Discuss about the Business and Strategic Management Of Chocolate Industry.
Chocolate industry is currently one of the leading industries in the world. Recent report from an extensive research shows that chocolate industry makes an annual retail sale of 98.2 Billon USD. Chocolate industry is an ever growing industry that has barely witnessed any significant downfall in the last ten years. The major producer of cocoa bean, the very primary ingredient of chocolate are Ghana, Indonesia, Niger (Koné et al., 2017)ia, Cameroon and many more. Though the demand in chocolate and cocoa products has never seen any deflation, yet the lack of production has resulted in shortage of processed chocolate in the global context.
A PESTLE analysis of Côte d’Ivoire, Indonesian and Dominican Republic would help to analyze the actual situations responsible for making a considerable impact on chocolate production (Phillips 2016).
The farmers of Côte d’Ivoire are in a pitiable condition, though it is one of the leading cocoa producers in the world market. Study shows that farmers are emotionally connected with the plantation of cocoa, though most of the conditions are unfavorable. Government help is seldom received, and the wholesalers that barely meet the daily need of the farmers pay much low price. However, it is only in the recent past that government interference has taken place and the pieces Hs been revised. In 2013, the country has witnessed a increase of 10% on an average.
Political factors: Côte d’Ivoire and its political structure favors the production of cocoa beans, since the change or the shift in government structure hardly makes any impact on the cocoa production. Cocoa is the major cash crop that is produced in Côte d’Ivoire, which makes the country a leading exporter of chocolate.
Economic factors: In the global context, Côte d’Ivoire contributes a thirty percent of the total cocoa produced in the world. The economic factors thus without any iota of doubt is favorable at least to this sector. However, Côte d’Ivoire otherwise have economic issues since it is a third world country, or can be said a developing country. Cocoa production brings the major economic balance to the nation.
Social factors: Cocoa production, to the farmers of Côte d’Ivoire has become more of a hereditary occupation where the farmers cultivate cocoa for the purpose of holding on to the family tradition.
Technological factors: Technological factors are at a large responsible for the surplus amount of crops that the country produces each year. The government helps the farmers with the use of latest technology and enriched cocoa beans.
Legal factors: The cocoa cultivating rules and policies in Côte d’Ivoire is favorable for cocoa production. Taking into account that chocolate production is the primary occupation of the people of Côte d’Ivoire, the legal issues are taken care of by the government.
Environmental factors: There are a number of environmental factors that impacts the production of cocoa products in Côte d’Ivoire. For instance, while good climatic conditions put a positive impact on the cocoa production, negative climatic factors like constant rainfall or absolute lack of rainfall harms the production to a huge extent.
Overall, the country has seen a decline in the cocoa production. The production as recorded in 2009 was 600000 tons a year, whereas now it is 490000 ton (Neilson and McKenzie 2016). The attack of pod borer insect is held as the main culprit.
Political factors: Indonesia started with the cocoa production lately in the 2000s. Being a peaceful country with more or less stable governmental structure, political factors do not seem to impact on the country’s cocoa production as such.
Economic Factors: As recorded in the year 2013, people living below poverty line were even below ten percent of the total population (Ithriah Suryani and Muhandis 2017). Economic factors do not as such favors the production of cocoa. However, it has also been noted that section of people below poverty line has taken up farming cocoa out of compulsion, in order to make a livelihood. As such, the moderate economy of Indonesia in a way also favored cocoa production.
Social factors: One of the major social factors that affects the production of cocoa in Indonesia is its gender inequity. Gender inequity being .500, refrain the women population to take active part in cocoa production process (Farrell et al., 2018 ). Farming is still male dominated in Indonesia.
Technological factors: It has been recently observed that the cocoa production has seen significant downfall due to attack of pa particular kind of insect known as pod borer insect. The spreading of this particular insect in the crops has done a great damage so far. Indonesia is working on the use of technological solutions to get rid of the harm caused by pod borer insect.
Legal factors: Production of cocoa is not the main occupation in Indonesia (Deheuvels et al., 2016). Yet the legal factors, the rules and policies regarding the amount of cocoa cultivation have been kept in accord to the crop produced.
Environmental factors: Environmental factors are soothing towards the cultivation of cocoa in large scale. However, necessary steps have been taken so that environmental factors and its corresponding ill effects can be curbed for better production of cocoa crops.
Considering the geographical area that the country holds, the production of cocoa is surplus. The country grows near about 70,000 tons of high quality cocoa each year that are fully organic and holds fine flavor (Omsa, Abdullah and Jamali 2017). Having a total population of 350000 in the country, 40,000 and above are engaged with the production of cocoa.
Political factors: As far as the production of cocoa are concerned, it does not have any impact on the production of cocoa. The stability or the under stability of the political conditions hardly influences cocoa production, since, it is the primary cash crop produced in Dominican Republic.
Economic Factors: Economic factors have been favorable in the context of cocoa production in Dominican Republic. Since cocoa is the major cash crop that is produced in the country, the economy of the country largely depends on the production of cocoa. The country employs over 40,000 farmers exclusively for cocoa production (Notaro et al., 2017).
Social factors: Since cocoa is cultivated as the primary cash crop, the farmers in Dominican Republic own their own land for farming. There is seldom land taken at lease by the farmers as most of them own their own land. This also has a negative impact. There is less chance for further flourish in the production.
Technological factors: The farmers to the utmost use technological factors. A unique feature about the cocoa grown is that it carries a floral fragrance. It uses treated cocoa seeds for production and there is no harm caused by vermin and pod borer.
Environmental factors: Environmental factors are soothing and are in favor for the production of cocoa in Dominican Republic.
Market positioning of the Company: Hershey is known by one call and is a leading chocolate and confectioner company. Over the years it has been able to hold on to its loyal customer base by innovating and creating chocolate products. The company has a market cap of 24.44B USD. Hershey is listed in the NYSE.
An analysis of Porters Five Force would further help to determine the impact of cocoa production on Hershey.
Threat of New Entrants (Moderate): New companies bring new innovations that steals the attraction of the customers. However, Hershey maintains the innovation and modification of its products in order to stay competitive. Given the fact that entering into the market needs a down pay of huge taxes and is an expensive process taking into account promotional activities, Hershey receives moderate competition.
Bargaining Power of Suppliers (Low): Hershey is a gigantic brand and as such, most of the suppliers in the market wish to chain up with the company (Yunna and Yisheng 2014). There are a number of raw materials suppliers in the market, which makes the bargaining power of the supplier low, specially to Hershey.
Bargaining power of Buyers (High): Owing to the fact that there are too many existing companies in the market, the customers have a wide range of options to choose from. To address the changing situation, Hershey keeps on offering discounts and offers o its existing products, apart from modifying and innovating products.
Threat of substitution (High): Similar products of different brands are widely available in the market. As such, the threat of substitution is too high for the company. Hershey can keep the price of the products in a way so that the customers buy Hershey products, also clients switch from different brands to Hershey.
Rival competitors: Since chocolate is an ever growing industry, the market is already saturated with companies and brands dealing with chocolates and chocolate bi-products. Hershey faces the threat of competition in the market (Mathooko and Ogutu 2015). Hershey strategically keeps up with a sustainable differentiation and builds a measuring scale to keep a continuous track of the competition in the market. It makes plans to collaborate with the existing competitors so that the service are can be expanded with the expansion of the customer base.
Reference List
Deheuvels, O., Costet, P., Martinet, M., Jagoret, P. and Saj, S., 2016. An innovative public/private partnership for a sustainable transformation of the cocoa agri-chain in the Dominican Republic.
Farrell, A.D., Rhiney, K., Eitzinger, A. and Umaharan, P., 2018. Climate adaptation in a minor crop species: is the cocoa breeding network prepared for climate change?. Agroecology and Sustainable Food Systems, pp.1-22.
Ithriah, S.A., Suryani, E. and Muhandis, I., 2017. Analysis of Cocoa Production in Smallholder Plantations to Increase Productivity Using System Dynamics Approach. Advanced Science Letters, 23(12), pp.12313-12317.
Koné, M.K., Bony Koffi, P., Guehi, T.S., Lebrun, M., Durand, N., Fontana, A., Montet, D. and Boulanger, R., 2017. Impact of technological post-harvest processing on the production of chocolate aroma compounds in raw cocoa beans originated from Côte d’Ivoire.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other factors that influence the choice of response strategies adopted by public universities in Kenya. International Journal of Educational Management, 29(3), pp.334-354.
Neilson, J. and McKenzie, F., 2016. Business-oriented outreach programmes for sustainable cocoa production in Indonesia: an institutional innovation. Innovative markets for sustainable agriculture–How innovations in market institutions encourage sustainable agriculture in developing countries, Rome: Food and Agriculture Organization of the United Nations, pp.17-36.
Notaro, M., Martinet, M., Vaca, R., Schloeggel, C., Costet, P., Gary, C. and Deheuvels, O., 2017. Participatory design of cocoa-based agroforestry systems–a Methodological approach in the Dominican Republic.
Omsa, S., Abdullah, I.H. and Jamali, H., 2017. Five Competitive Forces Model and the Implementation of Porter’s Generic Strategies to Gain Firm Performances Management.
Phillips, L., 2016. Côte d’Ivoire-bringing out the best in cocoa production: feature-cocoa production. Farmer’s Weekly, 2016(16029), pp.38-41.
Yunna, W. and Yisheng, Y., 2014. The competition situation analysis of shale gas industry in China: Applying Porter’s five forces and scenario model. Renewable and Sustainable Energy Reviews, 40, pp.798-805.
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