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PESTLE analysis on World Cocoa Shortage

Discuss about the Sustainable Cocoa Production Shortage.

The topic of world cocoa shortage is making headlines, alarming the chocolate lovers as well as the chocolate business owners.  The growth of chocolate is constantly declining and this is worrying the cocoa farmers and the business companies who deal with chocolate. From Peru, Mexico, Brazil to Ghana, Nigeria, Indonesia and Malaysia, this crisis is faced by every country. Taking this alarming fact into account, the cocoa farmers are trying their best to tackle the situation. Apart from the farmers, business owners are now taking the advice and suggestions of the scientists, as they believe science can resolve the issue by finding some alternative, a potential substitute of cocoa. Thus, the chief objective of the assignment is to present an article concerning the various internal and external factors which are responsible for the shortage of cocoa growth. With the help of the assignment, it will be possible to assess the steps which can be taken to counteract this situation in an effective manner.

The PESTLE analysis is conducted in order to know the various external factors due to which the production of cocoa has considerably declined.

Political: Political factors indicates that certain rules and regulation needs to be maintained by the Hershey company concerning the place where it is conducting its business. For example, the company has to oblige to the norms and the regulations made by the Dominican Republic, if the company wishes to import cocoa from this region. Mexico, on the other hand, is suffering from excessive drug dealing which is affecting the present generation of the company (PICK et al. 2015, p.204). As a result, the strict law needs to be followed in trading and business, however, this has put the company in a fix as the rules of trading often get very harsh and problematic. As a result, the company faces trouble to do business with this region.

Economical: The problem of the poor economy is really a cause of concern which acts as one of the reasons leading to a shortage of cocoa growth. Taking the case of Dominican Republic, lack of strong economy leads to low productivity, the opportunity of farmers to get professional training for cocoa farming is not present, affecting the production rate. The condition of Ghana and Nigeria in terms of economy is quite deplorable, which is affecting the cocoa production rate of these regions. Another crucial factor, in Ghana the money earned by farmers is meagre, negligible compared to the amount of labour they give, leading to loss of farming in the process (Harris, 2016, p.10).

Porter's five force analysis of Hershey's chocolate production

Social: In many places such as Dominican Republican, lack of proper labour is visible, however in spite of this, women employment is still not encouraged in many areas. It is as if it is the custom of that women should not work even when they are perfectly able to walk. The good news is that, in the contemporary times, women section of the population are encouraged to do work. In spite of this positive scenario, they still need to go a long way, such as they need to have education in order to have the necessary idea of farming cocoa (Horne, 2015, p.6).

Technological: This factor looks at the development aspect in terms of possessing improved technologies. In many places, technologies are not properly used, or rather many workers do not know usage and advantage of technology. Brazil, for instance, has reported a visible fall in its production due to its inconsistent climatic condition. The country does not have the knowledge or scope of proper technology which 0can enable them to protect and increase their rate of cocoa production (Lebailly and Ahouissou, 2015, p.390).

Legal: Various policies often act as barriers to effective production. Prices of chocolate beans are soaring high; on the other hand, no policy is made concerning the well-being of farmers of cocoa production, affecting the company as well as the poor farmers (Ouya, 2014, p.29).

Environmental: This factor has become one of the major reason for the cocoa shortage. Due to excessive drought, rainfall, Dominican Republic, Ghana, Nigeria, Peru, Mexico are losing much of their cocoa productivity. The climate has become unsuitable for cocoa production in many places which need to be considered. The company need to take help from science and farmers as well to tackle this problem (Stuart, 2015, p.55).

On being subjected to analysis of Hershey chocolate company it can be necessarily found that various determining factors encompassing the internal and external forces are conducted. Being a member of the commission of Hershey it is the responsibility to assess the growing problem of shortage in a development of cocoa in the world which can be identified through the application of the Porters five forces analysis.

This is considered as one of the most effective methods to assess the areas that can significantly contribute towards the problem identified in the present scenario. The world is faced with the global issue of having the shortage in cocoa production throughout the world (Brew, 2014, p.23). The reasons working behind them can be effectively analysed through analysing the forces working upon one of the leading chocolate companies concerning the world basis. The external factors which encompass the five forces as postulated by Porter primarily focuses upon the fact that increased competition in the market leading to a formation of one of the major reasons for the growth of the problem thus addressed.

Threats of new entrance: The food and beverage industry as it is known is one of the most profit-making industries in the global arena. The new entrances in this industry have to face a lot of struggle to battle up their position in the market with the existing companies. The market penetration, in this case, becomes extremely difficult on their part. The establishment with a growth oriented inclination is complicated. To deal with long-established companies such as Hershey the company needs to make their products exclusive and attractive enough to draw the attention of the customers (Mighty, 2017, p.72). Large procedural methods need to be followed by manufacturing the products. Government policies and regulations need to be fulfilled along with proper certification from the FDA before entering into the chocolate industry. Although the new entrances may not prove to be that strong in terms of the established companies as that of Hershey, but the existing companies do get affected in some aspects to share a compromised sales outcome than in the absence of such companies.


Threats of substitute goods: Concerning the current scenario of the market, most of the products especially in the food and beverage industry have an easy substitute available to grab the attention of the customers. The products of chocolate are seen to be replicated both in their packaging as well as contents for deceiving the customers with a comparatively lower cost and feasibility approach. They may not primarily win the faith and trust of the people being all new in the market (Wessel and Quist-Wessel, 2015, p.5). But through the process of extensive promotional strategies and strong marketing plans may be able to establish their place in the market gradually with the passage of time. The more the products become acceptable to the consumers, the greater becomes the threat among the long-established companies such as Hershey. Thus the substitutes in the market tend to have a relatively strong impact on the company under consideration in a negative manner. This also counts as a significant measure for the emerging shortage in the cocoa industry due to the increasing production of diverse agents and companies.

Bargain power of suppliers: Hershey is seen to adapt a non-compromising attitude in terms of using products contents for a preparation of their goods. The chocolates produced by this company are primarily known to make use of dairy ingredients as the prime raw material; hence the grade of the products produces becomes high in their standards. The suppliers are found to have a good relationship with the company. This practice tends to set high bars in terms of quality standards maintained by the company which ensures the customer’s demand and satisfaction (Winders et al. 2016, p.81).

Bargain of customers: Due to the high availability of substitute products in the chocolate industry with special emphasis towards chocolate, it can be found that the customers tend to develop a high bargaining attitude among them (Wessel and Quist-Wessel, 2015, p.5). Hershey, however, has been able to overcome this barrier by their marketing strategy of coming up with a wide range of variety of goods and products for their loyal customers. This practice has enabled in surpass the shortcoming posed by the substitute goods.

Competitive rivalry within the industry: a tough competitive climate has been evident concerning the chocolate industry. It has been noticed that Hershey has been able to grab the attention of its loyal customers by bringing in innovations in the quality and taste in terms of including new flavours in their wide range of collection (Stuart, 2015, p.32). Hershey is found to lead the industry in terms of production of standard quality products. The rivalry in the market has been a predominant event, although not being able to affect this company adversely. This state of rivalry in the market tends to pose a threat targeting the shortage of chocolate in the world market as it leads to creating pressure upon the cocoa production which is becoming rare in the recent times (Green, 2016, p.45). This event leads to drawing attention towards a global concern which can be addressed by reducing such competition and by minimising the rate of rivalry among companies.

Conclusion

It can be inferred from the above discussion that proper analysis is necessary to find the areas through which the rising cause of shortage in cocoa production in the world, a market can be fixed through an incorporation of the effective remedy. The PESTEL analysis and the Porter’s five forces contribute significantly in identifying the internal and the external forces minimising and control which can lead to fixing this problem in the coming years.

Reference List

Brew, B.A., (2014). Ghana’s Prospects of Growth in the Global Economy in Light of Michael E. Porter’s Model of National Advantage (Doctoral dissertation, University of Ghana).

Green, E., (2016). From Extensive to Involutionary Growth: A Dialectic Interpretation of the Boom and Busts of Cocoa Production in the Gold Coast. Journal of Agrarian Change.

Harris, B., (2016). Public-Private Partnership Design for Inclusive Cocoa Global Value Chains in Ghana.

Horne, P., (2015). Indonesia: From little things big things grow. Partners in Research for Development, (1), p.6.

Lebailly, P. and Ahouissou, B., (2015). European directive related to chocolate composition is unfair for the African cocoa planters. EC Agriculture, 2(4), pp.384-390

Mighty, M.A., (2017). “We Likkle, but We Tallawah”: Maintaining Competitive Advantage in the Crowded Specialty Coffee Market. Journal of International Food & Agribusiness Marketing, 29(1), pp.70-91.

Ouya, D., (2014). Village centres to boost cocoa production. Appropriate Technology, 41(4), p.29.

PICK CALDERÓN, H.A.N.N.A.H. and NIAVA, L., (2015), October. Redefining the Ivorian Smallholder Cocoa Farmer's Role in Qualitative Research: From Passive Contributions to Passionate Participation. In Ethnographic Praxis in Industry Conference Proceedings (Vol. 2015, No. 1, pp. 204-209).

Stuart, D.A., (2015). Sustainable Cocoa Production: A Healthy Bean Supply. In Chocolate and Health (pp. 28-55).

Stuart, D.A., (2015). Sustainable Cocoa Production: A Healthy Bean Supply. In Chocolate and Health (pp. 28-55).

Wessel, M. and Quist-Wessel, P.F., (2015). Cocoa production in West Africa, a review and analysis of recent developments. NJAS-Wageningen Journal of Life Sciences, 74, pp.1-7.

Winders, B., Heslin, A., Ross, G., Weksler, H. and Berry, S., (2016). Life after the regime: market instability with the fall of the US food regime. Agriculture and human values, 33(1), pp.73-88

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