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Instructor’s Manual

CASE TEACHING NOTES

Thorntons plc: Corporate and Business Strategy
David Jennings

1. Introduction
The case concerns the growth and development of Thorntons, the UK’s largest manufacturer and retailer of specialist chocolates. Throughout its history the company has followed a strategy of in-house manufacture, retailing largely through the company’s own shops and, to a lesser extent, through franchising. This policy presents the company with the difficulties of economically meeting seasonal demand variations in the chocolate and gift markets. The case includes the company’s attempts at diversification into the US market and Europe and their disappointing conclusion and more recent attempts to widen the product base and markets served. Following a decline in company profits in the mid 1990s the company appointed a nonfamily member to the position of Chief Executive. A review of the company’s activities led the directors to adopt a more retail-led approach to the company’s further development that included expansion of the chain of company owned shops, the relocation of shops, product and outlet development. A further deterioration in profits is followed by the replacement of the Chief Executive and the introduction of a three-year, three-phase, turnaround plan. During the three-year period there is evidence of successive attempts to reposition part of the core product group (boxed chocolates) and to redefine Thorntons and its businesses. The situation invites reflection on the role of planning in guiding the company’s strategic development.

2. Position of the case
Despite a series of strategic reviews Thorntons continues to follow a strategy that includes a large element of vertical integration through the ownership of both manufacturing and retailing stages of their business. The Thorntons case study helps to develop an understanding of the implications of a company’s pattern of vertical integration for competitive advantage and the strategic development of the company. Although the internalization and protection of core activities and their associated knowledge has often been advocated (Quinn, Doorley and Paquette, 1990), capabilities can be developed across organizations and forms of quasi-integration can provide superior speed of market response (Richardson, 1996). The choice of vertical integration strategy has been associated with strategic problems for a number of UK companies including Burtons and more recently the Body Shop. The Body Shop, faced 293

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Instructor’s Manual

with deteriorating commercial performance, attempted to focus more effectively on its priorities as a retail organization, combining a move to company-owned shops with the use of outsourcing to access greater external expertise and improve the pace of product development. A company’s pattern of integration has to support the particular form of competitive advantage which it is attempting to develop. Consequently analysis of the case can make use of Porter’s analysis of industry structure, generic strategies as well as the application of resource analysis to the company’s activities. Other aspects of corporate strategy (the scope of an organization’s activities) are also presented through the company’s unsuccessful international strategy, involving a diversification into the USA and Europe and by the recent entry into non-confectionery food markets. The case study also provides an opportunity to consider the role of planning. Since Mintzberg and Waters’ seminal article (1985) questioning the contribution of intended (planned) strategy to realized strategy (the strategy a company enacts) there has been a considerable growth in the critical literature concerning the planning process and its role. In the case study Thorntons’ experience with the turnaround plan invites reflection upon the role of the planning process and strategic drift as well as the appropriateness of the approach...
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