International Review of Public Administration

Cocoa is the most important export crop in Ghana and accounts for 8.2 percent of the nation’s GDP and 30% of the total earnings by exports (Asante-Poku & Angelucci , 2013). The total production of cocoa doubled from 450,000 in 2000 to 900,000 tons in 2010 (Asante-Poku & Angelucci , 2013). The main export destinations include countries in the European Union, the UNITED states and Japan. Cocoa in Ghana is an important item as it contributes 25% of Ghana’s foreign exchange and is subject to the policy interventions by the state including export tax, licensing procedures and input subsidies (Asante-Poku & Angelucci , 2013).

On the other hand, Cocoa is the leading agricultural product in Nigeria and thus important to the economy of Nigeria. Nigeria is currently ranked fourth among the leading producers of cocoa in the world (Olaya, 2016). In 1970, Nigeria was the second largest producer of cocoa in the world, however, following hefty investments in the oil sector, Nigeria’s share of world production dropped 2010, cocoa accounted for 0.3% of the GDP from agricultural products (Olaya, 2016).

As compared to Nigeria, Ghana’s government is solely involved from production to marketing. For instance, in Ghana, the cocoa producer’s price is not liberalized and the COCOBOD fixes the price (Gupta, 2013). However, in Nigeria the cocoa industry is liberalized following recommendations by world Banks as the cocoa were ineffective in their operations.

The stability of domestic currency to international currencies affects farmers of cocoa in both countries to a large extent (Sridhar, et al., 2016). For instance, weakened domestic currencies affect the price of coffee as it reduces the expected revenues hurting the farmers as the cost of production increases. Strong domestic currencies mean better revenues for the farmers’ exports. Recently, due to inflation in both countries and weakened domestic currencies, the farmers reap limited profits from the cash crop.

A country like Ghana has only allowed COCOBOD to sell cocoa on behalf of the farmers or to other small industries for domestic production. In contrast, Nigeria has liberalized the trade allowing farmers to sell their cocoa through other intermediaries who sell the cocoa to exporters. In Ghana again, child labor was employed in the past, however, following stringent rules, it is illegal to use child labor in cocoa farms.

The perception of the people regarding cocoa as health drink has promoted local consumption of cocoa in both Ghana and Nigeria. It has been reported that cocoa has substantial levels of antioxidants of flavinols associated with cardiovascular health benefits.

Initially the entire process of cocoa production from planting to harvesting involved traditional approaches. However, with farm mechanization farmers have their farms tilled and prepared to have the cocoa seedlings transplanted in large scale farming. The process of value addition to the cocoa product for export is now embraced in Ghana and Nigeria, this leads to better prices being fetched in the global markets.

Cocoa farming requires high temperatures with heavy rainfall which is a characteristic of the tropical rainforest where Ghana and Nigeria are located thus favoring the growth and production of the crop.

Mondelez International is among the top firms in the confectionary industry. Over the years, the company has redefined its methods of doing business in the confectionary industry. Mondelez International is also listed at New York Stock Exchange and its market cap is $69.6 billion (Halzack, 2018).

New entrants in confectionaries leads to innovation that puts pressure on Mondelez International through adopting a low-priced strategy for its products and providing value propositions to its customers (Dobbs, 2014).. The company finalized the process of acquiring 80% of stakes in Kinh Do, ranked as one of the leading company in snacks business in Vietnam (Mondelez International,Inc., 2017). The acquisition is aimed at strengthening the company’s main snaking categories and will help the company expand in the Asia pacific region.

Majority of the companies in confectionary industry purchase their raw materials from many suppliers. Suppliers holding dominant positions can cut the margins Mondelez International can accrue from the market. The overall impact of higher bargaining power by the suppliers is that it translates to low profitability of confectionaries and is the case with Mondelez International’s low profitability in subsequent years.

Buyers are often associated with many demands. Buyers always want to but the best products available by paying the lowest price possible (Indiatsy, et al., 2014). The small base of powerful customers of Mondelez International means more bargaining power by the customers and their ability to demand increasing discounts and offers (Mondelez International,Inc., 2017). The company introduced new products of Nespresso compatible espresso tablets with the Jacobs to increase its products in Germany, Austria and France.The company should focus on building a large customer base. This will enable the company to limit the bargaining power of the customers and enable the company streamline the process in sales and production.

The introduction of a new product or service that satisfies the similar customer needs in various ways, then profitability of the rival firm suffers. The existence of a substitute product possesses great threat as it presents value proposition that is different from present offers in the market.

Mondelez International should focus on being service oriented rather than being product oriented. The firm should understand customer needs rather than focus on what the customers are buying.

The existence of an intense rivalry among players in the industry drives down prices which affects the profitability of the industry. Mondelez International competes in a very intense confectionary market in terms of competition. Mondelez and D.E Master Blenders struck the final deal of combining their respective coffee businesses. The transactions entailed the company’s coffee (Mondelez International,Inc., 2017) portfolio in France, a move that will see the company create the Jacobs Douge Egberts which will now be the owner of the leading coffee brands in the world such as Tassimo, Maccona and Jacobs among others.Mondelez International should collaborate with competitors so that it can enjoy serving a larger market as opposed to competing in a small market.

Conclusion

The cocoa market has more to achieve from both the producers’ and suppliers’ side. Product innovation and value addition are important if profitability is to be achieved in the long-run. Manufacturers such as Mondelez Internal, Inc have to keep developing new confectionary products that meet the demands of the customers while at the same time be efficient enough to keep the cost of production low.

References

Adamkasi, 2015. PESTLE analysis of Ghana. [Online] Available at: http://freepestelanalysis.com/pestel-analysis-of-ghana/[Accessed 30 March 2018].

Asante-Poku, . A. & Angelucci , F., 2013. ANALYSIS OF INCENTIVES AND DISINCENTIVES. [Online] Available at: http://www.fao.org/3/a-at551e.pdf[Accessed 30 March 2018].

Dobbs, M. E., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitive Review, 24(1), pp. 32-45.

Gupta, A., 2013. Environment & PEST Analysis: An Approach to External Business Environment. International Journal of Modern Social Sciences, 2(1), pp. 34-43.

Halzack, S., 2018. Time for Mondelez to Eat or Be Eaten. [Online]
Available at: https://www.bloomberg.com/gadfly/articles/2018-02-01/mondelez-international-earnings-eat-or-be-eaten
[Accessed 30 March 2018].

Indiatsy, C. M., S. M. M. & Mandere, E. N., 2014. The Application of Porter’s Five Forces Model on Organization. European Journal of Business and Management, 6(16), pp. 2-12.

Mondelez International,Inc., 2017. Company profile. [Online] Available at: www.marketline.com[Accessed 30 March 2018].

Olaya, T. A., 2016. Examining the Political-economy of Cocoa Exports in Nigeria. The International Journal of Applied Economics and Finance, 1(1), pp. 1-13.

Sridhar, R., Sachithanandam, V., Mageswaran, T. & Purvaja, R., 2016. A Political, Economic, Social, Technological, Legal and Environmental (PESTLE) approach for assessment of coastal zone management practice in India. Internatioanal Review of Public Administration, 21(3), pp. 216-232.