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MandyleObjectiveMandyleChocolateisoneofthemostfamouspremiumfinechocolatemanufacturersandchainstoresintheworld.Asaconsultantinaleadingconsultingcompany,youneedtoworkwithyourteamtodevelopastrategicplanforhowtoexpandintheChinesemarket.BackgroundFoundedin1956,Mandyleowns10,000specialtyretailersacrosstheworld.InadditiontochocolatesMandylealsosellstruffles,coffee,cocoa.biscuits,dippedfruitsandsweets,chocolateliqueur,shakes.weddingandpartyfavorsandotheritemsarrangedingiftbaskets.SinceMandyleenteredtheChinesemarketin2010,theyhavedeveloped103stores,withanaverageannualincreaseofnearly20storesinChina.Mandylewouldliketoincreaseitsmarketshareandprofitabilityoverthenextfiveyears.AtpresenttheirtotalmarketshareintheChinesemarketis12%andismuchlessthanexpected.Inthefirst-tiercitiestheyhaveamarketshareof17%,whichdecreasedsharplywhenacompetitorcameintotheChinesemarket.Insecond-tiercities,ithasamarketshareof5%.Theyweredominatedbycommonchocolatebrands.Withthepromotionofbrandawarenessinsomesecond-tiercities,suchasNingboandSuzhou,theaveragesalesgrowthinsecond-tiercitiessurpassedthefirst-tiercitiesforthefirsttimeinMarch.Thefollowingtableshowstheannualrevenue,grossprofit,totaloperatingexpensesofMandyleChinaamong2011and2016.(MillionsofUSD)201620152014201320122011Revenue/收入339.925617494.66334Costofsales/成本22115487322617GrossProfit/毛利118.910286.662.63717TotalOperatingExpenses/总运营费用12410791664018TotalOperatingProfit/总运营利润(5.1)(5)(4.4)(3.4)(3)(1)Withtheincreaseofnewstores,operatingexpenseshaveincreasedandthefollowingistheinformationabouttheOperatingExpenses:TodelivertheultimatechocolateexperienceandFiveexpensesinOperatingExpensein2016PercentageTransportationExpense31%RecruitingExpense23%Research&Explorenewcatalogue21%MarketingExpense18%AdminExpense9%153043568010315508082848601020304050607080901001101201301401500102030405060708090100110120130140150201120122013201420152016StoreNumbersTransportationExpenses(InmillionsUSD)TheRelationshipBetweenTransportExpensesandTotalStoreNumberTotalStoreNumberTransportationExpensesTodelivertheultimatechocolateexperienceandrespectheritage,MandyledonothaveachocolatefactoryinChina.Allchocolatesareshippedinrefrigeratedtrucksfromabroad.Becauseofstrictrequirementsfortransportationandpreservation,theyhavetouseprofessionalshippingcompaniesatverycompetitivecosts.Transportationexpensestendtofluctuateverylittlewithanincreasingnumberofstores.Forstoresinthesameregions,themorethenewstoresoperate,thelowertheaveragetransportationcost.Mandyleishiringmoreseniorpeopleindifferentfunctions,sothesalariesofmanagementaremuchhigherthantheindustryaverage.Thestoresarelocatedincentralbusinessdistrictsinallselectedcitiesandtherentalcostisrelativelyhigh.Mandylehavechosentodevelopcorporate-ownedchainssincetheyenteredtheChinesemarked.ThismeansMandylerunstheday-to-dayoperationsandownstheprofitsandlossesofeachstore.Thereisanotherchoiceforexpanding,whichisfranchising(特许经营店).Eachfranchisedstoremustfollowcertainguidelinessetupbytheparentcompany,whichincludethetypesofproductsthatcanbesold,operatingproceduresandthepricestheycancharge.Inexchangeforthetime-testedbusinessplan,marketingpowerandbrandname,thefranchisortakesacutofprofits.Forreference,thefollowingaresomepopularmodesforfranchising,withconditionsandprofitdistributionvaryingaccordingtodifferentcompanies.ConditionsofvariousModesProfitDistributionSupplementThefranchisormanagestheinvestmentandalloperatingexpensesexcepttransportation.Unifiedpricinganddistribution,andsaleofparentcompanyproductsonlyParentcompanytakesaproportionfromthesaleofproductsBesidestheoperatingrevenue，theparentcompanysubsidizestheprofits（补贴）accordingtoperformanceoffranchisorTheparentcompanyinvestsandtakesastakeinthebusiness,independentpricingbystoresandtheytakeownershipofgoodsclosetothestore.They'realsoallowedtosellotherproductsotherthancompetitors'goodsandtheycanarrangetheirownbrandingTakeaproportionoftheprofitsoftheoperationMandyledidnotchoosetoexpandviafranchisedunitsatthestartofitsentryintotheChinesemarket;instead,theybeganwithcompany-ownedunits.Thiswasbecausetheywereworriedaboutthepoorinfrastructureandtheinadequatelegalframeworkforpreventingthesaleoffakeproductsviaunapprovedoutlets.Intheirfutureexpansionplans,themanagementisopentoproposedsolutionsforcorporateorfranchiseoptions.ThefollowingarethelocationswhichMandylehaschosenforitsexpansionofchainstoresinChina.AlreadyOpenedstoresNO.OfStoresTypesOfCitiesNominatedCitesForOpeningNewStoresTypesOfCitiesShanghai28First-tiercityNanjingSecond-tiercityplusHangzhou16Second-tierplus(二线发达城市)WuhanSecond-tiercityNingbo9Second-tiercity(二线中等城市)ChangshaSecond-tiercityWuxi5Second-tierZhengzhouSecond-tiercitySuzhou11Second-tierShenzhenFirst-tiercityNanjing14Second-tiercityplusQingdaoSecond-tiercityplusBeijing13First-tiercityDalianSecond-tiercityplusTianjin7First-tiercityChengduSecond-tiercityAllretailersareintheprocessofchange.Therearetwobusinessstrategieswhichareusefulasreference:Lifestylestrategy:AnAmericancoffeecompanyandcoffeehousechain,Starbucks,marketsitsproductsofservicesinawayth