Thorntons Case Study
1) UK confectionery market is one of the biggest in the world. It valued an estimated £5,179 million in 2002 (case p757). Chocolate confectionery accounts for the majority ofthe sales.
First of all, competition in the chocolate market is lively. There are lots of competitors (8 aims). For UK boxed chocolate market for instance, four companies (Cadbury, Nestlé,Masterfoods and Kraft) represents 72% of the market share (case p754) but these four are roughly in balance because their market shares are between 16 and 24% . Thorntons is just behind with 8%. Thesecompetitors are direct competitors because not only they sale the same product (e.g.: boxed chocolate) but also they target the same customer group. Besides, the competitive rivalry is high because thechocolate market is in continuous increase for 10 years: UK confectionery sales increased by 17, 4 % (1993 to 2002)(case P757).
Then, the threat of potential entrants isn’t very dangerous because ofmany barriers to entry. Indeed, initial investments (fixed costs) such as factories and machines are very expansive. Thus, more chocolate’s volume is big, less cost will be high: economies of scale.Barriers are all the more important because of difficulties to access not only supply but also distribution channels.
For threat of substitutes, chocolate has to cope with a lot of substitutes. All otherconfectioneries can be substitutes like cakes for instance. Moreover, when chocolate is given as gift, all other presents can be substitutes like flowers.
Furthermore, buyers bargaining power islimited by the big request in chocolate (sales volume sizeable). However, buyers are powerful because they can easily choose rival chocolate brand.
Last but not least, suppliers are powerful because aforward integration threat by suppliers is credible and there are many purchasers. Indeed, cacao suppliers for example can sell their cacao to other companies: this raw material is more and more in...
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