Valentino Chocolate

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3 CASE STUDY

Valentino Chocolates

3 CASE STUDY

Background
Valentino chocolates are made in Turin, Italy. They are recognised as luxury products with a delicious and unique taste. Some of Valentino’s finest chocolates are handmade and have won many international awards.

3 CASE STUDY

Expansion
The company started by selling raw chocolate to other chocolate manufacturers. These manufacturers then used it to make their own products. Later, Valentino began selling packaged chocolates directly to the public and created the Valentino brand.

3 CASE STUDY

Expansion
The company expanded fast. It now has almost 300 employees, 75 company-owned shops, and a turnover of € 90 million. However, in the last two years, sales growth has slowed down and costs have risen. This has caused a fall in profits (see Chart 1).

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Chart 1: Summary of the last three years’ results
Last Year Two years ago Three years ago

Turnover €90.5m Pre-tax profits €6.4m

€87.2m €8.2m

€62.6m €8.9m

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 

Reasons for falling profits
Prices There is widespread price cutting in the industry. Production Factory machines often break down. Demand Demand for its Classic Bar is falling. Valentino’s new products, biscuits and cakes, are not selling well. Staff morale Sales staff are becoming demotivated.





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Chart 2: Valentino’s main products (as a % of turnover)

Valentino Classic Bars Packaged chocolates Chocolate drinks

Raw chocolate Exclusive handmade chocolates Biscuits and Cakes

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The future
The company’s owners want Valentino to become an international business. They believe it makes the finest chocolates in the world. This year they have set aside €1.5 million to invest in their company. Their problem is to decide how to spend the money so that the company will continue to expand.

3 CASE STUDY

The future
Recently, a well-known business journal did a profile of the company. It ended as follows: Valentino can continue to grow, but only if it develops new products and finds new markets.

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Chart 3: Investment options
Option
1 Extend the factory 2 Buy new machinery 3 Invest in more research and development 4 Buy out a local competitor 5 Estabilish a factory in the US 6 Launch a marketing campaign

Cost
€500,000 €200,000 €200,000 €1.5 million €1.3 million €500,000

Benefit
Increase the factory’s capacity by 30% End the delays caused by the old machines breaking down Develop new products such as a low-fat chocolate drink, new biscuits/cakes Reduce local competition Manufacture chocolates in a major new market Increase sales of all products

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Chart 3: Investment options
Option
7 Finance a market survey and research trips to the US 8 Invest in an existing group of cafés 9 Set up online sales

Cost
€100,000

Benefit
Assess the market potential for Valentino products. Contact agents Become a partner in cafés wich sell and promote Valentino chocolates Increase sales and profits

€500,000

€150,000

10 Buy a new fleet of cars

€500,000

Increase motivation of the sales staff

3 CASE STUDY

Task
You
are
directors
of
Valentino.
Meet
to
 discuss
your
investment
plan. 1
Work
in
pairs.
Decide
how
to
spend
the
 €1.5
million.
Prepare
a
presentation
of
your
 investment
plan,
with
reasons
for
your
 choices. 2
Meet
as
one
group
and
present
your
ideas. 3
As
one
group,
agree
on
a
final
investment
 plan.


3

Writing

 As
a
director
of
Valentino
Chocolates,
write
a
memo
to
 your
CEO
outlining
your
investment
plan.
Give
reasons
 for
your
choices.
Begin
like
the
example.

CASE STUDY

Memo
To:
 
 From:
 
 Subject:
 CEO Investment
Plan

In
recent
years
Valentino
has
become
one
of
Europe’s
 leading
brands
of
chocolate.
It
is
now
ready
to
become
 a
successful
international
business.
The
Board
of
 Directors
has
agreed
the
following
investment
plan:
......
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