Case Study Formal Sample2

Integrated Case study Analysis
Zotter living by Chocolate
Integrated Case Study Analysis

Abstract
Background of the study: Zotter GmbH this chocolate manufacturing firm is
renowned for introducing the most unique and most exciting chocolate flavors in
Austrian chocolate manufacturing industry. Zotter was appointed as a chief chef in the
biggest restaurant of Austria and he has an unquenchable drive to introduce exclusive
tastes to the gamut lovers. Zotter GmbH has been a unique example of a product
innovation and out of the box thinking. Zotter had pioneered the art of hand scooped
chocolate, introduced even fish gum made chocolate, pushed up the mom and pop store
sales through distributing products through these stores, introduced the bean to bar
production phenomenon yet again, provided the customers chocolate theater
experiences.
But consistent drive for excellence has its own causes of maladies as well; two-third of
the products never see a word-robe life of more than a year; the products are produced at
30% capacity utilization rate; it has entered only into three EU countries; still nobody will
find their products at retail outlets and kiosks. So, just introducing 70 different flavors
and varieties of chocolates may not be the end of the story. In order to be successful
every entrepreneur has to learn the strategic management, financial analysis ad
management, marketing management and international business related issues, confront
all those challenges and overcome these challenges. This research study is of epitome
importance because it will help the researcher learn how an innovative entrepreneurial
venture manages key business challenges and eventually overcome these issues through
better strategy formulation and strategy implementation.
Brief statement of the problem: Chocolate manufacturing industry is a dynamic

one and the business model of Zotter should be capable in extracting opportunities and
remain itself safe from the weakness. Zotters capital structure is currently void of debt
and it has huge debt absorption capability and it needs to think how it can finance its
capital budgeting process. Zotter has no formal set-up to identify the customers
expectations, to fulfill these in under an organized framework. Zotters growth in Austria
and Germany has been confined and it needs to start thinking of a possible investment in
overseas location and the strategic manager must know where and how.
Aim of the business research: The researcher is going to understand how Zotter
can extract opportunities from the environment and can remain it safe from the threats of
the environment in order to sustain competitive edge in the longer run through
conducting the research. The researcher will also try to learn how Zotter can finance its
capital budgeting projects perfectly, how Zotter GmbH can implement the seven basic
marketing strategies product, people, process, promotion, product, placement and
2
physical evidence appropriately by conducting the research. Through this business

research, the researcher will also be able to determine the preferable foreign destination,
the preferable mode of entry and preferable mode of engagement in case of Zotter.
Approach of the business research: The research process was deductive; it was
guided by phenomenological approach. Theory formulation was not an objective of the
business researcher; rather the existing scenario was better evaluated through the existing
theory. So, the researcher had actually gone beyond the traditional statistical tools and
techniques and graphs and data points. It was a mixed business research based on
secondary data and information. Since the focus of the business research was extremely
concentrated; it could have been termed as a case study based business research.
Research Findings and recommendations: The unstructured production process

needs to be transformed into an efficient one lean and effective. The existing
production excellence based marketing philosophy needs to be replaced through
marketing oriented philosophy whereby promotional, distributional angles of the existing
business models needs to be revamped. For financing the capital budgeting projects of the
business firstly Zotter needs to use the financial slacks; then debts need to be introduced
followed up by equity financing. Asian market needs to be tapped through FDI or joint
venture as the mode of entry and localization as the mode of engagement. The bargaining
power with the suppliers which is currently low needs to be improved by long-run
sustainable contacts and stringent quality benchmarks.
Table of contents
Particulars
Page
number
Chapter one - Introduction

Rationale of the study
Problem statement
Aim of the research
Objective of the researcher
Structure of the case study
6
6
7
7
8
Chapter two - Case Brief
Zotter GmbH background

Zotter GmbH crafted a unique way of chocolate manufacturing
Austrian Chocolate manufacturing industry
Current business model of Zotter
Future challenge
Chapter Three Problem Statement and Plan of analysis
Analysis of the problem statement from strategic management perspective
Analysis of the problem statement from financial analysis and management perspective
Analysis of the problem statement from international business perspective
Analysis of the problem statement from marketing management perspective
Plan of analysis
Sources of data
Chapter Four Analysis and findings
Introduction
Analysis of strategic management issues
Analysis of financial analysis and management issue
Analysis of international business issues
Analysis of marketing management issues
Conclusion
Chapter five Proposed solution to the problem
Proposed solution to the strategic management issues
Proposed solution to the financial analysis and management issue
Proposed solution to the international business issue
Proposed solution to the marketing management issue
Recommendation
Limitations to the analysis
Action plan
Scope for further research
9
10
14
16
18
19
21
22
23
26
26
28
28
29
31
33
34
36
37
38
39
39
39
40
40
Chapter one - Introduction
Rationale of the study

Business survival and profitability is not often dependent on the production excellence or
the best price/quality relationship or based on the mere gift of the grab (Johnstone, 2010).
Survival and profit mark-ups are often dependent on the understanding the tastes and
desires of the key target clientele and providing them with the best possible solutions to
fulfill the desires and needs (Hammer and Champy, 2013).
Zotter has a big dream, the dream to sell the best chocolate in Austria, the dream to make
the customers well aware of the term hand-scooped and bean-to-bar production
process, the dream of introducing the chocolate theater in all its outlets, the dream of
experimenting with chili, ketch-up, fish-gum and cocoa beans to make something
serendipitous. So, far with a 4% market share, one can easily proclaim the dream of
Zotter (who used to be the chief chef in Hotel Imperial of Vienna) has become true.
But consistent drive for excellence has its own causes of maladies as well; two-third of
the products never see a word-robe life of more than a year; the products are produced at
30% capacity utilization rate; it has entered only into three EU countries; still nobody will
find their products at retail outlets and kiosks.
So, just introducing 70 different flavors and varieties of chocolates may not be the end of
the story. In order to be successful every entrepreneur has to learn the strategic
management, financial analysis ad management, marketing management and
international business related issues, confront all those challenges and overcome these
challenges. This research study is of epitome importance because it will help the
researcher learn how an innovative entrepreneurial venture manages key business
challenges and eventually overcome these issues through better strategy formulation and
strategy implementation.
Problem statement
Subject domain Chocolate manufacturing industry is a dynamic one and the business
model of Zotter should be capable in extracting opportunities and remain itself safe from
the weakness.
Problem statement Strategic management
Subject domain Zotters capital structure is currently void of debt and it has huge debt
absorption capability and it needs to think how it can finance its capital budgeting
process.
Problem statement Financial analysis and management

Subject domain Zotter has no formal set-up to identify the customers expectations, to
fulfill these in under an organized framework.
Problem statement Marketing management
Subject domain Zotters growth in Austria and Germany has been confined and it needs
to start thinking of a possible investment in overseas location and the strategic manager
must know where and how.
Problem statement International business
Aim of the research

The researcher is going to understand how Zotter can extract opportunities from the
environment and can remain it safe from the threats of the environment in order to sustain
competitive edge in the longer run through conducting the research. The researcher will
also try to learn how Zotter can finance its capital budgeting projects perfectly, how
Zotter GmbH can implement the seven basic marketing strategies product, people,
process, promotion, product, placement and physical evidence appropriately by
conducting the research. Through this business research, the researcher will also be able
to determine the preferable foreign destination, the preferable mode of entry and
preferable mode of engagement in case of Zotter.
Objective of the researcher

Subject domain Strategic management
Research objective To understand how Zotter can extract opportunities from the
environment and can remain it safe from the threats of the environment in order to sustain
competitive edge in the longer run
Related companies Zotter GmbH, Kraft, Nestle
Subject domain Financial analysis and management
Research objective To understand how Zotter can finance its capital budgeting projects
perfectly
Subject domain Marketing management
Research objective To understand how Zotter GmbH can implement the seven basic
marketing strategies product, people, process, promotion, product, placement and
physical evidence appropriately
Subject domain International business

Research objective To determine the preferable foreign destination, the preferable mode
of entry and preferable mode of engagement in case of Zotter
Structure of the case study

The case brief segment of the business research has delineated the background of the
firm; the unique business philosophy of Zotter, a brief overview of Austrian chocolate
manufacturing industry, the concurrent business model of Zotter and the future
challenges ahead of Zotter. In chapter three of the study, the researcher has discussed the
strategic management, financial management and analysis, international business and
marketing management related perspective from the academic perspective to better
understand Zotter GmbHs position. In chapter four of the study, the researcher has
evaluated the strategic management, financial management and analysis, marketing
management and international business related issues relevant to Zotters case; these
analysis will eventually help the analyst to better understand the research area of interest
and prescribe solutions. Chapter five of the research paper postulated solutions relevant
to the strategic management, financial management and analysis, international business
and marketing management related problems regarding Zotter GmbH. The researcher
will also delineate the action plan, the limitations of the research study, the scope for
further study and the key recommendations relevant to the business study.
Chapter two - Case Brief
The case brief segment of the business research will delineate the background of the firm;
the unique business philosophy of Zotter, a brief overview of Austrian chocolate
manufacturing industry, the concurrent business model of Zotter and the future
challenges ahead of Zotter.
Zotter GmbH background

Zotter GmbH this chocolate manufacturing firm is renowned for introducing the most
unique and most exciting chocolate flavors in Austrian chocolate manufacturing industry.
Zotter was appointed as a chief chef in the biggest restaurant of Austria and he has an
unquenchable drive to introduce exclusive tastes to the gamut lovers. Zotter GmbH has
been a unique example of a product innovation and out of the box thinking. Zotter had
pioneered the art of hand scooped chocolate, introduced even fish gum made chocolate,
pushed up the mom and pop store sales through distributing products through these
stores, introduced the bean to bar production phenomenon yet again, provided the
customers chocolate theater experiences.
This business researcher has questioned the concurrent excellence in production driven
philosophy, the existing distribution network, the existing promotion tools, the existing
capital structure and as a whole the existing value chain system of the firm.
Zotter GmbH crafted a unique way of chocolate manufacturing

International chocolate manufacturers have been relying on the prepackaged cocoa beans
to produce standardized chocolate whereby the chocolate mold is covered with a single
flavor. At Zotter different flavors are covered with the bean-to-bar processed cocoa and
that is why the taste of Zotter chocolate is unique.
10
Figure Production process Zotter

Source http://www.zotter.at/en/homepage.html
The whole process of extracting chocolate from the raw cocoa bean is done manually and
non-traditional equipment is often used in the process. The operating system is nowhere
even near to be proclaimed as a lean and efficient one; but the taste is just magical as
everything they produce is hand scooped at Zotter.
11
Zotter is a fair trader and it does cost four times than an average manufacturer of
chocolate as Zotter caters the need of the clientele who wants to know the chocolate is
manufactured on an ethical basis and in an organic way.
Supply price comparision

120
100
80
60
Supply price
comparision
40
20
0
Zotter's Cocoa
price
Organic &
fairtrade price
Farmer price
Figure Comparative supplier price comparison

Source Case study data
At Zotter, one does not necessarily eat some chocolates, in fact it is more of an
experience and through the chocolate theater concept installed in every Zotter stores the
customers can get a very precise idea about how the chocolate is manufactured, how
cocoa beans are separated from the bud, how the butter is extracted from a first hand
basis.
12
Figure The coca tour Zotter

At Zotter innovation is the other name of doing business. It had introduced bars of
different tastes in the same pack; some chocolate bars can be mixed with hot milk and be
drunk. There is some mass production of chocolate known as Mitz Blue and they have
not dared to introduce the chocolate filled in syrup.
13
Figure Product category Zotter

Austrian Chocolate manufacturing industry

Austrian chocolate manufacturing industry is a fragmented one and Kraft is the number
one firm holding more than 40% of the market share. Ferrero is the market challenger
followed by numbers of multinational chocolate brands. There are a number of strategic
groups in the industry one based on quality dimension and another one based on
price/quality dimension.
14
0.45
0.4
0.35
0.3
Kraft - market share
0.25
Ferroro - market share
0.2
Nestle - market share
0.15
Zotter - market share
0.1
0.05
0
1
Figure Comparative market share

Filled chocolate is the most popular brand in the industry; even though dark chocolate is
becoming popular now a day. There is a craze for chocolates made from organic
ingredients and the market share of plain milk chocolate is dripping on health ground.
There is an insurgence of a clientele who will like to purchase premium brands at a
premium price.
0.6
0.5
Plain dark - market

share
0.4
Plain milk - market share

0.3
Plain white - market
share
0.2
Filled - market share
0.1
0
1
Figure Comparative market share product category

15
Current business model of Zotter

Product sales Hand-scooped chocolate brand is the most lucrative category of chocolate
with a 74% of sales, but with time labooko and drinking chocolate is also becoming
mighty popular.
Product wise sales - Zotter

6%
9%
Handgeschopft
Labooko
10%
Drinking chocolate
74%
Other
Figure Product-wise sales Zotter

Distribution network Zotter mostly distributes its products through mom and pop stores
and the traditional wholesale retailers contribute less than a 10% of the sales.
2%
10%
Mom and pop stores
10%
Wholesale
Factory rour and visit
10%
68%
B2B sales
Internet
Figure Zotter distribution network

Market based sales Around 55% of the sales come from Austrian market and another
36% of the sales are generated from Germany. These markets have already saturated and
the strategic managers need to relocate newer geographical regions to promote sales.
16
4.50%
4.50%
Austria
Germany
36%
55%
Switzerland
Rest of the world
Figure Zotter sales regional

Future challenge
Zotters management needs to determine the future expansion mode, mode of
engagement and method of entering into the market.
Zotters management needs to upgrade the value chain, distribution network and
promotional schemes.
Zotters management needs to upgrade its marketing philosophy, capital structure

policies etc.
17
Chapter Three Problem Statement and Plan of analysis
18
In this portion of the study the researcher is going to discuss the strategic management,
financial management and analysis, international business and marketing management
related perspective from the academic perspective to better understand Zotter GmbHs
position.
Analysis of the problem statement from strategic management

perspective
Now the researcher will delineate several strategic management issues building blocks
of core competences, Ansoff matrix, five forces model and value chain model with
reference to Zotters position.
Building block of core competencies: Effectiveness, efficiency, innovativeness and
customer response time are termed as the building block of core competencies.
Effectiveness It is the ability of the strategic manager to achieve the business targets
within specific time, resource and quality based targets (Hammer and Champy, 2013).
Efficiency It refers to the output/input ratio prevalent to any business module.
Innovativeness It refers to process and product innovation, upgrading and renovation
(Pinson, 2008).
Customer response time Quicker the business module in understanding the changing
customers tastes and preferences, developed the building block of core competencies
(Kahane, 2012).
Explaining the growth - Ansoff matrix Market penetration, market development,
product development and diversifications are the generic modes of business expansion.
Figure Ansoff matrix

Source - (Rugman and Brewer, 2012)
19
Market penetration Here the marketer enters deeply into the same market with
the same product line (Pinson, 2008).
Market development Here the marketer presents the same product line to a new
market.
Product development Here the marketer offers new product to the same market.
Diversification Diversification is of two types related diversification and
unrelated diversification (Porter, 2008).
Porters five forces model of intra-industry competitiveness Porters five forces

model determines the possibility of earning abnormal profit in the longer run and it also
dictates whether this profit is sustainable in the longer run.
Barriers of new entry Higher the barriers of new entry, greater will be the possibility of
earning abnormal return in the industry and vice-versa (Johnstone, 2010).
Intra-industry rivalry Lower the intra-industry rivalry, greater will be the possibility of
earning abnormal return in the industry and vice-versa (Pinson, 2008).
Threat from substitute products Higher the threats from substitute products, greater will
be the possibility of earning abnormal return in the industry and vice-versa (Porter,
2008).
Bargaining power of the buyers Higher the bargaining power of the buyers, lower will
be the chances to hold onto the industry profit and vice-versa (Kahane, 2012).
Bargaining power of the suppliers Higher the bargaining power of the suppliers, lower
will be the chances to hold onto the industry profit and vice-versa.
Value chain analysis Through a value chain analysis, a strategic manager can
understand the way value is generated in the business module. Research and
development, operations, marketing and sales and after-sales service are termed as
primary activities (Hammer and Champy, 2013). On the other hand, firm infrastructure,
human resource management, information system and logistics are termed as secondary
activities under the value chain analysis.
20
Figure Value chain analysis

Generally primary activities are directly related with business conduction and secondary
activities render valuable contribution as a system support (David, 2005).
Analysis of the problem statement from financial analysis and

management perspective
Now the researcher will delineate several financial analysis and management issues
Pecking order theory, capital structure theory and time series based ratio analysis with
Pecking order theory It refers to the relative preferential order while financing any
business project. Initially financial slack or retained earnings are preferred to finance
capital expenditure projects, followed up by debt and finally equity IPO and SPOs are
used (Jeffrey, 2012).
M-M capital structure theory M-M capital structure theory discusses the optimal debt
level of a firm; under this theory it has been postulated that under a perfect market
condition it is always better to finance capital budgeting projects through debt as debt
financing is embedded with tax benefit (Ross, et al., 2009). On the other hand, under a
relaxed financial distress possibility it is assumed that a firm should finance a project
with debt inly upto its optimal debt absorption capability (Christy and Brandt, 2006).
Ratio analysis Ratio analysis is conducted to analyze the liquidity, leverage,
profitability and efficiency condition of a business either on a time-series perspective or
from a cross-sectional perspective (Jeffrey, 2012).
21
Analysis of the problem statement from international business

perspective
Now the researcher will delineate several international business issues modes of
international market entries, PESTL analysis, Hofstede cultural dimension model and
international business strategy with reference to Zotters position.
Modes international market entry Exporting, licensing, franchising, joint venture and
FDI are the most prominent modes to get entry into the international market. Exporting is
the least risky and least engaging mode of getting entry into the international market;
whereby the manufacturing firm sells the products through importer or dealer. Licensing
and franchising is a way of spreading the brand image by taking commission (Rugman
and Hodgetts, 2013). Joint venture and FDI are considered as the most risky and most
engaging mechanism of getting entry into international market (Rugman and Hodgetts,
2013).
Pestle analysis Pestle analysis analyzes the external environment the opportunities
and threats of the business module through analyzing the political, economic, social,
technological and legal factors (Hill, 2013).
Figure Pestl analysis

Source- (Rugman and Brewer, 2012)
Under the political analysis, the level of democracy, the possibility of war and conflicts
are evaluated; through the economic analysis the trend of different economic variables,
the researcher often determines the interactions among different economic variables
(Mead and Andrews, 2009). Through the social research, researcher determines the
relative apathy or relative interest of the inhabitants of a society towards foreign product
or service. The technological environment evaluates the current and future state of
technological set-up in a country, the transportation facility availability etc. and the legal
22
environment is encompassed of the state of law and order, the legal environments
prudence and framework of a legal jurisdiction of a country (Hill, 2013).
Hofstede cultural dimension model Countries across the world vary significantly in
terms of their relative adaptation with different cultural frameworks and perspectives and
under the very prominent Hofstede cultural dimension model countrys cultures are
evaluated from power distance, uncertainty avoidance, and individualism vs.
collectivism, masculinity vs. femininity and long-term orientation vs. short-term
orientation perspectives (Hofstede, 2011). Cultures differ based on their level of their
acceptance while they take the social differences for granted or not; cultures differ
through their depth or lack of vision (Hofstede, et al., 2007). Cultures differ by the way
they promote individual recognition or team work; culture differ through their belief that
some particular roles are pre-destined for males and for females (Hofstede, et al., 2007).
International business strategy Based on the extent of cost reduction pressure and
need for localization, international business strategies can be segregated into four basic
genres global standardization strategy, transnational strategy, localization strategy and
international strategy (Rugman and Hodgetts, 2013).
Figure International expansion strategy

Firms prefer either global standardization or international strategy if the cost pressure on
the business module is on a higher note; firms prefer either localization strategy or
transnational strategy if the need for localization is intense (Mead and Andrews, 2009).
23
Analysis of the problem statement from marketing management

perspective
Now the researcher will delineate several marketing management issues marketing
philosophies, 7Ps of marketing mix, industry life cycle analysis and product
development theory with reference to Zotters position.
Marketing philosophies Marketing philosophies does dictate marketers choice
through which they define the target market and serve the market.
Production concept Here, it is believed that the objective of the marketing

manager should be the sell the excellent product along with an efficient supply
chain (Loudon, 2012).
Product concept The proponents of the product concept are of the belief that at
the end of the day people makes choices based on the price/quality relationship.
Selling concept They believe that anything can be sold through the gift of the
grab (Mitre ga, 2008).
Marketing concept It is an encompassing theory whereby at first the customers
tastes and preferences are determined, then these tastes and preferences are
fulfilled through the best available product (Kotler, et al., 2012).
7Ps of marketing mix The 7Ps of marketing does entail the various strategic
dimensions relevant to the overall marketing process price, promotion, placement,
product, people, physical evidence and process (Loudon, 2012).
People
Process
Price
Promotion
Placement
Physical
evidence
Product
Figure 7 Ps of marketing
Source Researcher
24
Based on the market positioning, firms can have break-even plus margin based pricing or
market skimming price or even premium pricing (Evans and Berman, 2012). Products
can be promoted through online mediums, offline mediums or through a mixed offering.
Products can be placed through the traditional dealer-retailer-wholesaler setup or firms
can start selling the product through their firm-owned subsidiaries (McDaniel and Gates,
2010). A reasonable product can be sold at a reasonable price; or a differentiated product
can be sold out at a premium price (Kotler, et al., 2012). People, physical evidence and
process have become key elements of extended Ps of marketing.
Industry life cycle analysis At different phases of the life cycle, the industry reacts
differently with respect to competition nature, value chain, price/quality relationship,
recognition of the product and service.
Figure Industry life cycle analysis

Source- (Rugman and Brewer, 2012)
Embryonic stage At this stage of the life cycle, everyone is not well aware of the
product, the price/quality relationship is at its very low, the supply chain management
function of the industry is not totally established and the rival firms face very limited
competition (Mitre ga, 2008).
Growth stage At this stage of the life cycle, people started to become aware of the
product, the price/quality relationship is improving, the supply chain management
function of the industry is established and the rival firms faces competition in terms of
establishing the brand image (Loudon, 2012).
Maturity stage At this stage of the life cycle, even the laggards have purchased the
product, the price/quality is at its very high due to extensive competition, the supply
chain management function of the industry is established and the rival firms faces
competition in terms of customer retention (Evans and Berman, 2012).
25
Decline stage At the decline phase of the life cycle, most of the firms either get
liquidated, or gets its business limited or go for business process re-engineering or
renovation (Kotler, et al., 2012).
Product development theory Product development process is a multi-layered and
gradual process.
Idea generation Ideas can be generated from the customers, mid level or lower level
managers or from observing the peers business process.
Idea screening Based on the economic and non-economic yardsticks generally all the
relevant ideas are screened in this stage (McDaniel and Gates, 2010).
Business analysis Then the ideas are conceptualized and these concepts are transformed
into the product, promotion, and placement terminologies.
Test marketing and commercialization After the controlled and simulated test
marketing, the product and services are eventually commercialized (Pride and Ferrell,
2008).
Plan of analysis
The researcher had evaluated Zotters position based on the academic frameworks
postulated in the third chapter; based on the inputs extracted from chapter five, the
researcher had pinpointed the action plan suitable to Zotter.
The research process was deductive; it was guided by phenomenological approach.
Theory formulation was not an objective of the business researcher; rather the existing
scenario was better evaluated through the existing theory. So, the researcher had actually
gone beyond the traditional statistical tools and techniques and graphs and data points. It
was a mixed business research based on secondary data and information. Since the focus
of the business research was extremely concentrated; it could have been termed as a case
study based business research.
Sources of data
While conducting the study the researcher had used secondary data mostly from the case
study. The corporate website of Zotter GmbH was explored and chocolate industry
reports published by different international think-tanks were also evaluated by the
researcher.
26
Chapter Four Analysis and findings
27
Introduction
In this part of study the researcher is going to evaluate the strategic management,
financial management and analysis, marketing management and international business
related issues relevant to Zotters case; these analysis will eventually help the analyst to
better understand the research area of interest and prescribe solutions.
Analysis of strategic management issues

Now the researcher will analyze several strategic management issues building blocks of
core competences, Ansoff matrix, five forces model and value chain model with
Building block of Zotters core competencies:
Effectiveness Zotters current business model is effective in achieving its business
goals within the specified time, quality and budget based boundaries (Pinson, 2008).
Efficiency They do not use standardized process, standardized service and the
standardized business module.
Innovativeness Zotter is perhaps the best in the industry in terms of product and process
innovation (Johnstone, 2010).
Customer response time The customer response time very quick and Zotter moves
along with customers choice and preferences (David, 2005).
Explaining Zotters growth opportunities:
Market penetration Austrian, German and Swiss market is already saturated and
the rivalry is high in this part of the world (David, 2005).
Market development The unexplored Asian market can prove out to be the point
of break through in the coming days (Hammer and Champy, 2013).
Product development Edible zoo, chocolate soaps are the two generic
mechanisms to develop products for the coming days (Porter, 2008).
Diversification Zotter is currently not engaged in related and unrelated
diversification (Kahane, 2012).
Porters five forces model of intra-industry competitiveness
Barriers of new entry Threat of entry into the market is very high as chocolate
manufacturing is not a capital-intensive industry and non-traditional marketing channels
are often used to enter into the industry (Kahane, 2012).
28
Intra-industry rivalry There are two generic strategic group; one group of peers
compete on the costing quadrant and another group of peers compete on the quality
quadrant (Porter, 2008).
Threat from substitute products Fruits, snacks, coffees etc. are perfect substitute of
chocolate as a snacks item (Johnstone, 2010).
Bargaining power of the buyers Since the switching cost is tremendously low, the
bargaining power of the buyers are very high (David, 2005).
Bargaining power of the suppliers Since the switching cost of the manufacturer can
become severe the bargaining power of suppliers are considerably high (Porter, 2008).
Value chain analysis as per Zotter model
Research and development Zotter consistently invest on the research and

development to produce the most exciting and out of the box flavors (Johnstone,
2010).
Operations Its operation is not standardized and it is not efficient (David, 2005).
Marketing and sales The marketing and sales effort of Zotter is too pedestrian.
After-sales service There is no formal mechanisms left so that any customer can
not formally let the authority know their expectations and whether these
expectations are fulfilled or not (Kahane, 2012).
Firm infrastructure The firms norms, values and ethics are driven on
Human resource management Zotter can boast on its extremely loyal and valuedriven, qualified workforce (Hammer and Champy, 2013).
Information system There is hardly any prevalence of an MIS, EDS, TPS and
knowledge management system in Zotter.
Logistics Zotter offers the best possible supplier price in its inbound logistics
system (Pinson, 2008).
Analysis of financial analysis and management issue

Now the researcher will analyze several financial analysis and management issues
Pecking order theory, capital structure theory and time series based ratio analysis with
29
Pecking order theory For funding the future market development projects, Zotter
needs to use its financial slacks, followed by debt long-term bank loans and finally the
IPO proceeds (Berk, 2013).
M-M capital structure theory Since the firm has unlimited debt absorption capability
bulk of its income taxes will be saved by the interest tax shield (Ross, et al., 2009).
Ratio analysis The following table provides a glimpse of time series and cross
sectional ratios of Zotter and two internationally recognized players Kraft and Nestle.
Particulars
Revenue growth rate -Zotter GmbH
Revenue growth rate - Nestle
Revenue growth rate -Kraft
Gross profit margin - Zotter GmbH
Gross profit margin - Nestle
Gross profit margin - Kraft food
Net income margin - Zotter GmbH
Net income margin - Nestle
Net income margin - Kraft food
2003
101.4%
11%
8%
57.7%
45.8%
46.8%
22.7%
7%
6%
2004
59.8%
10%
9%
64.4%
43.4%
41.9%
25.8%
6%
4%
2005
44.4%
6%
11%
69.3%
42.1%
43.3%
33.9%
5%
4%
2006
67.1%
12%
10%
55.8%
43.5%
45.8%
32.9%
8%
5%
2007
23.8%
8%
6%
48.2%
53.3%
51.6%
18.9%
7%
6%
2008
12.5%
9%
9%
49.9%
51.6%
52.5%
17.9%
8%
5%
Table Ratio analysis

Source Researcher
The researcher will like to present some relevant graphs to present the rationale behind
Zotters market dominance across the years.
Yearly revenue inflow

16000
14000
12000
10000
8000
6000
4000
2000
0
Yearly revenue inflow
2002 2003 2004 2005 2006 2007 2008
Figure Yearly revenue trend line

30
Net income margin

35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Net income margin
2002 2003 2004 2005 2006 2007 2008
Figure Net income margin trend line

Revenue growth rate

120.0%
100.0%
80.0%
60.0%
Revenue growth rate
40.0%
20.0%
0.0%
2003 2004 2005 2006 2007 2008
Figure Revenue growth trend line

It is evident from the ratio that the revenue growth injected by the hand-scooped
chocolate brands is getting erode over time and the firm needs to think about
alternative ways to push the sales growth (Ross, et al., 2009).
The net margin and gross margin ratios of Zotter is very impressive in comparison
to its international counterparts (Christy and Brandt, 2006).
Analysis of international business issues

Now the researcher will analyze several international business issues modes of
international market entries, PESTL analysis, Hofstede cultural dimension model and
international business strategy with reference to Zotters position.
31
Modes international market entry FDI and joint venture looks like the best suitable
strategy for the firm as the firm needs to have tight control over its value chain and it
cannot jeopardize its brand image through licensing and franchising agreements (Rugman
and Brewer, 2012).
PESTLE analysis Assuming that Asia is the territory that Zotter is eventually
targeting, the researcher had analyzed the PESTLE model.
Political factors The political environment of Asia is improving and the chances
of a great political strife or conflicts are fairly low.
Economic factors The purchasing power of the population and the real growth
of the economy is improving (Rugman and Brewer, 2012).
Social factors There is a huge social craze for foreign products in the whole
territory.
Technological factors The technological, transport and the information
technology based elements are astoundingly improving in this part of the world.
Legal factors The possibility of profit retaliation, the possibility of
nationalization is fairly low in this part of the world (Mead and Andrews, 2009).
Hofstedes cultural dimension model Assuming that Asia is the territory that Zotter is
eventually targeting, the researcher had analyzed the cultural dimension model.
Power distance The inhabitants of the eastern culture takes the social status differences
take for granted than the case with the inhabitants of the western culture (Hofstede,
2008).
Uncertainty avoidance The inhabitants of the eastern culture try to avoid the uncertainty
as much as it could be than the case with the inhabitants of the western culture (Hofstede,
2008).
Individualism vs. collectivism The inhabitants of the eastern culture believes more on
team work, team success and team responsibility than the case with individual
achievement, individual responsibility, individual recognition and vice versa (Hofstede,
et al., 2007).
Masculinity vs. femininity There are some pre-conceived notion about gender specified
roles in the eastern culture (Hofstede, 2011).
Long-term orientation vs. short-term orientation Eastern culture people are far more
myopic than the case with western culture oriented people.
32
International business strategy Due to severe localization needs to be fulfilled and

since Zotters business model has fairly low cost pressure, the best mode of getting
engaged in international market will be following localization strategy (Hofstede, 2011).
Analysis of marketing management issues

Now the researcher will analyze several marketing management issues marketing
philosophies, 7Ps of marketing mix, industry life cycle analysis and product
development theory with reference to Zotters position.
Marketing philosophies The current belief of Zotters strategic managers is that they
should strive for producing the best product ever and they will always be able to sell the
product at a premium price; in a nutshell the marketing philosophy of Zotter is guided by
production concept (McDaniel and Gates, 2010).
7Ps of marketing mix
Price Premium products are sold at Zotter at a premium price.
Promotion Zotter uses unconventional promotional packages like better designs to
promote its products and services.
Placement Zotter currently places its products through the unconventional mom and
pop stores and the traditional placement facilities need to be installed as quick as it could
be (Evans and Berman, 2012).
Product It is a premium product and this product is really high on its price/quality
quadrant (Pride and Ferrell, 2008).
People, Physical evidence, Process All these elements of the extended marketing Ps
are properly placed up by Zotter authority so these parts also play a major role while
delivering the key values (McDaniel and Gates, 2010).
Industry life cycle analysis The European chocolate manufacturing industry has
reached its maturity phase (Kotler, et al., 2012). At this stage of the life cycle, even the
laggards have purchased the product, the price/quality is at its very high due to extensive
competition, the supply chain management function of the industry is established and the
rival firms faces competition in terms of customer retention (Pride and Ferrell, 2008). On
the other hand, the Asian chocolate manufacturing industry is currently placed at its
growth phase and at this stage of the life cycle, people started to become aware of the
product, the price/quality relationship is improving, the supply chain management
33
function of the industry is established and the rival firms faces competition in terms of
establishing the brand image (Roger , 2012).
Product development theory
The traditional product development phases are not maintained at Zotter; the R & D team
keeps on improving the quality on a sustainable basis and they keep on trying different
ingredients every now and then. Only 45% of the developed products get a shelf space
over one year at Zotter (Mitre ga, 2008).
Conclusion
So, it had been evident from the discussion that the strategic management, financial
management and analysis, international business and marketing management affairs of
Zotter is not error-free and there is a huge drive for improvement.
34
Chapter five Proposed solution to the problem
35
Chapter five of the research paper will postulate solutions relevant to the strategic
management, financial management and analysis, international business and marketing
management related problems regarding Zotter GmbH. The researcher will also delineate
the action plan, the limitations of the research study, the scope for further study and the
key recommendations relevant to the business study.
Proposed solution to the strategic management issues

Efficiency needs to be prioritized The overall business conduction process at Zotter is
severely manual and things are done here on a below capability-capacity level (Pinson,
2008). That is why the efficiency level of the business model has to be improved and
there is a huge opportunity of cost savings.
Market development in Asia Austrian, German and Swiss market is saturated and
Zotter cannot penetrate that market through its existing value chain (Jeffs, 2008). So,
using the existing product profiling the firm should target the Asian territory as the future
expansion path. Product development and innovation will be the business philosophy
(Hammer and Champy, 2013).
Exerting higher bargaining power over suppliers Zotter is a fair trader and it pays more
than 4 times to the Nicaraguan farmers than an average supplier does (David, 2005). So,
this opportunity of extracting the worlds best cocoa beans needs to be exploited through
imposing stringent quality bars and through longer run exclusive supplier contacts
(Kahane, 2012).
Value chain needs to be revamped The existing value chain system at Zotter looks very
unimpressive as there is severe lacking in research and development, operation,
information system, sales and marketing and after-sales services endeavors (Johnstone,
2010). The research and development activities of the value chain can be improved
through becoming more customer need specific; the operating activities can be
transformed into more lean and thin, the Information system needs to promote transaction
processing system, executive decision support system, management information system
etc (Ireland, 2008). The marketing endeavor of the firm should be based on identifying
customers tastes, preferences and choices; the after-sales service of the firm needs to be
formalized (Jeffs, 2008).
36
Improvment in value
chain - phase 1
R & D - Identify the customer's need at first

Operation - The production process has to be more efficient, effective
Improvment in value
chain - phase 2
HRM - Recruiting loyal, value-driven and commited workforce

IS - Introducing TPS, DSS, MIS and ESS
Improvment in value
chain - phase 3
Marketing - Philosophy should be changed

Formal after-sales service
Figure Revamping Zotters value chain system

Source Researcher
Proposed solution to the financial analysis and management issue

Sources of financing The profitability position of the firm is exemplary and these
retained profits should be better utilized in expansionary projects in the coming days. On
the other hand, since there is currently no debt utilized in the capital structure system, the
firm should think about adding on long-term bank based financing as an additional source
of financing (Christy and Brandt, 2006). Equity dilution, IPO issuance comes at the latter
phases of the pecking order.
Consistent sources of value By increasing the profit margins, by increasing the asset
turnover, by reducing the liability turnovers, through better managing the working
capital, through utilizing the debt capability in a better fashion, a corporate house can add
on better value into the system (Berk, 2013). Zotter should think about the permanent
sources of corporate value.
Value derived
from Operation
Coporate Value
sourcing
Value derived
from financial
policy
Higher Profit
margin
Higher asset
turnover
Better working
capital
management
Optimal debt
utilization
Figure Sources of Zotters value

Source Researcher
37
Proposed solution to the international business issue

Most attractive foreign location At the Asian territory, per unit consumption of
chocolate is fairly low, the purchasing power of the people is improving and finally the
economy is blistered with a real growth rate (Hill, 2013). So, from these perspectives
Zotter needs to think China, India or other Asian countries as their next target, not the
saturated European market (Folsom, et al., 2009).
Mode of entry into foreign land Zotter cannot allow tarnishing its brand name by
inefficient operators just to earn some mere commissions. So, the mode of entry should
be either joint venture or FDI; it cannot be licensing or franchising (Rugman and Brewer,
2012).
Engagement in international business In order to get engaged into international business
the business should be focused on the localization strategy; chocolate is a product with
huge local needs and Zotter is not an efficient cost leader (Mead and Andrews, 2009). So,
from both this perspectives, localization is preferably the best strategy while getting entry
into the foreign land (Shenkar and Luo, 2014).
Proposed solution to the marketing management issue

Understanding the market pulse Zotter cannot keep innovating products with limited
shelf life; cash cows do emerge by innovating but before innovating the products and
services, Zotter needs to understand the market trends, clientele behavior, clientele tastes
and their preferences (Roger , 2012).
Up-gradation in the distribution network It needs to start depending on the established
discount stores and established retail outlets (Pride and Ferrell, 2008). When around 67%
of Austrian retail sales are dependent on these retail stores there is no real point in
ignoring these established retail channels and merely getting dependent on the mom and
pop stores (Roger , 2012).
Marketing philosophy, not the production one Pioneers firms which have excelled in
production excellence, craftsmen firms with innovative capabilities have failed at
tandem in every parts of the world as they have not listened to the market pulse (Mitre ga,
2008). Through an efficient IS information system the firms top management needs to
understand the customers tastes and patterns and provide the market with the desired
product categories (Evans and Berman, 2012).
38
Up-gradation in the promotional tools The firm currently does very negligible PRs; so
in the coming decades the firm should concentrate on traditional and non-traditional
promotional tools and techniques in order to grab a superior brand image and brand
recognition (McDaniel and Gates, 2010).
Recommendation
The unstructured production process needs to be transformed into an efficient one

lean and effective.
The existing production excellence based marketing philosophy needs to be
replaced through marketing oriented philosophy whereby promotional,
distributional angles of the existing business models needs to be revamped.
For financing the capital budgeting projects of the business firstly Zotter needs to
use the financial slacks; then debts need to be introduced followed up by equity
financing.
Asian market needs to be tapped through FDI or joint venture as the mode of
entry and localization as the mode of engagement.
The bargaining power with the suppliers which is currently low needs to be
improved by long-run sustainable contacts and stringent quality benchmarks.
Limitations to the analysis
The research findings and recommendations are relevant only to the chocolate
industry dynamics.
This business research is based on secondary data and information. So, if the
research data and information is inaccurate or irrelevant the findings and
observations of the research will also become unreliable and irrelevant.
Action plan
The action plan of Zotter can be represented through the following Gantt chart.
Particulars
Establishing formal IS, MIS, EDS, TPS system
Distribution contacts with retailing super stores
Capability building in Edible zoo project
Capability building in Chocolate soap project
Installation of first Zotter shop in China and India
Installation of first Zotter shop in China
2016
39
2017
2018
2019
2020
2021 2022
2023
Figure Action plan Zotter

Source Researcher
Scope for further research

There is scope for conducting further business research in understanding the structureconduct-performance dynamics of the chocolate industry, understanding the changing
trends and norms of the industry. Researchers can conduct business research based on
each of the major manufacturer separately; the profitability and growth of the industry
can be decomposed into operating and non-operating territory for better
understandability.
40
References
Berk, P. (2013). Corporate Finance (3rd Edition).
Christy, G. and Brandt, L. (2006). Business Finance. The Journal of Finance, 21(1),
p.141.
David, F. (2005). Strategic management. Upper Saddle River, N.J.: Pearson Prentice
Hall.
Evans, J. and Berman, B. (2012). Marketing. New York: Macmillan.
Folsom, R., Gordon, M. and Spanogle, J. (2009). International business transactions in a
nutshell. St. Paul, MN: West.
Hammer, M. and Champy, J. (2013) Reengineering the Corporation, Harper Business,
New York.
Hill, C. (2013). International business. Boston, Mass.: McGraw-Hill/Irwin.
Hofstede, G. (2008). Attitudes, Values and Organizational Culture: Disentangling the
Concepts. Organization Studies, 19(3), pp.477-493.
Hofstede, G. (2011). Dimensionalizing Cultures: The Hofstede Model in Context. Online
Readings in Psychology and Culture, 2(1).
Hofstede, G. and Fink, G. (2007). Culture: organisations, personalities and nations.
Gerhard Fink interviews Geert Hofstede. EJIM, 1(1/2), p.14.
Ireland, H. (2008) Understanding Business Strategy. South western.
Jeffrey, J. (2012). Corporate Finance (10th Edition). Mcgraw-Hill.
Jeffs, C. (2008) Strategic Management SAGE Publications Ltd.
Johnstone, B. (2010). Business plan. Nature, 346(6283), pp.423-423.
Kahane, A. (2012). Transformative scenario planning. San Francisco: Berrett-Koehler
Publishers
Kotler, et al. (2012) Marketing Management. 14e. Pearson Education Limited 2012
Loudon, D. (2012) Consumer Behavior: Concepts and Applications, McGraw Hill,
London.
McDaniel, C. and Gates, R. (2010). Marketing research. 1st ed. Hoboken, NJ: Wiley.
Mead, R. and Andrews, T. (2009). International management. Chichester, England: John
Wiley & Sons
41
Mitre ga, M. (2008). Market analysis. Katowice: Publisher of the Karol Adamiecki
University of Economics.
Pinson, L. (2008). Anatomy of a business plan. 1st ed. Tustin, CA: Out of Your Mind and
Into the Marketplace.
Porter, M. (2008) The Five Competitive Forces That Shape Strategy, Harvard business
Review, January 2008.
Pride, W. and Ferrell, O. (2008). Marketing. Boston: Houghton Mifflin Co.
Ross, S., Westerfield, R. and Jaffe, J. (2009). Corporate finance. Boston: McGrawHill/Irwin.
Roger , A. (2012) Marketing: The Core. McGaw-Hill Ryerson.
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York: Oxford University Press.
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Publications.
42

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Integrated Case study Analysis

Zotter living by Chocolate

Integrated Case Study Analysis

Integrated Case Study Analysis

Zotter living by Chocolate

Brief statement of the problem: Chocolate manufacturing industry is a dynamic

Integrated Case Study Analysis

Zotter living by Chocolate

physical evidence appropriately by conducting the research. Through this business

Research Findings and recommendations: The unstructured production process

Integrated Case Study Analysis

Zotter living by Chocolate

Chapter one - Introduction

Zotter GmbH background

Integrated Case Study Analysis

Zotter living by Chocolate

Chapter one - Introduction

Integrated Case Study Analysis

Zotter living by Chocolate

Rationale of the study

Integrated Case Study Analysis

Zotter living by Chocolate

Problem statement Financial analysis and management

Aim of the research

Objective of the researcher

Integrated Case Study Analysis

Zotter living by Chocolate

Subject domain International business

Structure of the case study

Integrated Case Study Analysis

Zotter living by Chocolate

Chapter two - Case Brief

Integrated Case Study Analysis

Zotter living by Chocolate

Zotter GmbH background

Zotter GmbH crafted a unique way of chocolate manufacturing

Integrated Case Study Analysis

Zotter living by Chocolate

Figure Production process Zotter

Integrated Case Study Analysis

Zotter living by Chocolate

Supply price comparision

Figure Comparative supplier price comparison

Integrated Case Study Analysis

Zotter living by Chocolate

Figure The coca tour Zotter

Integrated Case Study Analysis

Zotter living by Chocolate

Figure Product category Zotter

Austrian Chocolate manufacturing industry

Integrated Case Study Analysis

Zotter living by Chocolate

Kraft - market share

Ferroro - market share

Nestle - market share

Zotter - market share

Figure Comparative market share

Plain dark - market

Plain milk - market share

Filled - market share

Figure Comparative market share product category

Integrated Case Study Analysis

Zotter living by Chocolate

Current business model of Zotter