Case Study

Key Issues Facing Skellig Chocolate Company (SCC)

Reviewing the external environmental forces using “Porters 5 Forces”, we have determined the following key issues facing SCC.

With very few barriers to entry there is a constant threat of new competitors entering the premium confectionary market. The industry is growing and profitable making it very attractive to new entrants. According to Datamonitor, the global confectionery market was worth $135,300 million in 2009, and it is expected to reach $156,400 million by 2014, an increase of 15.6% since 2009. In 2009, Europe accounted for 48.7% of the global confectionery market followed by Americas with 35.2% and Asia-Pacific with 16.1%. Irish Truffle manufacturer Lir Chocolates Ltd posted gross profits of €3.16million in 2010 (The Irish Times, December 28, 2010). There are relatively high capital requirements and expertise involved in entering the industry.

The threat of substitute products facing SCC is constant, many substitutes already readily available on the market. Given the current economic climate consumers are very price sensitive, and more willing to substitute based on price. There is no buyer switching costs involved in purchasing a substitute product.

With high availability of existing substitute products customers are sensitive to price changes. This enhances the bargaining power of the customers and enables them to put the firm under pressure.

Suppliers have little bargaining power. As a direct manufacturer SCC can adjust production to in line with demand, and are free switch suppliers to meet their demands.

Rivalry in the confectionery industry is fierce. SCC ultimately has to compete against large UK, European and International producers with superior economies of scale and lower manufacturing costs.

Experts Evaluation

The experts have targeted three areas that SCC needs to address in order to expand their operations and build...