Environmental Analysis Of The Chocolate Industry – D. Bilo Chocolates

Macro-Environment Analysis

Discuss abou the Chocolate and Confectionery Manufacturing.

In the whole world, the ways of doing business has changed and so is the case with chocolate industry. There are several factors that are affecting the business of the Chocolate Industry. In this regards it is essential for the companies under it to analyse the environment (Abdel-Basset, Mohamed and Smarandache, 2018). This is because both internal and external factors are influencing the business of companies in Chocolate industry. Such analysis is also necessary for finding opportunities and threats which can be achieved with the help of various types of strategies. For the entrepreneurial venture that is expanding their business into other parts of the world, this is highly necessary.

Donald B is an entrepreneurial venture and is in the business of manufacturing chocolates. He had his brand name D. Bilo Chocolates. He had two stores, one in Toorak Rd South Yarra and other one is Lygon St Carlton. In this report, there is a detail description of environmental analysis of D. Bilo Chocolates including the analysis at micro level and Macro level. The micro analysis includes competitor’s analysis, elements of marketing mix. Along with this there is evaluation about the things that are providing company with competitive advantage as well as about customers. In the macro analysis this report presents the industry analysis of chocolate industry as well as about major trends and potential impacts. In the last section of the report opportunities and threats related to the cite firm has been done.

In the type of business condition prevailing all over the world, it has become essential for the organisations to understand external factors that are affecting their business (Lu, et. al. 2018). The macro environment affects almost all the types of business.

The Chocolate industry has its revenue of $5.7bn in 2017-18. It has been further forecasted an increase of 1.3% over the last five years, which will ultimately reach $6.1 billion (Lupton, Sánchez and Kerpel, 2018). This will increase the demand for the product in the particular market. Then, the next is the quality of the product. This means that the producers should try to maintain the quality of the product, which means that the producer should use the new and natural things for making the product. This makes the product more authentic and the consumers will purchase the product due to the use of natural ingredients in the products (Neilson, et. al. 2018).

Issues	Description
Downsizing	There is a constant decrease in the size of the bars.
Price	Prices of the chocolates have gone up which is reducing the sales growth.
Tax	There is a constant increase in the taxation especially the ones that are linked with import of raw materials
Unfavourable Weather	There is an unfavourable weather conditions prevailing in the producer countries. This is directly affecting the production of cocoa.

Industry Sector Analysis

This industry has opportunity in the rural market where there are larger market segments that have not been properly addressed (Ogden, 2018). In the outskirts regions of the country, there are huge opportunities available in the market.

Industry Sector Analysis (IBIS Reports)
Key Points/ Issues	Chocolate & Confectionery Manufacturing (CCM)	Confectionary Manufacturing (CM)	Speciality Chocolates Stores (SCS)
What includes	Operators of the industry mainly manufacture chocolates or cocoa based confectionery. They distribute it through grocery, supermarkets as well as convenience stores. Chocolate bars Kitkat M&Ms Mars Block chocolates Snickers	Operators of this industry mainly manufacture confectionery products excluding some products like chewing gums and chocolates. Candied nuts manufacturing Marshmallow manufacturing Liquorice manufacturing Chewing gums Mints Gummies Candies	Operators of this industry are mainly engaged in retail of chocolate products, pure chocolates. It also includes chocolate products through speciality stores both made through premium machines and handmade. The industry has moved towards the concept of ‘Café trade’ Speciality chocolate retailing Organic chocolate retailing Chocolate food and beverage retailing Premium chocolate retailing Fair trade chocolate retailing Seasonal boxed chocolate retailing
Revenue	In 2017-18 it was around $5.7bn and it is expected to have revenue of $6.1bn in the year 2022-23.	In the year 2017-18 it around $849.1m.	It is having a revenue of $317m in the year 2017-18 while in the year 2021-22 it is going to become $356m.
Annual revenue growth rates	In the year 2013-18 it is having a growth rate of 0.7%. In the coming years from 2018-23, it is going to grow with the rate of 1.3%	There was decrease in the annual revenue of the industry as the growth rate was -0.1% while in the coming years it is expected to grow with the rate of 1.3%.	Consumption of artisanal chocolate is increased due to high intake by customers. There is stimulated growth due to increase in the number of special occasions. In the coming five years also there will be increase in the growth rate. Operations of café style will give the industry with its highest of growth rate. Its revenue growth rate in the year 2012-17 is expected to be at 3.9%. In the coming years it is expected to remain at 2.4%.

These are the major forces or trends that help in shaping particular industry and strategies and the actions that are there in the industry (Shemesh, et. al. 2018). These generally include all the external factors of the company. These include:

Factors	Issues	Impact on company	Opportunity (O) or Threat (T) & Importance (H,M,L)
Political	Rules and Regulations. Import duties	The government of Australia has made many types of rules and regulations that would is influencing the chocolate industry. The increase import duties on the raw materials have affected the prices of the chocolates (Singh, et. al. 2018).	(-M) (-M)
Economic	Instability in the economy. Various factors are affected.	This has influenced the business of chocolate firms as there is risk in the new kinds of investments. These factors generally represents the economy in the wider sense, which includes the growth rates, employment levels, materials including energy and unemployment’s, cost of raw, steel and petrol, inflation rates and exchange rates. These factors also vary from country to country (Stringfellow, 2017).	(-H) (-M)
Social	Buying Behaviour of the consumers.	These are the factors, which generally relate to the culture and backgrounds of the people. This means the cultural factors also affect the buying behaviour of the customers. As the customer’s choice, of purchase is going to affect the sales of the product in that particular country (Strobl, Krump and Borek, 2018).	(+H)
Technology	Fast Innovations Quality maintenance	The technology, in this case, plays a very important role as the new developments and inventions, changes in internet and e-commerce and last it includes government spending in the research. The technology is used here is to maintain the quality of the product and improve the efficiency of the product.	(+H) (+H)
Legal	Consumer laws	The consumer laws have strengthened over the past few years. This has affected the company’s operations.	(-M)
Environment	Burden on resources	With the increasing demand for the quality products there is increase in then demand for high quality raw materials. This has put pressure on the farming activities of the nation.	(-H)
Demographics	Demographic change	This further includes the study of the human populations including the term of density, size, location, age, gender, race, and other statistical data. This includes the involvement of the people and the people make up the markets. In this case, the demographic environment includes the age of the population that purchase a particular product. For example, if in a particular country the population is of young age so the people will prefer chocolates as a gift many times.	(+H)

Micro- Environment includes all those factors that affect the business strategy. Along with this it also affects its decision-making and performance.  Such factors generally involve the employees, media, customers, stakeholders, competitors, and suppliers (Bisbis, Gruda and Blanke, 2018). This is considering all the individual aspects, which are present there in the market.

The competitors are Nestle Australia Ltd, Mars Australia Pty Ltd, Mondelez Australia Holdings Pty Ltd, and many other local special chocolate shops (Calof, Arcos and Sewdass, 2018). 

Competitors Name	Company Size	Market Share	Product Range	Key Product	Branding and Positioning
Nestle	447 factories	15.1%	Beverages, milk, ice cream, chocolate and confectionery	Milk	Service, product, channel creation, and image differentiation.
Mondelez	44 brands	11.9%	Salad dressing, cheese, and dairy products, milk, wood products and manufactured goods.	Food and Beverages	Sustainability growth from top to bottom line (syracusecoe.org. 2018).
Mars	20 manufacturing facilities in 78 countries	12.3%	Chocolate, gum, bars, candy, beverages, pet food, foodstuffs and mint	Pet Food	They had some of the principals including responsibility, efficiency, freedom, quality, and mutuality.

There are various chocolate stores that are also affecting the business of the cited firm. Some of them are:

• Mork chocolates that is famous for their hot chocolates.
• CACAO LAB famous for handicraft chocolates.
• KOKO BLACK famous for artisan chocolates.

Marketing Mix elements	Nestle	Mondelez	Mars
Product	Beverages, Milk and its products, prepared dishes and cooking aides and chocolates.	Meals, Dairy and Side Dishes, Cooking/Baking Goods, cheese products, Bacon, Deli Meat, and Hot Dogs, and Desserts, Dressing, Sauces and Condiments, Snakes and beverages.	Divided into six segments including symbioscience, food, drinks, Wrigley, Petcare and chocolate (Diehl,2018).
Price	Depend on the market of individual product	Adopt reasonable pricing policy as their major target consumers are price conscious.	Depend on advertising, production, distribution, marketing, and rival brands.
Place	One level and three level distribution channel is used.	Due to its international reach, it is operate in many countries like Germany, United Kingdom, India, Australia, Canada, and Bangladesh. They follow two level distribution channels.	Operate in many countries like china, India, Germany, Indonesia, France, Australia, Japan, and Ireland.
Promotion	Advertisement campaign and website promotion	Magazines, televisions, billboards and social network includes Facebook, twitter, blogs, and shopping portals.	Electronic Media include advertisement campaign, social media, and various sponsorships.

There are factors that are there in order to have a competitive advantage. This includes Economies of scale, marketing of the differentiated products, guaranteed supply of the key products, modification of production output, the establishment of an export market and ability to pass on the production cost (Gallo, Antolin-Lopez and Montiel, 2018).  

Consumer analysis is essential in the modern day business. This is due to the fact that it helps in understanding different aspects of the customers. It is effective in the case of making segmentations and targets. The consumer’s preferences mainly depend on the favoured premium and healthier products over the traditional chocolates and the confectionery (Konstantas, et. al. 2018). There is higher sale of the products that are high in fat and sugar. There are various types of segments made by the company based on the type of consumers. First is that there is an increase in the demands of the processed food that is processed by natural ingredients. The natural product includes nuts, fruits, and coca. These kinds of products are offer at higher prices and the consumers are willing to pay the higher price for these products. Second is that there is increase in the demands for gyms and the fitness canters is expect to increase over the years. This comes under the part of consumer buying behaviour also there are various steps for the same. These are information search, problem recognition, purchase, evaluation, and post-purchase evaluation (Laverty, et. al. 2018). Changing market means the new changes in the demand for a particular product.

Competitive Analysis

The major target market for the cited firm is the children. This is because it has products of different taste that attracts children towards their firm. It is also because children have greater interest in the chocolate products. Children at different ages like different types of chocolates. It is further used as bakery items and is used as the gift items in many occasions. Therefore, the producer needs to do some of the innovation in that field in order to attract the consumers, so that they can sell the product to wider segments in the market (Loo and Leung, 2018).

There are various potential impacts on the industry and the Donald B’s business potential venture. The potential impacts are:

• Demand for supermarkets and Grocery Stores: All the business operates a significant amount of revenue from the sales to the supermarkets and the grocery stores. The increase in demand ultimately reflects the consumer spending (Sueyoshi and Goto, 2018).
• Health Cautiousness: The people now days are very much aware of their health and they want to use and purchase only healthy products. There is an increase in the public awareness about the nutrition and health. This tends to affect the sales of traditional confectionery and chocolate products and threatening the revenue growth of the industry.
• Real Household disposable income: The income gives the reflection of the income available for the individuals in any of the households that include generally the items of beverages and food items.
• Price of Competitors product: This means that the price of the competitors’ product also affects the sales of Donald B’s venture. For example, if price of the competitor’s product, is low as compared to their own product. The consumer will change the product. The consumers will change the product due to its price (syracusecoe.org., 2018).
• Demand from the food product manufacturing: Increase in demand from food product manufacturers can result in an increase in demand for the industrial goods. They generally use the Chocolate and Confectionery Manufacturing industry as an input that generally produces the products from their own products.
• Trade-weighted Index: In the following case, alterations in the trade-weighted index can have impact on the industry’s strong performance. An Australian dollar can make the products comparatively inexpensive to purchase than that of domestically manufactured products. This can increase the export prices, controlled demand from the export markets and industries.

• Coverage: This means that the organization needs to increase the coverage area of the brand. This means creating more and more consumers for the brand and maintaining the relations with the regular customers (Thaichon, et. al. 2018).
• Increased Quality: This means the producers need to increase the quality of the product means including more and more natural products in the process of manufacturing of the product and this should be offer at the best possible price to the consumers so that there should be a level of profit to both consumers and producers.
• Increase in Production: The production can be increase by improving the technology in the process of making the chocolates. This will increase the production and supply of the product, which will result in increasing the profit of the company.
• Health Cautious: The consumer preferences are changing due to the change people are becoming more health cautious and the demand for the products are made by the natural ingredients is increasing and the consumers are ready to pay a higher price for the product made for natural ingredients (Singh et al., 2018).

Apart from this they also should focus on the product differentiation as it is the base of modern day marketing. This is also essential for attracting larger number of consumers towards their products. They must focus on the path of research and development work so as to bring flavours as per the demands of the consumers.

Threats

• Competition: The competition is a threat for every organization. The competitor’s price, technology, and marketing strategy play a big role in the sales of the organization. If we take the example of technology, if the competitor has the good technology then he can sell the same product with the same quality at the lowest price.
• Local Development: The development of local economy serves as the biggest threat for the organization. This means that only at the peak season time the people will purchase the branded product but on other day’s they will purchase the competitors’ product. This will lead to ignorance of local manufacturers.
• Workforce: This is one of the major problems faced by many global organizations. This means that every organization needs good employees for them and it is not possible that people with the same level of education and experience are available in all the countries. This is the reason that makes workforce a threat for the company.
• Huge Investments: The investment is a very big criterion for any of the business to get profit. This means that all the creativity is converting into innovation only when the funds are available with them.

• Target Business Segment: This means that the business should divide the market into various segments. In this case, the organization can divide the market based on types of uses of the particular product. The chocolates used in many places and on various occasions, so the business should need to put some of the innovation in diversifying their target business segment.
• Target Geographic Markets: In this case, the organization is a global organization and the business can divide the market based on countries. By doing this, the organization can have different marketing policies for different countries and can attract many consumers (University of South Australia. 2018).
• Target Consumer Market: This means dividing the market based on the consumers available in the market, it will observe on the basis of age, income structure and population density in the market of a particular country. In terms of age, producers should market the product differently for kids and differently for young adults.

Conclusion

From the above report, there are many things that can be concluded. This report gives a brief idea about the marketing mix of one of the important competitors. Macro-Environmental analysis is very essential for the organisation along with latest trends that includes PEST+D analysis and the potential impacts of the same being explain based on their business direction. The major opportunities in regards to the business have been explained. Along with this threats are also given, and lastly, one of the major recommendations is given that suggests that the market can be segment according to different kind of consumer’s behaviours. These include three types of segments, which are target business segment, target geographic market segment, and lastly the target market segments. From the above analysis, this is been observed that the company needs to have many advantages but it also includes many disadvantages as well.

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