................................................................................................................................... 54
TUTORIA1 20 02/03/09...................................................................................................................................... 56
TUTORIAL 21 09/03/09...................................................................................................................................... 57
TUTORIAL 22 16/03/09...................................................................................................................................... 58
TUTORIAL 23 13/04/09...................................................................................................................................... 59

TUTORIAL 24 20/04/09...................................................................................................................................... 61
TUTORIAL 25 27/04/09...................................................................................................................................... 62
CASE ONE RYANAIR....................................................................................................................................... 63
CASE TWO THE REAL CHOCOLATE COMPANY INC ........................................................................................ 78


1. Introduction

Welcome to the course Business Strategy (BUSI0009).

This course is designed to allow you insight into the world of
corporate and business strategy. The course should also serve to
provide you with a basis for integrating the learning you have
undertaken in other courses during your studies.

I hope you enjoy the course and learn a lot from studying it.

Prof. Will Hearne and Dr Jo Cullinane


2. Contact Details and Roles and Responsibilities

Email address Room Phone number
Course leaders
Prof Will Hearne Hw10@gre.ac.uk QA306 0208 3319023
Dr J o Cullinane Cj59@gre.ac.uk TBA 0208 3317880

Administrative Team
TBA TBA QM245 0208 3319760

2.1 Your Roles and responsibilities

It is your responsibility to undertake all of the work requested of you in this course (i.e.
assessment, reading and tutorial preparation). To do well in courses it is often
necessary to make sure you go beyond the minimum instructions (in reading for
example) and that you ask questions or seek advice if you dont understand readings,
lecturers, tutorial exercises or assessment.

It is also your responsibility to attend regularly or notify the admin staff if you are sick.
Please remember that although learning should be intellectually challenging it is
important that classes run smoothly so it is important not to be disruptive (e.g. not
chatting during classes, leaving mobile phones on, or being persistently late) and not
to be impolite to other members of the class.

Finally, remember that your assessments should be your own work unless group
work is allowed. Plagiarism and similar forms of cheating will be punished and it is
important not to engage in such behaviour or to make it easy for other members of
your class to cheat.

Please review the regulations governing suspected plagiarism and exam offences:
http://www.gre.ac.uk/students/regulations/plagiarism

3. Course Details
3.1 Aims
The course seeks to consolidate, develop and integrate students' learning during the
entire undergraduate business programme. It aims to provide students with holistic
understanding of the strategic and general management issues which confront
business managers, to develop a creative yet systematic approach to business
decision making, and to provide the basis for continuing self development and
professional development, by encouraging analytical and critical communication skills.

3.2 Learning Outcomes
A. Knowledge and understanding of:
- The principal theoretical paradigms of business strategy;
- The principal analytical tools of strategic analysis;

- The relationship between an organisation's goals, capabilities and its business
environment;
- The inter-relationship of the different functional areas of management.

B. Intellectual Skills:
B1. Breadth of Outlook
- Analyse business situations from contrasting theoretical perspectives,
- Reflect on the strategic role of different functional areas of management.

B2. Wisdom
- Reflect on the applicability of competing theories,
- Make informed decisions on the basis of conflicting or uncertain information,
- Select appropriate analytical tools to assist complex problem solving,
- Integrate learning from this course and the programme as a whole.

B3. Personal Effectiveness
- Apply learning to concentrate business problems,
- Generate creative and innovate strategies,
- Use evaluation techniques that ensure selected strategies are sound and relevant.
- Deploy implementation methods across all the functions in any organisation to
overcome barriers to change and successfully implement agreed strategies.

C. Subject Practical Skills:
- Analyse any organisation to reveal its current strength, or weakness, to face the
future challenges;
- Develop strategies for any organisation that are designed to ensure its long-term
survival and prosperity;
- Devise strategy implementation "action plans" for any organisation.

D. Transferable Skills
D1. Critical Thinking
- Critically assess different theoretical paradigms,
- Critically assess a range of analytical tools.

D2. Information Management
- Identify relevant information within complex descriptions of business situations,
- Access relevant information from primary sources in the Internet.

D3. Communication Skills
- Confidently engage in class discussions and defend point of view,
- Make effective seminar presentations,
- Write succinct business reports,
- Provide effective critical support for peers.

3.3 Learning and teaching activities
This course ordinarily runs on the basis of one-hours lecture and one hours tutorial
per week. However in addition, several other learning and teaching activities are
considered integral to your capacity development in this course. Specifically:

- Set reading;

- Participation in tutorial discussions
- Seminar and tutorial exercises
- Preparation for assessment
- Library and online searches
- Analysis and synthesis of course and other materials
- Simulation exercise

4. Assessment Details

4.1 Summary of assessment
In this course there are three pieces of assessment and your final grade for the
course is determined by a weighted average of the pieces.

All assessment is individual and collaboration between students in the writing up
of the coursework is not permitted.

Assessment Title Weight
towards final
grade
Length Due Date
Individual report (on
simulation exercise)
20% 2,000 09 Dec 2008
3.00 pm
Individual Case Analysis
report (on the Real
Chocolate Company)
30% 3,000 10 March 2009
3.00 pm
Exam

50% 3 hours During exam
period.

4.2 Detailed description of assessment
4.2.1 Individual report (on simulation exercise)
Reflect on the simulation exercise and lessons learnt about strategy.

Due 09 December 2008 3 pm

Instructions:
1. Undertake the StratSim Management simulation exercise in a group (between
3 and 5 members). Run the exercise to its end by making the 6 decisions at
the designated time, saving the various outcomes of these decisions along the
way.
2. Working individually, address the questions below in report format.
3. Write your report in an appropriate academic style and particularly ensure you
use third person narrative, Harvard style in-text citation and referencing.
4. Utilise a number of academic-style resources (e.g. textbooks, books and
journals) and try to ensure that you use no, or only a small number, of internet
sources.

5. Do not copy any materials you use word for word unless you identify these
sections clearly as quotations.
6. If you paraphrase any materials you must identify the materials sources
through in-text referencing.
7. This is an individual report please do not work closely with anyone else.
8. Write 2000 words (+or - 10%) including the text of your essay but excluding
the cover page, reference list, footnotes and appendices.

Individual Report on Simulation Exercise Questions
1. What was the initial strategic direction chosen for the firm and why was this
chosen?
2. What decisions were made during the course of the simulation and why were
these taken?
3. How closely did the decisions your firm take match your initial strategic
direction? Was it possible to stick to the strategic direction chosen?
4. What were the final results of the simulation exercise and how did these
results arise from the decisions taken?
5. What underlying strategic principles were evident in the results and process of
the simulation? i.e. what kinds of outcomes arose from decisions you made
and strategies you adopted?
6. What did the simulation reveal about business strategy?

Marks allocated
to criteria:
Criteria
20% Focus
Does the report address the set questions in a meaningful manner?

20% Synthesis
Does the report bring relevant literature to bear on the set questions
in a significant manner?
20% Soundness
Does the report indicate a comprehensive understanding of the
theory and evidence utilised?
20% Self evaluation
Does the student demonstrate some capability in identifying his/her
own learning processes
10% Clarity of structure
Is the report well organised and logically constructed to achieve
synthesis while being mindful of the needs of the reader?
10% Mechanical Soundness
Is the report clearly written, spell checked and grammatically sound
and referenced appropriately?

4.2.2 Individual Case Analysis report
Working individually, build up a portfolio of analyses utilising tools and theories of
strategy to analyse the Real Chocolate Company case study. Report this analysis in
a business report.

Due 10 March 2009 3 pm. See the case study later in this handbook

Instructions:
1. Undertake a comprehensively strategic case analysis of The Real Chocolate
Company utilising relevant theoretical frameworks and models.
2. Write your report in an appropriate academic style and particularly ensure you
use third person narrative, Harvard style in-text citation and referencing.
3. Utilise a number of academic-style resources (e.g. textbooks, books and
journals) and try to ensure that you use no, or only a small number, of internet
sources.
4. Do not copy any materials you use word for word unless you identify these
sections clearly as quotations.
5. If you paraphrase any materials you must identify the materials sources
through in-text referencing.
6. This is an individual report please do not work closely with anyone else.
7. Write 3000 words (+or - 10%) including the text of your essay but excluding
the cover page, reference list, footnotes and appendices.

FREQUENTLY ASKED QUESTIONS ABOUT THE REPORT

A. Are the appendices included in the word count?
No. However the appendices need to be as brief as possible and probably should be
around 5-7 pages in length. Remember if a model is not directly useful dont include it.
B. Can we include diagrams of models in the main body of the report?
This is not recommended include these in the appendices instead.
C. Do we need to explain the models and theories used?
Generally no unless you are doing something very unusual.
D. Do we have to write the report as outlined on the next page?
No but something similar would be sensible.
E. Can I take a resource based view of the firm approach?
Yes adjust the report structure so that the resources and capabilities and VRIO are
more prominent throughout.
F. As third years we are meant to demonstrate research capability, where do I
include my research in the report?
Normally the organisation SHOULD NOT be researched further and you should limit
your data to that provided in the case. However there is some small scope for you to
acquaint yourself with the industry and developments and to reference that material
but limit your data, news and literature to that available at the case date. All of the
Appendices should be referenced.
G. The case uses data from 2006. -- how should we deal with that?
Write in current tense and limit your data, news and literature to that available at the
case date.
H. Can we work together?
You may discuss the case with colleagues but no collaboration on structures, models,
content or conclusion(s) is allowed. Do not share reports or models.
I. What kind of report should we write?
A business report but you do not need an executive summary. In the main body,
write in clear, business-like English, using full sentences rather than bullet points.

J. What do I need to do to get a distinction?
Write a coherent and informed report that demonstrates complete mastery of the
models and the case and insight into the strategic process.
Handy Hints for a Professional Report
- No description/ justification of the operation of the theories or model is needed
- The main body of the report should include discussion but the specific application
of models and theories should only be included in the appendices
- Appendices should be limited to 5 pages and any appendix must be referred to in
the main body of the report for a marker to look at it
- Use descriptive headings and sub-headings to structure your report.
- Be complete and direct. Use specific examples to illustrate main points
throughout the report.
- Present your thoughts in complete sentences (avoid simply listing points)
structured into paragraphs. Identify new paragraphs by skipping an extra line. Try
to remember to use the appropriate vocabulary and grammar. Avoid jargon and
slang expressions. Avoid absolute terms such as obvious or certainly
- Avoid value-laden words or phrasing such as proper planning, etc
- Do not needlessly repeat case material or unimportant facts. You can assume
that the report reader is familiar with the general circumstances of the case.
- You may make assumptions but they need to be clearly stated. Try not to make
unwarranted assumptions.
- Do not quote any outside sources of information, commercial or academic, unless
they are directly relevant to an argument. There is usually more than enough
material in the case to do a thorough analysis.
- Do not use material that contains information about the organisation subsequent
to the period referred to in the case.
- Edit and revise! Edit and revise!
- Proof read and use a SPELL CHECKER to check for any typos or spelling
mistakes!

POSSIBLE STRUCTURE FOR CASE ANALYSIS REPORT

Introduction ~5% word-count
Describe The Real Chocolate Companys current strategic position, products or
services, markets, key stakeholders & strategic purpose (mission & vision /strategic
intent). Discussion must be at case date
Part 1 External Analysis ~20% word-count
Using the appropriate analytical tools identify the major threats and opportunities
confronting The Real Chocolate Company in its business environment. Discussion
must be at case date.
Part 2 Internal Analysis ~20% word-count
Using the appropriate conceptual tools identify the main internal capabilities of The
Real Chocolate Company and match them against the Critical Success Factors of
the industry. In your judgement how well is the company performing? All of this
discussion must be drawn directly from the case.
Part 3 Current Problem Diagnosis ~10% word-count
Summarise the issues identified in Part 1 & 2 to reveal The Real Chocolate
Companys problems. Also ensure you pose the problems so that Part 4 provides
options which address them.

Part 4 Generation of Strategic Options ~15% word-count
Outline 3-4 explicit strategic options that might potentially address the problems
identified in Part 3. Drawing on your TOWS analysis show how the options
realistically relate to the companys problems.
Part 5 Evaluation of Strategic Options ~10% word-count
Using any relevant tool of strategy evaluation show which strategic option you
propose for the company and explain your choice.
Part 6 Description of Selected Strategy ~10% word-count
Give a more detailed description of the option selected and identify the specific
resources need for its implementation.
Part 7 Action Plan for Implementation ~10% word-count
Provide a description of the proposed actions & parties involved & rough timescales.
Part 8 Conclusion
Provide a concluding comment about The Real Chocolate Companys strategic
future.*

We offer below a list of models and conceptual tools which are available to you at
each stage of your assignment. For example for environmental scans and industry
analysis See Appendix A. For internal analysis see Appendix B. and so on.. You
must consult your Tutor if in doubt about their application.
Appendix A Consider including exhibits applying the following:
PESTEL (forecasts);
CSFs and Industry Group
Analysis;
Porters 5 Forces (industry and no-
frills strategic group);
Markets and segments (forecasts);
and
Opportunities and Threats facing
industry and no-frills.
Industry life cycle
Appendix B Consider including exhibits applying the following:
Resources and Capabilities
(P.R.O.F.I.T) and VRIO;
Value Chain
Benchmarking
The BCG
Balanced Score Card
Functional performance (incl
Financial Ratios);
Strengths and Weaknesses.
Appendix C Consider including exhibits applying the following:
Strategy clock;
Porters Generic Strategies
Ansoffs matrix;
TOWS
Appendix D Consider including exhibits applying the following:
J ohnson et al.s criteria for
evaluation
Rumelts criteria for evaluation
The Balanced Score Card


Marks allocated
to criteria:
Criteria
20% Focus
Does the report analyse the case in a meaningful manner?

30% Synthesis
Does the report bring relevant theories/models and external
evidence to bear on the analysis of the case?
30% Soundness
Does the report indicate a comprehensive understanding of the
theory / models utilised?
10% Clarity of structure
Is the report well organised and logically constructed to achieve
synthesis while being mindful of the needs of the reader?
10% Mechanical Soundness
Is the report clearly written, spell checked and grammatically sound
and referenced appropriately?
4.2.3 Three Hour Exam
Closed book exam divided into 2 sections:
- Section A - 5 short paragraph questions on tools/theories of strategy (5 marks
each 25 marks in total)
- Section B - 4 questions/tasks related to the pre-seen case study on Ryanair
(75 marks in total)

4.3 Resit Assessment
Your courseworks and exam results will be reviewed by a Subject Assessment Panel
(which looks at the course) and a Progression and Award Board (which reviews your
progress) and the deliberations of these two committees will determine whether you
have failed any coursework or exams and therefore need to complete resits.

Resits will usually involve a new coursework topic or exam being completed.

5. Electronic Submission

Written coursework will only be accepted as a Word, Excel, Powerpoint or PDF
electronic file submitted through the respective course WebCT site by the coursework
deadline.

Submissions must comprise a single file with a University header sheet as the first
page. The maximum file size for submission is 5Mb. Submissions that do not meet
these requirements may not be marked.

5.1 Extenuating circumstances
The following section must be read in conjunction with the University regulations on
extenuating circumstances which can be found at:
http://www.gre.ac.uk/students/regulations/extenuating


5.1.1 How extenuating circumstances works
The University acknowledges that at times matters beyond a students control will
impact upon their performance. Examples of such matters include a new illness,
death in a family, injury or suffering violence. The matters the University is most
concerned with are those that either impair a students performance or interfere with
a student completing assessment within a give timeframe.

The University has a mechanism called extenuating circumstances, which is
overseen by committees within each School of studies, that receives applications by
students who have experienced matters beyond their control which have impacted
upon their performance or ability to complete assessment.

To make a claim, a student needs to complete an extenuating circumstances form
(available from the web address in the section above), attach relevant evidence and
submit the form at the earliest instance that it is clear that the matter will impair their
performance. The evidence must (normally) not just describe the matter but also
indicate the level of impact it has had on the student.

The appropriate school committee will then review the claim and evidence and either
accept the claim or reject it and the secretary of the committee will notify the student
accordingly.

The proceedings of the committee are confidential and only the committees decision
will be made public never the details of the claim.

Regardless of whether a claim is accepted or rejected, the Progression and Award
Board will be advised that a claim was made, in addition, the decision of the
extenuating circumstances committee will be announced so that a students
performance can be considered in light of the matters that may have affected them.

5.1.2 Failing to meet a deadline
The University does not allow extensions to coursework deadlines. Any coursework
that is handed in late without extenuating circumstances will receive a 0 grade.

In general, students with a reason for missing a deadline where that reason can be
described as unexpected, uncontrollable and where the reason can be suitably
evidenced, may apply for extenuating circumstances and may submit their
coursework up to two weeks after the deadline using Extenuating Circumstances.

The decision as to whether the coursework submitted late will be marked or not
depends upon the outcome of the Extenuating Circumstances Committees
deliberations.

To take this option, submit an extenuating circumstances claim at the earliest
instance of the problem being known, then later (within two weeks of the deadline but
as early as possible) print your assignment and attach a header-sheet and an
envelope with an electronic copy on a disk. Also attach a completed extenuating
circumstances form and your evidence and give all of this to the School Office. Keep
the receipt you will be given.

5.2 Plagiarism
Please note that coursework will be routinely checked for plagiarism using the 'Turn it
in' software system (see
http://www.turnitin.com/static/products_services/plagiarism_prevention.html for an
illustration of how this works).

The University Regulations governing suspected plagiarism and exams offences is
explained at:
http://www.gre.ac.uk/students/regulations/plagiarism

Plagiarism is defined as including, but is not limited to:
1.1 Plagiarism includes, but is not limited to
i) using published work without referencing (the most common)
ii) copying published work but with minor paraphrasing
iii) copying coursework essays or allowing one's work to be copied
iv) using work previously submitted for another award
v) collaborating with any other person when the work is supposed to be
individual
vi) taking another person's computer file/program/designs/drawings
vii) submitting another persons work as ones own
viii) the use of unacknowledged material published on the web
ix) purchase of model assignments from whatever source
x) copying another students results

Penalties for plagiarism vary but may include failure in the piece of work, failure in the
course, failure for the entire stage (year) of study, a lower degree classification or
exclusion from the university.

5.3 Preparing a File for Electronic Submission
The most straightforward way to prepare a file for electronic submission is to create a
single Microsoft Word file. Other techniques are also discussed below:

5.3.1 Preparing a File from Word or Similar
The process of preparing an assignment in Word or similar word processing software
for electronic submission involves the following steps:
1. Prepare the assignment on disk as a normal Word file.
2. Create a header sheet for the assignment on BannerWeb.
3. Copy the header sheet from your web browser and paste it as the first page of
your Word file.


5.3.2 Generating and Inserting a Header Sheet for an Assignment
You can generate the relevant header sheet directly from BannerWeb with the
following steps (summarised in the screen shots on the next page):
1. In BannerWeb Click on Student Services
2. Click on Coursework Header Sheets, then View/Print Header Sheets.
3. Select the current Academic Session.
4. Enter Coursework Header ID number for the assignment provided in the
Course Handbook or Course WebCT site.
5. Enter your registration number from your resource card.
6. Click on Submit
7. The header sheet for your assignment appears on screen
8. Copy this from your web browser, using Edit/Select All, then Edit/Copy.
9. Position your cursor at the very start of the Word file.
10. Paste the header sheet into this page, using Edit/Paste
11. Adjust the width of tables and/or margins so that the header sheet fits on a
single page.

5.3.3 File Considerations
Submissions must be a single file, no larger than 5MB. Large file sizes normally arise
because of the inclusion of images, so review the necessity of these and use black
and white and smaller jpg images where possible (We print in black and white so
colour is unnecessary).

When naming files for submission, please include your Banner ID number in the file
name. e.g.:
000383880BusStrat

Do not use special characters such as %&.

Please note that when we print your submission, the formatting of the file may vary
from what you intend because of differences in printers and fonts available. To
reduce the likelihood of this occurring, use default formats and fonts unless there is a
particular need to do otherwise.

A good way of ensuring that your file is printed the way you intended it is to save the
file as a Portable Document Format (PDF) file. Computers in the Business School
lab have Adobe Acrobat software installed to create these files. But freeware
software available on the internet can allow you to do this yourself.

5.3.4 Preparing a File for Submission from Other Software
Generally, the easiest way to prepare a file for submission using information from
non-word processing software is to paste this information into a Word file, insert the
Header Sheet and submit this compiled Word file, as discussed above. Information
from other software can often be directly inserted into Word using copy and paste or
the Insert/Object command.

Another way of inserting output from other software or other sources is to scan the
printed output into an image file and insert the image as a whole page in Word. But

you must be cautious using this approach because too many images will cause the
file size to exceed the 5Mb limit.

A third way of compiling the output of different programmes is to use the Portable
Document Format (PDF) and software such as Adobe Acrobat. This can be used to
compile the output of a wide range of virtually anything that can be printed, including
scanned images, preserving the format you wish.

5.3.5 Generating and Inserting a Header Sheet for an Assignment

1. Location of Coursework Header Sheets Menu

2. Enter Header Sheet ID and Student ID


3. Header Sheet Displayed: Use Edit/Select All , then Edit/Copy

4. Paste Header Sheet into the Front of your Word Document

6. Session Details
Details Session Title and Description Reading
Lecture 1 Introduction to the course and overview of
assessment
Handbook
Introduction to Strategy
- Strategic decision making
- Levels and process of strategy
J SW Chapt 1
29/09/08
Tutorial 1 The Case Method Handbook
Lecture 2 Paradigms of strategic management
- Design Approaches
- RBV

Strategic purpose
- Vision/ Mission
- Strategic intent
J SW Chapt. 4.
06/09/08
Tutorial 2 Overview of simulation exercise Handbook
Lecture 3 External Strategic Analysis 1
- Analysing the external environment
- PESTEL
- OT
- SWOT
J SW Chapt. 2
13/10/08
Tutorial 3 Strategic Purpose Ryanair Case
- The problem
- Strategic purpose
- Stakeholders
Ryanair case
Lecture 4 External Strategic Analysis 2
- Porters five forces
- Critical success factors for the industry
- Industry groups
- Driving forces
- Industry Life Cycle
J SW Chapt. 2
Specifically pp 51-
85
20/10/08
Tutorial 4 External Analysis 1 for Ryanair Case
PESTEL and OT
Ryanair case
Lecture 5 Internal Strategic Analysis 1
- Strategic resources and capabilities
- Fit and stretch
- Threshold capabilities
- VRIO
- Core Competencies
J SW Specifically
pp 93-123
27/10/08
Tutorial 5 External Analysis of RyanAir 3
- Porters 5 forces
- Critical success factors
Ryanair case
- Value Chain analysis
- Creating superior capabilities
- Value Chain Integration
J SW Chapt. 3
03/11/08
Tutorial 6 External Analysis of RyanAir 4
- Critical Success Factors
- Industry Groups
Ryanair case

Details Session Title and Description Readings
Lecture 7

Internal Strategic Analysis 3
- Benchmarking
- The balanced Score Card
J SW specifically
pg 69-72
10/11/08
Tutorial 7 Internal Strategic Analysis 1
Analysing Value Chain Capabilities
Ryanair Case
Lecture 8 Internal strategic analysis 4
- Culture and best fit
- Valuing human capital
J SW pg 177-205
17/11/08
- Value Chain Capabilities and VRIO
Ryanair Case
- Innovation and creativity
- Knowledge creation and its capture
J SW Chapt. 9
24/11/08
- Internal functions of Ryanair
- Application of the Value Chain
Ryanair case
Lecture 10 Internal Strategic Analysis 6 Finance
- Ratios
- Profit and loss
- Evaluating financial strength
J SW pg 489-496
01/12/08
Tutorial 10 Tutorial on Assignment 1 (Simulation Report) Ryanair Case
Lecture 11 Internal Strategic Analysis 7 Marketing
- The Marketing Mix
- The marketing the portfolio

08/12/08
Tutorial 11 Financial Appraisal at Ryanair Ryanair Case

Christmas Break
Lecture 12 Strategic choices I
- The generic Strategies of Porter
- The Strategy clock of J SW
J SW Pgs 221-250
05/01/09
Tutorial12 The Real Chocolate Company Case External
Analysis
RCC Case
Lecture 13 Strategic Choices 2
- The Ansoff Matrix
- The TOWS Matrix
J SW pg 293-318
12/01/09
Tutorial 13 The Real Chocolate Company Case Internal
Analysis
RCC Case
Lecture 14 Strategic choices 3
- Diversification

19/01/09
Tutorial 14 Strategic Choice 1
Application of the strategy clock and/or the
generics
RCC Case
Lecture 15 Strategic Choices 4
- Integration and Outsourcing
- Strategic alliances and joint ventures
J SW Chapts. 7 26/01/09
Tutorial 15 Strategic Choice 2
From SWOT to TOWS
RCC Case

Details Session Title and Description Reading
Lecture 16 Strategic choices and their evaluation
-Rumelt
-J ohnson Scholes et al
-(develop your own method?. Well why not?)
J SW Chapt 10
02/02/09

Tutorial 16 Using the Ansoff and Expansion Methods
Matrices
RCC Case
Lecture 17 Strategy Implementation 1
-Managing Change and overcoming resistance
J SW Chapt 14
09/02/09
Tutorial 17 Strategic Options for The Real Chocolate
Company Case
RCC Case
Lecture 18 Implementation 2
From options and choice to decisions and
sustainable implementation
J SW Chapt 11
16/02/09
Tutorial 18 Force Field Analysis The Real Chocolate
Company Case
RCC Case
-Strategic renewal
-Entrepreneurship and creativity
-Performance Feedback
J SW pg 418-420
23/02/09
Tutorial 19 Action for The Real Chocolate Company
Case
RCC Case
Lecture 20 Exam briefing and discussion of Case study
02/03/09
Tutorial 20 Examine Case study and revisit case analysis
technique
Ryanair Case
Lecture 21 Session details TBA
09/03/09
Tutorial 21 Exam Preparation Ryanair Case
Easter Break
Control and evaluation
J SW Chapt 13
13/04/09
Tutorial 22 The Balanced Score card RCC Case or
Ryanair Case
Lecture 23 Contemporary and Developing Issues in
Strategy

20/04/09
Tutorial 23 Mock Case Exam questions Ryanair Case
Lecture 24 Final Summary and last exam comments
27/04/09
Tutorial 24 Drop-in Tutorial session

7. Reading
Author Date Title Publisher
J SW=J ohnson, G.,
Scholes, K. &
Whittington, R.
2008 Exploring Corporate
Strategy. Text (8th Edition)
FT Prentice Hall I ISBN
1405887338
You may also find it useful to visit the publishers website for the recommended text.
This can be found at:
http://wps.pearsoned.co.uk/ema_uk_he_johnson_excorpstrat_7/0,9855,1709359-
,00.html


8. Tutorials

BUSI0009 Business Strategy
Tutorial 1: 29/09/08

The Case Method

Learning Objectives:
1. To begin to develop insight into the case based method of teaching
business strategy

Student Instructions
1. Before class, read the material on the following page about case based analysis
methods
2. During class your tutor will discuss case based analysis and invite your questions

My Notes on Case Based Analysis Methods (complete before class):


Strategic Case Method

1. Case Studies
A case describes the events and circumstances surrounding a particular
organisational situation. A business strategy case may concern a whole industry,
a single organisation, or some part of an organisation.

The objectives of case analysis are:
1. To build your skills in conducting strategic analysis in a variety of
industries, competitive situations, and organisational circumstances;
2. To enhance your sense of managerial judgement by wrestling with actual
problems of actual managers and from practice working with complex
situations and incomplete information;

The aim of case analysis is for you to think actively, offer your analysis, and
propose plans of action and to explain and defend your assessments.

2. Analysing a Case
a) Read the case through quickly for familiarity to get idea of the issues
involved. Then read the case again to understand the finer details.
b) Try to identify the major strategic problem or issues needs to be
resolve and any secondary issues which need to be addressed.
c) Identify the current vision, mission and strategy. Look for statements
about what the organisation wants to be or what it wants to do.
d) Identify the organisations products and markets. Also consider the
competitive focus which is indicative of significant competencies,
resources or capabilities.
e) Select and apply appropriate environmental analyses models/ theories
to develop an understanding of the organisations current strategic
position and the issues which need to be addressed.
h) Develop two or three feasible alternative strategies to resolve the major
problem or issue. These should evolve from the analysis and need to be
specific.
i) Design and apply a set of decision criteria for evaluating the alternative
strategies and select a specific strategy to recommend for
implementation. Make sure that your recommended strategy is
addressing the key strategic problem or issues you have identified.
j) Develop an action plan that spells out the details required to implement
your chosen strategy. This plan needs to address key issues in each of
the major functional areas including finance, marketing, HRM, and
systems.


Tutorial 2: 06/10/08

Overview of the simulation exercise

1. To develop an understanding of the operation of the StratSim
Management Simulation exercise.
2. To determine the firms strategic approach

1. Before class, re the material on page Error! Bookmark not defined..
2. Before class, identify any questions you might have on the operation of the
simulation game.
3. Before class, log in to the simulation and read the simulation case study. Make
notes of the key issues.

My Notes on the StratSim Management simulation game (complete before
class):

My Notes on the Simulation case study


What is StratSim Management?
StratSim Management is a competitive business strategy simulation that covers all the
functional areas of managing a business. Teams compete directly against each other in this
strategic management simulation, within the environment of the fast-paced automobile industry.
Faculty control the difficulty level of the simulation by customizing the simulation with the many
available options, in order to make the experience appropriate for undergraduate or graduate
applications.
StratSim Management ties all the functional areas together:
Strategic Management
Strategic management is at the core of all decisions made in StratSim Management. Students
start by conducting environmental analysis before articulating the vision and mission of the
organization. Students must determine their firms' core competencies, and formulate corporate-
level, business-level and functional-level strategies
Product Development
Students create new product concepts and choose whether to develop them and ultimately
launch them into the market. Each team also has the ability to improve its development
capabilities through investment in vehicle technologies, as well as by expanding the number of
product development centers.
Operations
Teams make operations decisions that consist of building or selling off capacity, moving products
from development to production, and entering a sales forecast and production level for each
product. Retooling costs and estimated inventory are recalculated when the forecast or
production is changed.
Marketing Students develop an understanding of the marketing function and strategic
management by analyzing consumer/product relationships, selecting a market segmentation
strategy, and designing and implementing a marketing mix strategy
HR
Students must decide how team responsibilities are divided. Will they be product managers?
Functional managers? How will information be analyzed? Who will negotiate with potential
partners? All students on a team make one set of decisions for their firm, so coordination among
team members is an essential ingredient for success.
IT
Students may develop their own complex information systems to support their decision
processes. StratSim Management offers easy ability to export data to Excel. The challenge for
students is deciding which information is most relevant and how best to analyze it.
Finance and Accounting
Financing and management accounting decisions in StratSim Management involve analyzing
projected cash flows and ensuring there are sufficient funds to cover investments and operations.

In addition to choosing among many alternative uses for their limited funds, students also make
decisions involving dividends, short vs. long-term debt, and raising capital by issuing stocks and
bonds. Students are expected to perform financial ratio, breakeven, and net present value
analysis.

StratSim Assignment Report. Due Date:

09/12/08

Tutorial 3 13/10/08

Strategic Position of RyanAir
- The problem
- Strategic purpose
- stakeholders

1. To develop understanding of the concepts of strategic purpose by
reviewing the RyanAir case.
2. To develop an understanding of strategic problem identification by
reviewing the RyanAir case.

1. Before class, re-read the RyanAir case on page 694 of the text book and identify
the major problems that Ryanair is facing
2. Before class, identify RyanAirs mission and vision at the end of the case.
3. During class your tutor will lead a class discussion on RyanAirs problem and
mission and vision and you will be asked to contribute to this.

My Notes on RyanAirs strategic problem (complete before class):

My Notes on RyanAirs mission and vision (complete before class):

My notes on the key stakeholders at Ryanair and their relative power
(complete before class)


BUSI 0009 Business Strategy
Tutorial 4 20.10.08

External Analysis 1
- PESTLE
- OT

1. To develop understanding of external analysis by applying the PESTLE
. tool to the RyanAir case.
2. To develop understanding of external analysis by applying the OT (of
. SWOT) tool to the RyanAir case.

1. Before class identify the trends in RyanAirs environment using PESTLE.
2. Before class, identify opportunities and threats in RyanAirs environment.

My Notes on RyanAirs external environment (complete before class):

Political

Economic

Socio-cultural

Technological

Legal

Environmental


My Notes on RyanAirs OTs (complete during class):

Opportunities Threats


Tutorial 5 27/10/08

External Analysis 2
- Porters five forces

1. To develop understanding of the external analysis by applying the Porters
Five Forces model to the RyanAir case.

1. Before class, consider how the Porters Five Forces model applies to RyanAirs
industry.
2. During class work in small groups to fine-tune the findings and then contribute
this to a discussion.

My Notes on RyanAirs industry Porters Five Forces (complete before
class):

Threat of development of substitute products

Bargaining power
of suppliers
Threat of development
of substitute products
Rivalry among
competing firms
Bargaining power
of consumers
Threat of entry of new
competitors

Bargaining power of suppliers

Bargaining power of consumers

Threat of entry of new competitors

Rivalry among competing firms


Tutorial 6 03/11/08

External Analysis 3
- Critical success factors 4
- Industry Groups

1. To develop understanding of the external analysis by applying critical
success factors and industry group analysis to the RyanAir case.

3. Before class identify the critical success factors in RyanAirs industry.
4. During class you will also draw up an industry group analysis
5. During class, contribute to the discussion your tutor leads

My Notes on RyanAirs industry Critical Success Factors (complete before
class):


Industry group analysis (complete during class):


Tutorial 7 10/11/08

Internal Analysis 1
- Analysing value chain capabilities

1. To develop understanding of the internal analysis by exploring RyanAirs
. Resources and capabilities.

1. Before class identify the resources and capabilities mentioned in the RyanAir
case.
2. During class contribute these identified resources and capabilities into a class
discussion.

My Notes on RyanAirs Resources (complete before class):

Physical - tangible property (prod/admin)

Reputational - perceptions of stakeholders

Organisational - structure, systems/process

Financial - money, assets, stocks

Intellectual & Human - K, experience


Technological - process, system

My Notes on RyanAirs Capabilities (complete before class):

Note the Core Competencies


Tutorial 8 17/11/08

Internal Analysis 2
- VRIO
- The value chain

1. To develop understanding of the internal analysis by applying the VRIO
. Framework to the RyanAir case.

Student Instruction

1. before the class identify four value chain activities that may be regarded as
significant capabilities of Ryanair.
2. using the VRIO model given below identify those capabilities which contribute to
the companys competitive advantage

Applying VRIO to RyanAirs Value chain Capabilities (complete during class):

Value

Rareness

Imitability

Organisation

1

2

3

4

5

6

7

8


Tutorial 9 24/11/08

Internal Analysis of Ryanair
- Internal Functions of Ryanair
- Value chains

. value chain.

1. Before class identify the key features of RyanAirs Value Chain.
2. During class contribute to a discussion of the value chain in the RyanAir case.

My Notes on RyanAirs Value Chain (complete before class):

1. Key features of value provided by RyanAirs Primary Activities:

Firm Infrastructure
Human Resource Management
Technological Development
Procurement
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
& Sales
Service
S
u
p
p
o
r
t
i
n
g

A
c
t
i
v
i
t
i
e
s

P
r
i
m
a
r
y

A
c
t
i
v
i
t
i
e
s

Relationship with Suppliers Relationship with Buyers
Elapsed Time - Value added time cost

2. Key features of value provided by RyanAirs Supporting Activities:

3. The main sources of RyanAirs margins


Tutorial 10 01/12/08

Tutorial on assignment 1 (Simulation Report)

1. To answer any questions related to the first assignment.

1. Before class identify any questions you have about the first assignment.
2. During class you will discuss these questions.

My Notes on Assignment One (complete before class):



Internal Analysis
Financial Appraisal of Ryanair

. financial structure.

1. Before class analyse RyanAirs finances using the key financial ratios.
2. During class check your calculation and contribute to a discussion about what
these ratios reveal about RyanAirs financial well being.

My Calculations of RyanAirs Finances (complete before class):

Return on assets (ROA)

ROA= Net Profit
Total Assets

Return on equity (ROE)

ROE= Net Profit (after tax)
Total Equity

Gross profit margin (GPM)

GPM = Gross Profit or (Sales COGS)
Sales

Net profit margin (NPM)

NPM = Net Profit
Sales


Asset turnover (AT)

AT = Sales
Total Assets

Debt to assets (D/A)

D/A = Debt
Assets

Current ratio (CR)

CR = Current Assets
Current Liabilities

Quick (or acid test) ratio (QR)

QR= Current Assets - Inventory
Current Liabilities

Implications of the Financial Ratios for RyanAir: (complete during class):



The Real Chocolate Company External Case Analysis

1. To undertake an analysis of the external environment of the Real Chocolate
Company

1. Before class read the case study and make some preliminary notes about the
external features discussed in the case study.
2. During class students will identify which external analysis tools would be most
usefully applied to this case and conduct the analysis

My Notes on the Real Chocolate Companys External Analysis



The Real Chocolate Company Internal Case Analysis

1. To undertake an analysis of the internal environment of the Real Chocolate
Company

1. Before class read the case study and make some preliminary notes about the
internal features discussed in the case study.
2. During class students will identify which internal analysis tools would be most
usefully applied to this case and conduct the analysis

My Notes on the Real Chocolate Companys Internal Analysis



Strategic Choice 1
- Strategic clock
- Generic Strategies

1. To develop understanding of strategic choice by applying the strategic
. clock and Porters generic strategies to the Real Chocolate Company case to
. begin to identify possible strategic options.

1. Before class apply the strategic clock framework to the Real Chocolate
Company case.
2. During class you will work in small groups to identify possible strategies identified
by the application of the Strategic Clock and contribute these to a class
discussion.

My Notes on applying the Strategic Clock to Real Chocolate Company
(complete before class):


Strategies Identified as possible options for Real Chocolate Company Case
by application of the Strategic Clock



Strategic choices 2
- SWOT to TOWS

1. To develop understanding of strategic choice by applying the TOWS
Matrices to the Real Chocolate Company Case to identify possible
strategic options.

1. Before class apply the TOWS Matrix to the Real Chocolate Company Case.
by the application of the TOWS Matrix and contribute these to a class discussion.

My Notes on applying the TOWS Matrix to Real Chocolate Company Case

Weaknesses:
1.
2.
3.
Strengths:
1.
2.
3.
WO Strategies
Use Opportunities to
overcome weaknesses
SO Strategies
Use strengths to
take advantage
of opportunities
Opportunities:
1.
2.
3.
WT Strategies
Defensive strategies
to minimize
weaknesses and
avoid threats
ST Strategies
Take advantage of
Strengths to
avoid
threats
Threats:
1.
2.
3.
From
External
Analysis
From
Internal
Analysis

Strategies Identified as possible options for Real Chocolate Company by
application of the TOWS Matrix



Using the Ansoff and Expansion Methods Matrices

1. To develop understanding of strategic choice by applying the Ansoff and
Expansion Matrices to the Real Chocolate Company Case to identify possible
strategic options.

1. Before class apply the Ansoff Matrix to the Real Chocolate Company Case.
by the application of the Ansoff Matrix and contribute these to a class discussion.

My Notes on applying Ansoffs Matrix to the Real Chocolate Company Case

M
a
r
k
e
t
s

Present
P
r
e
s
e
n
t

New
N
e
w

Market Penetration
Product Development
Market Development
Diversification
Products

Strategies Identified as possible options for Real Chocolate Company Case
by application of the Ansoff Matrix



Strategic Options for the Real Chocolate Company

1. This session allows students to ask questions about the strategic options open
to Ryanair

1. Before class Please refer to chapters 7 and 8 of J SW
2. Before class, Identify two strategic options for the Real Chocolate Company and
make your case in support of your choices from:
Diversification
Merger
Strategic Alliances
Acquisition
J oint ventures
Outsourcing

My Notes on Questions Strategic Options for the Real Chocolate Company



Force field analysis for the Real Chocolate Company

1. To develop understanding of barriers to change, apply a Forcefield
. Analysis to Marks and Spencer.

1. Before class apply a Forcefield analysis to Marks and Spencer assuming you
were trying to implement the strategy you outlined in the previous tutorial.
2. During class you will contribute your findings to a class discussion.

My Notes on applying a Forcefield Analysis to Marks and Spencer (complete
before class):

Pushing
Resisting
Proposed additional
forces


Evaluation of strategies
- J ohnson & Scholes
- Rumelt

1. To develop understanding of strategic evaluation by the J ohnson and
. Scholes and Rumelt criteria to strategic options for Ryanair
. identified in earlier tutorials.

1. Before class apply the J ohnson and Scholes and Rumelt evaluation criteria to
strategic options you identified in earlier tutorials.

My Notes on applying Johnson and Scholes Criteria to evaluating strategic
options identified in tutorials 14 and 15 (complete before class):

Possible Strategies

Suitability Acceptability Feasibility
1

2

3

4

5

My Notes on applying Rumelts Criteria to evaluating strategic options
identified in tutorials 14 and 15 (complete before class):

Possible Strategies

Consistency Advantage Consonance Feasibility
1

2

3

4

5

K
e
e
p

t
h
e

s
a
m
e


Which strategy should be recommended for Ryanair

and why? (complete during class):

How does the recommended strategy address the problem identified in
earlier tutorials? (complete during class):


Tutoria1 20 02/03/09

Strategy implementation

1. To develop understanding of processes of implementing strategy.

1. Before class apply develop an action plan for implementing the strategy for
Ryanair that you have already selected

My Notes on an action plan to implement strategy for tutorial 19 (complete
before class):

A
c
t
i
o
n
s

T
i
m
i
n
g

W
h
o

C
o
s
t

P
r
o
g
r
e
s
s

C
o
n
t
i
n
g
e
n
c
y

Structure /
Culture

HRM
Marketing
Finance /
Accounting

R&D/
Info Systems

Operations



The anxiety reducing session
Exam Case study

1. To allow students the opportunity to clarify their thoughts on the Ryanair Case
prior to the exam

Student Instructions.
1. Before class. Read the Exam Case.
2. Before class Take note of your concerns and identify areas in which you would
benefit from further clarification and discussion in relation to the Ryanair case
study which will be utilised in the exam.

My Notes on areas that could usefully be further clarified:



Exam preparation

1. This session allows students to ask questions about the structure and nature
of the exam.

1. Before class read the past exam papers

My Notes on Questions Related to the Exam (complete before class):



Balanced Scorecard

1. To give insight into the development of a Balanced Score Card for either
the Ryanair or Real Chocolate Company Case

1. Before class- For each of the FOUR perspectives included in the balanced
score card identify at least TWO performance indicators for each one for Ryanair
or the Real Chocolate Case.
2. When completing this task you should consider that each of your indicators will
resemble a critical success factor of the industry which the company has to excel
at AND you should also try to identify .how the company is going to measure its
success in relation to the performance indicators. Remember the BSC is about.
MEASURABILITY.
3. During class engage in discussions about this method.

My Notes:

1. The financial perspective

2. The customer perspective

3. The internal perspective

4. The innovation and learning perspective



Mock Exam Questions

1. Students will be provided mock exam questions on which they can practice
developing appropriate answers

1. During class. Undertake the questions provided and then engage in class
discussion to evaluate and fine-tune answering approaches

My Notes:



Drop in session

1. To allow students to attend class to ask questions that have arisen during their
personal revision

1. Before class undertake revision for the exam and make notes of questions that
arise
2. During class, attend and discuss these questions with your tutor

My Notes:


CASE ONE
Ryanair















CASE TWO
The Real Chocolate Company Inc

The Real Chocolate Company Inc
The gourmet chocolate segment is the fastest growing segment in the chocolate industry and
accounts for 10 percent of overall chocolate sales. Gourmet chocolate sales were $1.3 billion in
2005 and are expected to reach $1.8 billion in 2010, which reflects a 6.4 percent growth rate. Two
main reasons contribute to this growth: the health benefits from the antioxidants in chocolate and
the placement of products in mass-market channels. Don Montouri, publisher of Packaged Facts
states, "Gourmet chocolates have come out of the closet and are showing some muscle in the
mass market arena with exceptional branding that is making gourmet indulgence a household
phenomenon.
On May 10, 2007, managers at the Real Chocolate Company announced record earnings for the
year ended February 28, 2007. Brent Masters, Chief Accountant of the company, stated, "We are
very pleased to report another year of impressive net income growth with earnings per share
increasing to record levels the 2007 financial year. Our revenues rose over 12 percent to a record
$31.6 million, while total systemwide sales of our franchised and company-owned stores
increased 9 percent to $108.9 million, compared with $99.7 million in the previous fiscal year."
While Real Chocolate Company was growing nicely, the question on the minds of CEO Sarah
Smith and her management team had to be whether they could maintain this level of growth in
the years to come in the highly competitive, fragmented chocolate and confectionary industry.

Company Operations
History In 1981, Sarah Smith had a dream of raising her family in a quiet, small-town
environment. Upon the family's arrival in Kingstown, Colorado, Sarah did not have a plan to
support her family so she surveyed the town's local residents and merchants. Sarah recalls, "It
came down to either a car wash or a chocolate shop. I think I made the right choice." The original
shop is still located on Main Street and the smell of chocolate lures the tourists and local citizens
into the store. The company offers a choice of 300 chocolates and a range of other confectionary
products and during the Christmas, Easter, and Valentine's Day periods the company will offer an
additional 100 products. As of March 31, 2007, there are 5 company-owned and 316 franchised
store locations across the USA, plus stores in Canada. The company employs about 235 people.
The philosophy at Real Chocolate Company is to use only the finest, highest quality ingredients
and no artificial preservatives. Its motto is "Perfection in Handmade Gourmet Chocolates. The
Real Chocolate Company brand name is well known in the USA and company managers believe
this, along with its reputation for quality, variety, and taste of products, special ambiance of the
stores, store site selection criteria, expertise in the manufacture and merchandising of chocolate
candy products, and good customer service, provide the company with a competitive advantage.
In J une 2005, it was announced that Real Chocolate Company was identified as one of America's
100 fastest-growing small public companies. Sarah Smith commented, "We are proud that the
Real Chocolate Company was selected as one of the 100 fastest-growing small public companies
in America. Our goal is to build the Company into the premier retail chocolatier in the United
States.

Products In order to maintain high quality levels and provide the best taste experience to
customers, only the finest chocolates and ingredients are used. The proprietary recipes have
been developed by the master chocolate maker. Each store offers at least 100 chocolate
varieties, 15 types of fudge and over 30 varieties of caramel-covered apples at any one time.
One signature product is a Paw which is a paw-sized mixture of caramel, roasted nuts, and
chocolate. Other favorites on offer include nut clusters, butter creams, truffles, toffee. The
company also dips a variety of fruits, nuts, and cookies in milk, dark, or white chocolate. Recently
introduced is a line of sugar-free and no-sugar-added sweets.
One trademark of the company is the large portions of chocolate. Sarah Smith reports that "... this
was a fortunate mistake. In the early days, my partners and I did not know how to make chocolate

and had to literally learn on a ping gong table. From the start we made the candy centers too big,
not compensating for the added size and weight when coating the pieces in chocolate. And if they
didn't look quite right we would dip them again."' The oversized pieces were a hit with customers
and have become a Rocky Mountain benchmark.
In 2000, managers hired a nationally recognized packaging design firm to completely redesign
the packaging that is featured in the retail stores. The project was completed in 2002 and the
design is very contemporary and highlights a coordinated line of packaged products that
conveys the Real Chocolate Company store experience of freshness, fun, and excitement.
Stores and Distribution Company managers are very careful about selecting sites for new
stores. When identifying possible sites, managers review and consider tenant mix, visibility,
attractiveness, accessibility, foot traffic, and costs. Locations of stores are in factory outlet malls,
tourist environments, regional malls, street fronts, airports, and other entertainment-oriented sites.
There are 110 factory outlet malls in the United States and by February 28, 2007, Real Chocolate
Company had stores in 65 of these malls in 25 states. The company has about 45 stores in
locations considered tourist environments or entertainment-oriented sites. There are about 1,400
regional malls in the United States and the company has stores in about 100 of these. Other
sites that company managers consider appropriate locations include airports and sports arenas.
Real Chocolate Company has nine stores in airports.
The stores are designed to establish an inviting atmosphere to customers. Products such as
fudge and caramel apples are made in the store. Approximately 50 percent of store sales are
from products made on-site. This concept conveys freshness and homemade quality to
customers, and in-store preparation is fun and entertaining as customers watch the candy being
made. In 2000, managers hired a design firm to evaluate existing store design. A new design was
developed and implementation began in 2002. By March 2007, 159 stores incorporating the new
design had been opened. The pre-2002 design was a country Victorian decor that included wood
cabinets, copper and brass accents, and etched mirrors. The post-2002 design is more modern
and designed specifically for the high-traffic mall locations. The average store size is 1,000
square feet with 650 square feet of selling space.
In addition to its stores, the company also sells product through wholesaling, fundraising,
corporate sales, mail order, and the Internet.

Manufacturing Operations Real Chocolate Company products are made at the factory located
in Ventre, Colorado. The manufacturing process involves cooking or preparing the sweets
centers, which include nuts, caramel, peanut butter, creams, and jellies, and then coating them
with chocolate and other toppings. Temperature ranges are carefully controlled and quality
control measures exist at every step of the manufacturing process. Both manual and automated
processes are utilised. When it becomes cost effective, the company will move a manual
operation to an automated process, but they are careful to not compromise product quality or
appearance when changing to an automated process.
Chocolate, nuts, sugar, corn syrup, cream, and butter are the main ingredients used in sweets.
Shipments of ingredients arrive at the factory daily in order to ensure freshness. The company
buys ingredients from a limited number of reliable suppliers and often enters into purchase
contracts of between 6 and 18 months in order to ensure a constant supply of ingredients,
especially chocolate and nuts. At least one alternative source is maintained for all essential
ingredients so that the loss of a supplier would not have a substantial effect on the operations of
the company. A limited amount of candy is purchased from third parties and is sold in stores as a
private label product. A large portion of product is shipped from the factory to stores via the eight
company-owned trucks so that product arrives at stores quickly and cost-efficiently. Ingredients,
supplies, and products from third parties are back-hauled on return trips in order to maintain low
costs for the trucking operations.
Controlling costs and continuing to find ways to increase efficiencies is important to company
managers. In recent years the company has purchased additional automated factory equipment;

implemented a comprehensive MRP II system that includes forecasting, planning, scheduling,
and reporting; and installed all enhanced point-of-sale system in all company-owned stores and
162 of the franchised stores.

Marketing In-store promotions and point-of-purchase materials are the primary means of
marketing used by Real Chocolate Company. Local store marketing is important to the company
so advertisements, coupons, flyers, and nail order catalogs are customized for each store by the
in-house Creative Services Department. The company participates in local and regional events,
sponsorships, and charitable causes as a means to attain low-cost but high return publicity.

Franchising In 2002, most company-owned stores were sold and in March 2007, the company
had 316 franchised stores. The company began franchising stores in 1982. The initial investment
is between $129,000 and $435,515 and the franchise fee is $24,500. Real Chocolate Company
has been ranked as the best franchise opportunity in the candy category by The New
Entrepreneur Magazine.
Most new franchises are awarded to people who have been referred by current franchisees,
customers who have visited Real Chocolate Company stores and are interested in owning one,
and to existing franchisees. The company does advertise for new franchisees in national and
regional newspapers in areas where suitable potential store locations have been identified.
Franchisees are selected based on net worth and liquidity, work ethic, and a personality that is
compatible with the company's operating philosophy. Because of the emphasis on excellent
customer service, the company looks for high levels of motivation and energy when hiring
employees or evaluating franchisees. In 1992, the company entered into a franchising
development agreement with Immaculate Confections, Ltd. of Vancouver, British Columbia to
develop stores in Canada. By March 2007 there were 35 stores operating in the Canadian
market.
Real Chocolate Company provides a comprehensive seven-day training program to franchisees
at its training center in Durango. Franchisees learn about store operations and management at
the full size replica store. Topics covered include company philosophy, customer service,
merchandising, pricing, cooking, inventory and cost control, quality standards, record keeping,
labor scheduling, and personnel management. During the program, trainees are completely
oriented to company operations by working in key factory operational areas and by meeting
senior managers. Operating standards are stated in operating manuals provided to trainees.
Franchisees are continually supported by company field consultants who regularly visit franchise
stores and talk with franchisees via phone. Field consultants review and discuss operating results
and provide advice and guidance on improving profitability and implementing marketing and
merchandising programs. A handbook containing a prepackaged local store marketing' plan is
provided to all franchisees.
Franchisees must pay the initial franchise fee, royalties based on monthly gross sales, and a
marketing fee based on monthly gross sales. Franchisees are granted an exclusive area of
operation. Chocolate and candy products that are not made on-site must be purchased from the
company factory or from approved suppliers.

Finances Real Chocolate Company derives income from three sources: (1) sales of chocolates
and confectionary products to franchisees, (2) sales of product at company-owned stores, and (3)
initial franchise fees and royalties from franchisees. At fiscal year end February 28, 2007, 72% of
revenues were from sales of products to franchisees, 8 percent from company-owned store sales,
and 20 percent from franchise and royalties fees.
Company sales vary seasonally with the most sales occurring during the Christmas holiday and
summer vacation season.
Revenues increased 12.5 percent from fiscal 2006 to fiscal 2007, operating income increased

17.1 percent, and net income increased 16.7 percent. Exhibit 1 contains a breakdown of
amounts received from the revenue sources.
Exhibit 1 Revenues
(in $ thousands)
2007 2006 %
Change
Factory Sales $22,709 $19,297 17.7%
Retail Sales 2,626 3,046 -13.8%
Royalty & Marketing Fees 5,604 5,048 11.0%
Franchise Fees 634 683 -7.1%
TOTAL $31,573 $28,074 12.5%

The increase in revenue is primarily due to the increased number of franchise stores that were in
operation during the year. In fiscal year 2007, 37 new franchised operations were opened. In
fiscal year 2008, the company expects franchisees to open between 35 and 40 new stores, and
the company expects net income to increase 15 to 20 percent. In May 2006, the board of
directors authorized the repurchase of up to $2 million in common stock. On May 3, 2007, this
repurchase was completed and the board of directors authorized the repurchase of an additional
$5 million, or up to 350,000 shares, of common stock.
For the 12 months ending May 2007, the stock price ranged from a high of $15.49 per share to a
low of $11.67 per share. The P/E ratio for Real Chocolate Company is 20.14 compared to an
industry average of 21.68 (see Appendices A B and C).
Sarah Smith summed up Real Chocolate Company's growth and performance over the years
when she stated, "Fiscal 2007 represented another year of progress towards our goal of building
Real Chocolate Company into the premier retail chocolatier in the United States with system wide
sales breaking the $100 million mark for the first time in the Company's history.
"

The Chocolate and Confections Industry
The National Confectioners Association (NCA) estimates that in 2006 retail confectionary sales
reached $28.9 billion, a 2.8 percent increase over 2005. Retail chocolate sales reached $16.3
billion for the year ended December 2006. Per capita consumption of chocolate was over 13
pounds in 2004. Gourmet chocolates account for about 10 percent of the chocolate industry with
sales of $1.3 billion in 2005 and expectations that sales will reach $1.8 billion by 2010, a 6.4
percent growth rate. One major reason for this growth rate in the gourmet chocolate segment is
the expansion of distribution through food, drug, and mass market channels. Exhibit 2 contains a
listing of major competitors in the U.S gourmet chocolate industry.
Exhibit 2 Gourmet Chocolate Marketers
Company Brand Names
Sees Candies
MasterFoods USA Dove, Dove Promises
Lindt & Sprungli A.G. Lindt, Lindt Lindor, Ghirardelli
Ferrero USA Inc Confetteria Raffaello, Ferroro Rocher,
Mon Cheri
Hersheys J oseph Schmidt Confections, Scharfflen
Berger
Nestle USA Inc Nestle, After Eight, Perugina
Campbell Foods Co Godiva Chocolatier
Kraft Foods Inc Terrys, Toblerone chocolate
Maxfield Candy Co. Mrs. Field, Maxfields, Hallmark
Alfred Ritter Gmbh & Co Ritter Sport
Droste BV Droste

Exhibit 3 contains the National Confectioners Association reports of confectionary sales for 2006.
What new products and trends from chocolate and confectionery manufacturers can consumers
expect to see in the future? Dark chocolate is still a consumer favorite. It appeals to the older

demographic and it is being touted for its health benefits. Dark chocolate sales increased 49
percent from 2003 to 2006. Marcia Mogelonsky, a senior analyst with Mintel International states,
"Companies have been working hard to introduce people to different ranges of dark chocolate,
from 45 percent to 75 percent cacao." New products from Hershey's include the Extra Dark line;
Pure Dark with cranberries, blueberries, and almonds; and Pure Dark with macadamia nuts and
cranberries. Nestle's has Dark Chocolate Raisinets, Treasures, and Turtles. Ghirardelli will
introduce Intense Dark Gourmet Chocolate Bars and Botticelli will introduce Choco-Omeg (which
comes in 3 formulas: the cardio bar with omega-3s, the calcium bar with calcium and omega-3s,
and the memory bar with choline and omega-3s).

Exhibit 3 2006 Confectionary Sales
(in billions of dollars)
Category Retail Sales Manufacturer
Sales
% Change
Total $28.9 $18.8 +2.8
Chocolate $16.3 $10.5 +3.1
Non-Chocolate $8.9 $5.8 +1.7
Gum $3.7 $2.5 +3.8

Consumers will see more high-end chocolates with the introduction of Chocolate Bows Dark
Almond Chocolates and Sweet Candy Company Gourmet Taffy twists. Fortified candies that have
vitamins and skin-enhancing ingredients that are being introduced by N.I. Corporation. Pure
Beauty Strips and J elly Belly Sport Beans come in fruit punch and berry blue. Sugar-free and
healthy sweets products will be introduced with Simply Lite Foods' Sunkist fruit gummies with
Vitamin C, Hershey Sticks that are 60-calorie chocolate treats, and a sugar-free Dove Dark.
Russell Stover is beginning to sell its No Added Sugar products in the UK. Sugar-free sales
account for 7 percent of the UK confectionery market, 58 percent of Spain's confectionery market,
and 32 percent of France's market. In 2005, 2,767 new confectionery products were introduced
to consumers and studies have found that 23 percent of sales can be attributed to new products.
Other trends in the industry have been predicted by NCA:
Product placement, promotions, displays, and signage will become more important to candy
manufacturers as they try to achieve product differentiation. Retail space allocated to candy
has not changed much in the past 10 years. In 1993, retailers allocated 21.7 linear feet to
candy, on average, and in 2004 retailers devoted about 22.2 linear feet. However, as
average store size has increased 33%, the percentage space has decreased.
More national retailers are offering candy, gum, and mints at cash registers. Sales through
these nontraditional outlets have doubled over the last several years.
Artisan chocolates from small manufacturers are creating a niche market. These makers are
experimenting with exotic flavors and ingredients mixes.
As consumers become more ethically aware, it is expected there will be growth and new
introductions in the organic and natural chocolates. Consumers have indicated that they
would purchase more fair trade items if they were available.
Demographic changes are also affecting the industry. Asians are the prime consumers of
gourmet/premium chocolates. Younger adults who are not married, are college graduates,
and rent will consume above average amounts of gourmet and premium chocolates.
Premium chocolate consumers are not correlated to high income groups.
Manufacturers may create new opportunities for consumers to purchase candy by focusing
on nontraditional candy holidays (such as J uly 4th) or by cross selling products such as with
greeting cards or wine.
Obesity is becoming a major concern in the USA. In 1986, the Centers for Disease Control
reported that just eight states had 10 to 14 percent of the residents obese. In 2002, every
state reported at least 15 to 19 percent of its residents were obese. Sweets represent 4.1
percent of total calorie intake for adults with optimal Body Mass Index. Sweets account for 4
percent of total calorie intake for overweight adults and 4.3 percent for obese adults.

The chocolate and confectionery industry must comply with numerous regulations that cover
health, sanitation, safety, and franchise operations (relating to registration and disclosure of
information). Product labels must comply with the Nutrition Labeling and Education Act of 1990
and the Food Allergen Labeling and Consumer Protection Act of 2004. During 2005, the NCA
was actively involved in supporting or fighting numerous legislative proposals. Vending machine
restrictions were proposed in New J ersey, California, and Connecticut. Candy taxes were
proposed in Pennsylvania, North Carolina, Nebraska, and West Virginia. Legislation concerning
the levels of lead in candy was introduced in California, Texas, New York, and Maryland. The
NCA supported the Central American Free Trade Agreement (CAFTA) that provided for an
increase in sugar imports to the United States. CAFTA was signed by President Bush in August
2005.
The prices of chocolates and nuts can vary significantly in the commodities market due to
monetary fluctuations and economic, political, and weather conditions in the countries where
products are grown. It was reported in J une 2006, that the black pod, frosty pod, and witches'
broom diseases could adversely affect the cacao beans if these plant diseases are not controlled.
There are 4 million metric tons of beans valued at $4 billion produced each year.

Cocoa is
produced mainly in developing countries.
The ripe fruit of the cocoa tree is harvested by farmers with machetes. Once the raw cocoa bean
is fermented and dried, it is taken to the processing factory where the inner part of the kernel, the
nib, is heat treated. Fat is pressed out of the cocoa mass and once this cocoa butter is filtered it
goes to the manufacturer either in liquid form or solid form. What remains after the butter has
been removed is pressed into cocoa cakes. These cakes are broken up and ground into fine
cocoa powder. Chocolate is made from cocoa mass, sugar, cocoa butter, and, optionally, milk
may be added.

Exhibit 4 Coca Producing
Countries 2006
Country Production
Ivory Coast 38%
Ghana 21%
Indonesia 13%
Nigeria 5%
Cameroon 5%
Brazil 4%
Ecuador 3%
Malaysia 1%
Others 10%

The retail sales of confectionery products are very competitive and the candy market is maturing,
with expected 4 percent annual growth rates. Close competitors of Real Chocolate Company are
Godiva Chocolatier, with annual sales of $825 million; Russell Stover, with annual sales of $450
million; and See's Candies, with annual sales of $325 million. Today, it is not uncommon to read
about a new chocolatier opening a store or a major manufacturer introducing a new chocolate
product. How will Real Chocolate Company continue to compete in this fast-paced industry?

Appendix 1 Income Statements
Real Chocolate Company Inc.
Statements of Account
For the Years Ended February 28
2007 2006 2005
Revenues
Sales $25,335,739 $22,343,209 $19,380,861
Franchise and royalty fees 6,237,594 5,730,403 5,142,758
Total revenues 31,573,333 28,073,612 24,523,619
Costs and Expenses
Cost of sales 15,988,620 13,956,550 11,741,205
Franchise costs 1,570,026 1,466,322 1,411,901
Sales and marketing 1,538,476 1,320,979 1,294,702
General and administrative 2,538,667 2,239,109 2,497,718
Retail operating 1,502,134 1,755,738 1,453,740
Depreciation and amortization 873,988 875,940 785,083
Total costs and expenses 24,011,911 21,614,638 19,184,349
Operating Income 7,561,422 6,458,974 5,339,270
Other Income (Expense)
Interest expense (19,652) (99,988)
Interest income 67,071 95,360 92,938
Other 67,071 75,708 (7,050)
Income Before Income Taxes 7,628,493 6,534,682 5,332,220
Income Tax Expense 2,883,575 2,470,110 2,015,580
Net Income $4,744,918 $4,064,572 $3,316,640
Basic Earnings per Common Share $0.77 $0.65 $0.55

Appendix 2 Balance Sheets
Balance Sheets
As of February 28
2007 2006
Assets
Current Assets
Cash and cash equivalents $2,830,175 $3,489,750
Accounts receivable 3,756,212 3,296,690
Inventories 3,482,139 2,938,234
Other 690,891 715,803
Total current assets 10,759,417 10,440,477
Fixed Assets 5,754,122 6,698,604
Other Assets 1,942,630 1,918,399
Total Assets $18,456,169 $19,057,480
Liability and Stockholders Equity
Current Liabilities
Accounts payable $898,794 1,145,410
Accrued expenses 1,517,016 1,258,213
Other expenses 840,233 504,150
Total current liabilities
$3,256,043 $2,907,773
Deferred Income Taxes 685,613 663,889
Stockholders Equity
Common stock 183,397 188,458
Additional paid-in capital 6,996,728 10,372,530
Retained Earnings 7,334,388 4,924,930
Total stockholders equity 14,514,513 15,485,818
Total liabilities and stockholders equity $18,456,169 $19,057,480

Appendix C Cash Flow Statements
Statements of Cash Flows
For the Years Ended February 28
2007 2006 2005
Cash Flows from Operating Acti vities:
Net Income $4,744,918 $4,064,572 $3,316,640
Depreciation and amortization 873,988 875,940 785,083
Provision for loss on accounts and related foreclosure costs 70,000 --- 25,000
Provision for inventory loss 70,000 45,000 90,000
Loss on sale of assets 101 37,411 44,789
Expense recorded for stock options 201,269 --- ---
Deferred income taxes (133,432) 4,195 135,716
Accounts receivable (711,456) (445,921) (453,255)
Refundable income taxes --- 364,630 (364,630)
Inventories (613,905) (461,207) (136,402)
Other assets 104,843 (236,640) 89,661
Accounts payable (246,616) 56,934 135,934
Income taxes payable (33,729) (824,860) (121,403)
Accrued liabilities 452,255 602,187 23,726
Deferred Income 5,000 --- ---
Net cash provided by operating activities 4,783,236 4,082,241 3,570,859
Cash Flows from Investing Activities:
Additions to notes receivable (124,452) --- (236,142)
Proceeds received on notes receivable 211,143 345,442 172,776
Proceeds (expense) from sale or distribution of assets 434,335 (4,395) 23,834
Decrease in other assets (134,221) 15,748 451
Purchase of property and equipment (201,037) (1,300,314) (1,406,698)
Net cash provided by (used in) investing activities 185,768 (943,519) (1,445,779)
Cash Flows from Financing Acti vities:
Payments on long-term debt --- (1,665,084) (1,401,490)
Costs of stock split or dividend --- (8,902) (15,638)
Issuance of common stock 623,206 1,072,729 591,126
Tax benefit or stock option exercise 159,930 1,182,830 531,360
Repurchase and redemption of common stock (4,381,090) (2,958,441) (844,206)
Dividends paid (2,030,625) (1,710,980) (1,099.639)
Net cash used in financing activities (5,628,579) (4,087,848) (2,238,487)
Net Decrease in Cash and Cash Equi valents (659,575) (949,126) (113,407)
Cash and Cash Equi valents at Beginning of Year 3,489,750 4,438,876 4,552,283
Cash and Cash Equi valents at End of Year $2,830,175 $3,489,750 $4,438,876

This case was adapted by a case written by Debora J . Gilliard. The case is based on a real company and the majority of
the case is unaltered but names and locations have been altered for the purposes of focusing student assessment.

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