Five Forces Analysis of the Global Chocolate Industry
The study of various industries and their various components can provide a considerable amount of helpful information. An interesting approach for this scientific work is the practical application of the five forces model by Michael Porter. The main task of this method is to consider the level and intensity of competition within a particular field of activity. Therefore, the work will explore the global chocolate industry for competitiveness using the Porter model.
The first aspect that should be considered when applying Porter’s Five Forces model in practice is competition within the industry. Thus, the chocolate industry is characterized by the presence of a sufficiently large number of companies that operate pretty successfully in the market. One of the most common manufacturers of chocolate products is Mars Wrigley Confectionery, Ferrero, and Mondelez International (“2021 global top 100 candy companies”, n.d.). All productions create various types of various confectionery products that are popular with customers. Furthermore, such a force as competition in the chocolate industry has a high level of threat to the profitability of the sphere.
The following point is the threat of new entrants, which has a low possibility of influencing the profitability of the industry. This factor is because, due to the presence of a large number of manufacturers, it is pretty difficult for new companies to gain a fixed place in the market. Moreover, various chocolate manufacturers produce a considerable amount of various goods and also, due to their longevity, have customers already assigned to them. In other words, it is difficult to invent and distribute a product that will immediately gain the same popularity as the giants of the chocolate industry.
From the previous aspect of Porter’s five forces model, the force that lies in the threat of substances also stands out. This aspect is the possible availability of goods or services that may have an alternative. Thus, in the chocolate industry, this force has an average level and directly depends on the wishes and preferences of customers. Since there is an excellent variety in the production of sweets, individuals decide for themselves whether they want to change their favorite chocolate products or not. The fourth aspect being considered is the power of suppliers, whose threat to profitability is at a high level. The reason for this circumstance is the fact that the production of high-quality chocolate depends on products such as cocoa beans. If there is a lack of resources or problems with transportation, manufacturers may have problems with profitability. However, it is worth noting that this factor refers to large-scale companies that can create production facilities in places where a lack of resources is possible.
Porter’s last force to consider regarding the chocolate industry is the power of buyers. This aspect is one of the most important and has a high level of threat to the profitability of organizations. As already mentioned, buyers play a crucial role, and the success of the company directly depends on social trends and interests. Moreover, the industry is characterized by large size and a high level of competition in the market, which causes constant flows of buyers from one brand to another. This is also because of various price segments, where most individuals will tend to the average for everyday life: therefore, they will turn to it more often. Consequently, it is also worth noting the fact that customers have bargaining power over the company and can influence the change in the price of products.
Madecasse Case
Madecasse’s business was inspired by the creators’ trip to Madagascar, where they encountered a desire to provide more jobs to improve the situation in the region. Hence, the founder notes that the main task was to create an organization that, on the one hand, would be “grassroots rural development in Madagascar and commercial enterprise that’s a market-driven, market-based, for-profit sort of thing” (Marshall et al., 2017, p. 4). This prompted them to create their chocolate production called Madécasse. This part of the work will explore the business strategy of this initiative to provide possible recommendations either to increase the desire of buyers to pay or to reduce the cost of products.
The company’s business strategy based its future success on the fact that Madagascar could produce cocoa of an exceptionally high quality, which would allow producing high-quality goods. Moreover, the centralization of chocolate production in Africa can become a driver for positive social changes in the lives of the local population. Interaction with local farmers will also improve the quality of chocolate products and contribute to the development of the region. The last aspect that the creators of the company wanted to accomplish was the return of a sense of pride to the people of Madagascar, who, for a long time, could not gain complete independence.
The basis of Madécasse’s business strategy is to increase the added value of the final product in Madagascar. Several parties are involved in this process at once, which appear to be interactions with farmers, a chocolate factory, suppliers of ingredients in Madagascar, and exports of finished products. Henceforth, the creation of such a unique business model is of particular value, as it “provides more than four times greater social and economic benefits for Madagascar” (Marshall et al., 2017, p. 14). Further, the organization tries to support the region in which its main functions take place.
Therefore, it can be concluded that the Blue Ocean approach becomes the business strategy of the company under study. This is due to the availability of information that Madécasse pays quite a lot of attention to differentiation in its business while creating new projects in those countries where it is not so common. Moreover, the creators of the company were interested not so much in making a profit but also in informing customers of something new and unique for customers. Madécasse takes this step by introducing the production of chocolate products directly, where all the cocoa of the struggle is collected. This action also contributes to the creation of jobs in the region and the introduction of initiatives to preserve the sustainability and prosperity of the population.
In conclusion, this work considered two essential aspects that contributed to the acquisition of knowledge that is of particular value. Hence, the first section provides data on Porter’s Five Forces model, which helps to evaluate the business strategy from all sides at once. The second part of the work considered the analysis of a case study about Matelassé and its business (Madécasse et al., 2022). Thus, gaining knowledge of all these functions will help to better understand the way the business operates. It is worth noting that I believe that companies should take measures to increase customers’ willingness to pay. This step can contribute to an increase in interested buyers.
First of all, this requires providing customers with the confidence to purchase high-quality goods. Moreover, it is essential to transfer knowledge and spread awareness that the company pursues positive goals and works to preserve sustainability and social welfare. This can be done with the help of various advertisements. Moreover, such a phenomenon as a network effect can be of critical importance. When experiencing a positive experience of interacting with a company, customers will want to share it with others. Thus, there will be an increase in buyers willing to pay more.
References
2021 global top 100 candy companies. (n.d.). Candy Industry.
Marshall, R. S., Brown, D., Sakarias, B., & Cai, M. (2017). Madécasse: Competing with a “4× Fair Trade” business model. Case Studies in Social Entrepreneurship, 54-86.