Factors Affecting The Chocolate Manufacturing Industry In The United Kingdom

1. Write a short statement about the company’s business.
2. Beside the given set of variables, what are other macroeconomic variables which can affect share prices?
3. Comment on the descriptive statistics of the company’s monthly returns.
4. Examine the correlation between dependent and independent variables using SPSS or Eviews.
5. Discuss in your own words the random walk theory and test the stationarity for all independent variables included in your model.
6. Estimate a regression model that seeks to examine whether unexpected changes in the independent variables can have any impact on the monthly returns of your share.
7. In line with financial theory, discuss whether the coefficients have their expected signs.
8. Model the risk levels of the company (in terms of returns volatility) using GARCH model.
9. Comment on the overall predicted performance of the company, given the results of your generated models. (Hint: consider also the market sector the company operates in. Think how this has affected volatility in share price and how the sector has interacted with the given set of macroeconomic variables).

The chocolate manufacturing industry of United Kingdom (UK) is considered as a major industry of the country contributing a significant portion to the gross domestic product. In the year 2017, the total amount of revenue of UK chocolate industry was $4 billion. In this industry, three major players can be seen that occupy 83% market share; they are Mondelez International (Kraft), Mars and Nestle. It is expected that there will be decline in sales of this industry (ibisworld.co.uk, 2018).

Political Factors: The introduction of Sale of Goods Act has affected the chocolate industry of UK. With the help of this act, the consumers have the power to sue the companies if they are not satisfied with the products (legislation.gov.uk, 2018). After that, the introduction of Competition Act in 1998 made the provisions against the abuse of dominant position in the market (legislation.gov.uk, 2018). The introduction of Conservative Party in UK also has negative impact on the chocolate industry of UK. One important aspect is the effects of Brexit on the UK chocolate industry. The effects of Brexit will lead to smaller chocolate bar at higher prices as there has been 1.5% rise in cocoa prices. UK uses to export 205% of their chocolates to EU (businesswire.com, 2018). It needs to be mentioned that all these aspects have high effects on the chocolate industry of UK.     

Economic Factors: It needs to be mentioned that the world economic crisis and the recent economic depression have major negative effects on the whole UK chocolate industry. The effects of these factors have decreased the spending capacity of the common people and it leads to the decrease in the sales of the UK chocolate companies. Moreover, the decrease in the value of pound is expected to decrease the profit margin of the chocolate companies. It is expected that the overall revenue of the chocolate companies of UK is going to be decreased by 1.4% (ibisworld.co.uk, 2018). Massive rise in the price of chocolate can be seen due to the effects of Brexit and it leads to the increased price of the chocolates in UK. The material are priced in euro and UK is buying them in sterling and paying more amounts (managers.org.uk, 2018). Thus, this factor has high impact on the companies.   

Social Factors: It can be seen that the chocolate companies of UK have become more conscious about the health of their consumers due to the bad effects of chocolate on health. For this reason, the companies are required to pay high amount of taxes on their products and it is responsible for the decrease in the sales of these companies. In addition, the chocolate companies of UK have also introduced chocolates for the ageing population of the country in order to make the older people as their customers. After that, the sales of these UK chocolate companies has received boost due to the decreased in unemployment (Kew & Stredwick, 2017).

Disadvantages

Technological Factors: Massive advancements in technologies have major positive effects on the chocolate companies of UK. The chocolate companies become able to make effective business communication strategies by using the advanced technology. Moreover, the chocolate companies of UK has established more advanced production and manufacturing system that  has contributed towards the increase in profitability (Völter et al., 2013). Most importantly, the vast use of internet has provided these chocolate companies with necessary boost in performance. The companies become able to reach to maximum number of customers with the help of internet. For these companies, one major strategy has become the advertisements in social media with the help of internet (Völter et al., 2013). Thus, technological factors have major positive effects on the business of UK chocolate companies.   

Environmental Factors: The chocolate companies of UK have taken many steps for maintaining environmental sustainability. One of such initiatives is the process of recycling by reducing the amount of wastes. The aspect of recycling can be seen in both packaging and production in order to decrease the effects of plastic on the environment. Moreover, the introduction of Fair Trade movement has changed the business perspective of the chocolate companies of UK (fairtrade.org.uk, 2018).  

Legal Factors: It needs to be mentioned that the chocolate companies of UK have to comply with different kinds of legislative regulations while operating in the country. At the same time, it is also required for these companies to comply with the global regulations in order to operate in the foreign countries (Kew & Stredwick, 2017).

The two business opportunities are discussed below:

• From the above discussion, it can be observed that technological advancement in UK is creating major business opportunities for the chocolate companies. The companies can decrease the total cost of production by implementing advanced technology in the production process. Most importantly, the reduction in the overall cost of production contributes towards the high profitability of these companies. In addition, these companies can capitalize on the opportunity social network advertising for reaching the product information to maximum number of customers (Hakansson, 2015).
• Most importantly, the emerging market is creating business opportunities for the UK chocolate companies as these companies can capitalize on the opportunity to expand in the global market. It needs to be mentioned that there is large demand of chocolates in the counties like USA, China, Russia and in the countries of Asia. By expanding in these countries, the UK chocolate companies can increase their total sales along with the total market share (Kew & Stredwick, 2017).

References

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How Brexit is making chocolate more expensive (and what that means for British business as a whole). (2018). Managers.org.uk. Retrieved 12 February 2018, from https://www.managers.org.uk/insights/news/2016/october/how-brexit-is-making-chocolate-more-expensive-and-what-that-means-for-british-business-as-a-whole

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Size, F., Size, F., & WIRE, B. (2018). BizVibe Examines the Impact Brexit Will Have on the UK’s Chocolate Industry. Businesswire.com. Retrieved 12 February 2018, from https://www.businesswire.com/news/home/20170829005896/en/BizVibe%C2%A0Examines-Impact%C2%A0Brexit%C2%A0Will-UK%E2%80%99s-Chocolate-Industry

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