Now turn to section four on page seven. You will hear part of a lecture in a business class. The professor is discussing a case study of a company in North America called Chocazine.
First, you have some time to look at questions 31 to 40 on page seven. Now listen carefully and answer questions 31 to 40. We've been talking about small businesses and some of the challenges they face.
Today, I want to look at a case study based on a company called Chocazine that illustrates the need to evaluate opportunities very carefully. A man called Eric Smith and two of his colleagues were struck by the mass customization movement that was spreading through a large number of industries in the U.S. This involved mass-producing products and at the same time individually customizing them for their customers. Why not apply the same concept to chocolate? Customers could choose the ingredients they'd like to have put into their chocolate bars.
So Smith and his colleagues decided to launch a customized chocolate operation called Chocazine. Then, when Chocazine was only about nine months old, Smith received an email from a large European luxury retailer. This retailer was inquiring about ordering 15,000 bars of chocolate for their customers.
They wanted to give these as a gift in their high-end stores in New York City, Miami, and Los Angeles during the holiday shopping season. The offer certainly sounded enticing because Chocazine was selling fewer than 150 chocolate bars a day. Smith and his co-founders knew it could also be very good publicity.
So they needed to consider it carefully. They had many things to consider. Obviously, it was a tempting offer.
But at the same time, the risk was great. They didn't know whether they could get the order completed in time. Also, if they accepted it and then it turned out they couldn't do it, what about the financial fallout as well as the possible damage to the company's reputation? As well as this, another thing they had to think about was how they were actually going to produce all these chocolate bars as the number of machines they had was limited.
They only had three of them and that clearly wasn't going to be enough. So they decided to think creatively and try to find a subcontractor to produce the bars. They weren't ready to pass up such a rare opportunity.
Smith spent two days searching for a suitable subcontractor. But he couldn't find anyone who had experience of making bars with the type of melted toppings that Chocozine used. Then something rather unexpected happened.
A professor at Harvard Business School was teaching a class about product customization. So she wrote to Smith and asked if he would speak to the students. So in late October, Smith had an opportunity to talk about the deal to about 90 MBA students and to ask them for their advice.
Many of the students thought that doing the deal with a luxury retailer would be a mistake. However, after the class, Smith spoke with one of the students. This student had worked as a buyer at a major chocolate retailer and he said he had a contact in the business who might be interested in doing the job.
Smith called the new subcontractor the next day. He said he was interested in doing the order. But he found there were difficult technical issues to be worked out, including how to faithfully reproduce the distinctive shape of the Chocozine bars.
Smith thought about it. And in the end, reluctantly, he sent an email declining the luxury retailer's order. But fortunately for Chocozine, their sales picked up anyway.
And the company gradually expanded its market share and is now doing very well. Chocozine's case is important. They were wise to carefully consider whether they could actually manage an order of this kind.
But not every small business will have the happy ending that Chocozine did. And taking on too big an order has destroyed many a small business. That is the end of section four.
You now have half a minute to check your answers.