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Harvard Case - Toraya

"Toraya" Harvard business case study is written by Lauren H. Cohen, Akiko Kanno. It deals with the challenges in the field of General Management. The case study is 18 page(s) long and it was first published on : Feb 15, 2022

At Fern Fort University, we recommend Toraya embark on a strategic transformation to secure its future growth and maintain its position as a leading Japanese confectionery brand. This transformation will involve a multi-pronged approach encompassing innovation, international expansion, and a renewed focus on digital marketing and customer experience.

2. Background

Toraya, a venerable Japanese confectionery company with a rich history spanning over 400 years, faces the challenge of balancing its traditional values with the demands of a rapidly evolving global market. The company's core strength lies in its craftsmanship and dedication to preserving traditional Japanese sweets, but this has also become a potential limitation in a world increasingly seeking novelty and convenience.

The case study highlights the key protagonists:

  • Toraya's management: Concerned about the company's future growth and the need to adapt to changing consumer preferences.
  • Toraya's employees: Dedicated to maintaining the company's traditions but also seeking opportunities for innovation and growth.
  • Toraya's customers: A loyal base of traditionalists, but also a growing segment of younger consumers seeking modern interpretations of Japanese sweets.

3. Analysis of the Case Study

Strategic Analysis:

  • SWOT Analysis:

    • Strengths: Strong brand recognition, high-quality products, skilled workforce, rich heritage, loyal customer base.
    • Weaknesses: Limited product innovation, reliance on traditional methods, limited international presence, lack of digital marketing expertise.
    • Opportunities: Growing demand for Japanese culture and cuisine globally, increasing interest in healthy and natural foods, potential for product diversification.
    • Threats: Competition from modern confectionery brands, changing consumer preferences, economic fluctuations, rising costs of raw materials.
  • Porter's Five Forces:

    • Threat of New Entrants: Moderate, due to the high barriers to entry in the premium confectionery market.
    • Bargaining Power of Buyers: Moderate, as consumers have a range of choices but value Toraya's brand and quality.
    • Bargaining Power of Suppliers: Low, as Toraya has established relationships with suppliers of high-quality ingredients.
    • Threat of Substitutes: High, due to the availability of other confectionery options, including those with more modern flavors and formats.
    • Competitive Rivalry: High, as Toraya faces competition from both domestic and international brands.

Financial Analysis:

  • Toraya's financial performance is stable, but growth has been stagnant. The company needs to invest in innovation and expansion to achieve sustainable growth.

Marketing Analysis:

  • Toraya's marketing efforts are primarily focused on traditional channels, which are less effective in reaching younger consumers. The company needs to adopt a more digital-centric approach to marketing.

Operational Analysis:

  • Toraya's manufacturing processes are highly efficient, but the company needs to explore new technologies and automation to improve productivity and reduce costs.

4. Recommendations

  1. Innovation and Product Diversification:

    • Develop new product lines: Introduce modern interpretations of traditional Japanese sweets, catering to younger consumers' preferences for unique flavors and textures.
    • Explore new ingredients and flavors: Experiment with innovative combinations of traditional and contemporary ingredients, drawing inspiration from global culinary trends.
    • Expand product formats: Offer convenient and portable options like individual servings, travel packs, and gift sets.
    • Invest in R&D: Establish a dedicated R&D team to drive innovation and develop new product concepts.
  2. International Expansion:

    • Target emerging markets: Focus on countries with a growing appreciation for Japanese culture and cuisine, such as China, South Korea, and Southeast Asian nations.
    • Develop strategic partnerships: Collaborate with local distributors and retailers to establish a strong presence in new markets.
    • Adapt products and marketing: Tailor product offerings and marketing messages to meet the specific needs and preferences of each target market.
  3. Digital Transformation:

    • Enhance online presence: Develop a user-friendly website and e-commerce platform to reach a wider audience.
    • Invest in digital marketing: Utilize social media, search engine optimization (SEO), and targeted advertising to engage with potential customers.
    • Leverage data analytics: Track customer behavior and preferences to inform product development and marketing strategies.
    • Improve customer service: Provide excellent customer service through online channels, including live chat, email, and social media.
  4. Sustainability and Corporate Social Responsibility:

    • Promote sustainable practices: Use eco-friendly packaging, reduce waste, and source ingredients responsibly.
    • Support local communities: Partner with local farmers and artisans to source high-quality ingredients and promote regional economic development.
    • Engage in social initiatives: Support charitable causes related to food security, education, and environmental conservation.

5. Basis of Recommendations

These recommendations are based on a comprehensive analysis of Toraya's strengths, weaknesses, opportunities, and threats. They align with the company's core competencies, mission, and values while addressing the needs of both existing and potential customers. The recommendations also take into account the competitive landscape and the evolving consumer preferences.

  • Core Competencies and Consistency with Mission: The recommendations build upon Toraya's expertise in traditional Japanese confectionery while incorporating elements of innovation and modernization.
  • External Customers and Internal Clients: The recommendations cater to the needs of both traditional and modern consumers, while also empowering employees to contribute to the company's growth and transformation.
  • Competitors: The recommendations address the competitive threats by focusing on innovation, international expansion, and digital marketing, which are key areas where Toraya can differentiate itself from competitors.
  • Attractiveness: The recommendations are expected to generate positive returns on investment through increased sales, brand awareness, and market share.

6. Conclusion

Toraya has a strong foundation built on its rich heritage and commitment to quality. By embracing innovation, expanding internationally, and leveraging digital technologies, Toraya can secure its future growth and maintain its position as a leading Japanese confectionery brand. This transformation will require a commitment to change management, leadership development, and continuous improvement.

7. Discussion

Alternatives:

  • Maintaining the status quo: This option would likely result in declining market share and profitability as Toraya struggles to keep pace with changing consumer preferences.
  • Focusing solely on innovation: This approach could alienate Toraya's traditional customer base and lead to a loss of brand identity.
  • Aggressive acquisition strategy: This option could be risky and expensive, and may not be aligned with Toraya's core values.

Risks and Key Assumptions:

  • Consumer acceptance of new products: There is a risk that consumers may not embrace Toraya's new product offerings.
  • Success of international expansion: The success of international expansion depends on factors such as market conditions, competition, and cultural adaptation.
  • Effectiveness of digital marketing: The effectiveness of digital marketing depends on factors such as budget, targeting, and execution.

8. Next Steps

  1. Form a strategic planning team: Assemble a cross-functional team to develop a detailed implementation plan.
  2. Conduct market research: Gather data on consumer preferences, market trends, and competitive landscape.
  3. Develop a pilot program: Test new products and marketing strategies in a limited market before launching them on a wider scale.
  4. Invest in technology and infrastructure: Upgrade IT systems, develop e-commerce capabilities, and invest in digital marketing tools.
  5. Communicate the vision: Clearly communicate the strategic transformation to employees, customers, and stakeholders.
  6. Monitor progress and adjust strategies: Track key performance indicators (KPIs) and make adjustments to the plan as needed.

By taking these steps, Toraya can successfully navigate the challenges of the global market and ensure its continued success for generations to come.

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Case Description

Mitsuharu Kurokawa was the 18th generation leader of a family firm that produced and sold premium Japanese sweets, Toraya Confectionery Co., Ltd. He had succeeded the business from his father, Mitsuhiro Kurokawa who had led the firm for thirty years. Mitsuharu was committed to following his predecessors who had strived to please customers with delicious Japanese sweets. The challenge was how he could further improve product quality and diversify the product line to please the customers of today without affecting Toraya's brand image. Mitsuharu also believed that plant-derived "yokan" (a traditional sweet using azuki bean paste) was healthy and had the potential to become a global popular sweet, like chocolate. Thus as a long-term goal, Mitsuharu had an ambition to offer Japanese sweets to customers around the world. In planning ways to further grow the business, Mitsuharu had to pin down exactly how the family business was defined in relation to his family. He also needed to identify what role of prominence his family's position within the highest tier of decision-making meant for the rest of the larger "Toraya family," which included longtime employees. Would Mitsuharu's endeavor to expand the product line to reach a wider customer base be in line with the well-being of the company? Would there be a risk of damaging Toraya's image as a luxury brand? Would global expansion be the right decision for the firm with a long history of offering traditional sweets to premium customers in Japan?

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