Table of Contents
1. Carry out an analysis and summary of the Ghana and Nigeria cocoa production situations inclusive of a PESTEL or PEST analysis. 3
2. Provide an exposure analysis of Hershey to the world’s growing cocoa shortage. This report should include a synopsis of the group, its holdings, current market position, and Five Forces Analysis. 5
The give report deals with the academic research relating to the chocolate production across the world. As such it covers a case study on chocolate, cocoa industry, and similar products. This will help to gain an understanding of the production of such products and its related concepts. An attempt has been made to understand the various concepts relating to the chocolate production. For the ease of understanding, practical instances of various firms or companies engaged in the production of these productions have been covered throughout the report. These will help and facilitate the reader or user of the report to understand the scope and ambit of chocolate production in a better and an informative manner.
1. Carry out an analysis and summary of the Ghana and Nigeria cocoa production situations inclusive of a PESTEL or PEST analysis.
The major and predominant source of foreign exchange for Nigeria used to be from Cocoa production until the discovery of oil which shifted or divert the focus completely to oil (Mamary, et. al., 2014). Thus, there was a time when the economy of Nigeria is totally dependent on the cocoa production since the climate of Ghana and Nigeria are suitable and appropriate for the cocoa production (Verna, 2013).
But cocoa production is still quite significant to the revenue generation in Nigeria. Presently, Nigeria is fourth on the list of the largest Cocoa producer and it is the third largest exporter. However, still, it is not in a position to grow substantial revenue from the cocoa production.
Image 1: PESTLE or PEST Analysis of cocoa and chocolate production in Ghana and Nigeria and nearby areas
Source: By author, 2018
Ghana has retrogressed and little progressed since independence. The democracy existing or prevalent in Ghana or Nigeria is working well which is actually a mirage right now. Ghana is characterized or represented by political discrimination along with ethnic discrimination. About 99% of them are of aneroid ancestry but they aren’t one people.
There is a pseudo dictatorship from one election until the next. There is a high degree of centralization leading to poor governance. Ghana is divided into regions and districts. All executives of these sub-entities are appointed by the President according to his whims and caprices and they aren’t accountable to anybody.
Cocoa from Ghana is not famous. Rather the concerned country or nation is famous for being one of the world’s major producers of cocoa (Mamary, et. al., 2014). Cocoa from Ghana, like cocoa from similar regions or area of Africa such as Coite d’Ivoire, is usually of lower flavor grade and used primarily for mass production along with its consumption chocolates and industrial uses or purposes, not for higher- value, specialty chocolate products.
When someone eats a chocolate made in a developed nation, he or she might not think the main ingredient cocoa is from poor countries like Africa (Ada ; Ghaffarzadeh, 2015). Cocoa is one of the best assets Ghana has ever had due to its nutritional value and a foreign exchange to Ghana. Ghanaian farmers have the perception and are of the opinion that anything did must be of good quality especially when it comes to anything people use to eat and this has raised the image of Ghana so much. The use of good agricultural practices matters when it comes to the quality of cocoa.
Cocoa growers in Ghana still use older and more traditional methods for processing the cocoa beans, which leads to a higher quality bean and more complex flavor profile then mechanizes methods that are used in some other places. This is the reason behind the non-development of these two nations and countries despite the fact that massive production of chocolate and cocoa takes place in such countries and nations (Rahi, 2017). They are not using the updated technology. If they can use the latest production techniques, they can foster an economy of their country.
2. Provide an exposure analysis of Hershey to the world’s growing cocoa shortage. This report should include a synopsis of the group, its holdings, current market position, and Five Forces Analysis.
Hershey chocolate is formerly known as Hershey Foods Corporation. It is an American based corporation. It is well-renowned company since it is the largest producer of chocolate in the world. The products of Hershey are available in all the places and cities of United States due to its wide distribution network (Ada & Ghaffarzadeh, 2015). It has its customer base in 30 countries or nations all over the world. This all has been possible due to its prominence in the cocoa industry.
Fortunately for Mr. Hershey (and unfortunately for enthusiasts of the European variety), chocolate candy was still something of a delicacy in the United States. Since the best chocolate needed to be imported from Europe, it was restricted to people with the means to obtain it (Verna, 2013).
According to Hershey estimation or prediction, the cocoa will go extinct by the end of 2020. The cocoa is the major component or ingredient of chocolate. Without cocoa, chocolate cannot be produced across the globe. As such, the chocolate will not taste as it tastes today. It will be disastrous news for all the chocolate lovers. There are many reasons for such deficit as increasing popularity of dark chocolate, frost pod fungus in West Africa, etc. but the bottom line is cocoa production is falling with each passing year.
Image 2: Five forces model or analysis of Hershey Company (earlier known as Hershey Food Corporation)
Source: By author, 2018
Five forces model have been explained below:
1. Competition of existing rivalry or rival firms: This factor indicates the intensity or level of competition that exists between all the chocolate manufactures or producers operating or functioning in the chocolate industry (Rahi, 2017).
The major points covered in this factor are as follow:
• High no of chocolate manufacturers in the concerned industry.
• The industry is growing at the faster rate despite the fact that the whole world is facing a cocoa crisis.
• The chocolate industry is very large.
2. Threats of substitutes: Since the chocolate industry is large, it may be possible that chocolate lovers may switch over the brand (Latif, 2013). Accordingly, Hershey needs to properly evaluate the position of those corporates that can give tough competition to it. Some points that are covered in this factor are as follow:
• The cost of changing or switching to substitutes is too high. As such, Hershey needs to take tension.
• There is a substantial product differentiation of product ranges offered by Hershey Company. As such, all the products produced by it are unique and differs from each other. They aim to fulfill the different requirement of various chocolate consumers or lovers.
• The substitutes of Hershey have lower performance.
3. Threats of new competitors: Hershey needs to continuously evaluate the possibility of entrance of new firms. Some points that are covered in this factor are as follow:
• High switching costs for customers. As such, the new entrants have to incur a high cost for establishing themselves into the market.
• There are some entry barriers for new firms that are planning to give tough competition to the Hershey Corporation.
• For entering into the chocolate industry, there is a strong requirement of distribution network so that new customers can be attracted (Verna, 2013).
4. Bargaining power of customers: Some points that are covered in this factor are as follow:
• The customer is now a day’s quality oriented. As such, if they are not satisfied with the products, they will switch over the brand (Rahi, 2017).
• There is a wide range of customers of Hershey across the world. Thus, it has a wide customer base.
5. Bargaining power of suppliers: Some points that are covered in this factor are as follow:
• There are various suppliers of Hershey. Since Hershey is a well-known brand, suppliers are always ready to provide products to the concerned Hershey Company (Latif, 2013).
• Also, there is high competition among suppliers providing various kind of products or services to Hershey Company.
From the discussion throughout the report, it can be concluded that there is a serious threat to the cocoa industry of the world. Since cocoa is a major ingredient of the chocolate, it can be said that there is a major and serious threat to the chocolate industry. The dominant chocolate producers across the world have predicted and estimated that the chocolate will go extinct at the end of forthcoming years. An attempt has been made to understand the opinion or perception of the Hershey, a chocolate manufacturer, on the shortage of cocoa industry that the world is currently facing right now.
• Ada, S., ; Ghaffarzadeh, M., 2015. Decision Making Based On Management Information System And Decision Support System. International Journal of Economics, Commerce, and management.
• Latif, R., 2013. Chocolate/cocoa and human health: a review. The Journal of Medicine.
• Mamary, Y. H. A., Aziati, N., ; Shamsuddin, A., 2014. The Meaning of Management Information Systems and its Role in Telecommunication Companies in Yemen. American Journal of Software Engineering.
• Rahi, S., 2017. Research Design and Methods: A Systematic Review of Research Paradigms, Sampling Issues and Instruments Development. International Journal of Economics ; Management Sciences.
• Verna, R., 2013. The history and science of chocolate. Malaysian J Pathol.