Management: Cocoa Production and Industry Analysis with Porter's Five Forces

This article discusses the cocoa production in different countries and analyzes the industry with Porter's Five Forces. It also includes information about Cargill, a leading company in the chocolate and cocoa industry.

Running head: MANAGEMENT
Management: Cocoa Production
Name of the Student
Name of the University
Author’s note

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Part 1: PESTEL Analysis of the countries of production
1. Côte d'Ivoire, Indonesia, Dominican Republic
Côte d'Ivoire or Ivory Coast is the largest producer of cocoa beans in the world and has been
producing this cash crop for over generations. On the other hand Indonesia is a relatively new
addition to the list of countries, it is one of the most prominent exporters of Cocoa in Asia and in
the world list takes the third position (Indonesia-investments.com2018). It has just been 25 years
that the country has been producing significant amount of cocoa. The quality of the produceis
one of the major factors which have helped the country gain popularity in this crop export.
Dominican Republic holds the tenth position in the list, and is also popular for the quality of the
produce. The most prominent ones are SanchezandHispaniola. This place has been ideal for
luxury chocolate makers as these two types are perfect for the products they make
(Worldatlas.com 2018).
 Political: There has been the support of the government in each of these countries to
encourage trade and business, the government of each of these countries has laws and
regulations to guide and support this industry.There are also several international
agreements based on which the industry of coco export is dependent.
 Economic: In Ivory Coast Cocoa industry impacts the economy in a significant way there
is a considerable amount of people earning their livelihood through this industry. But
with Indonesia this is not the case as there are other significant industries in Indonesia as
cocoa is grown in a particular region the people of that region is involved in the industry.

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 Social: The cocoa production is one of the significant parts of the culture of Ivory Coast
as there has been generations involved in the production, but not until recently people
discovered the use of the product in its end result.
 Technological: there is a lot of scope for technological advancement in the harvest and
cultivation of the crops in these countries.
 Environmental: The authorities in these countries who are responsible for the
development of the industry try to incorporate sustainable measures.
 Legal: There are several rules and regulations that bind the production of cocoa beans in
these countries.
2. Peru and Mexico
One of the major issues in the world is drug abuse and cocaine industry had taken over
Peru, with the help and effort of government and also the authorities, the situation is in
considerable control. Yet there is a lot of scope of improvement. In Mexico there has been
significant decline of production of cocoa owing to pest and diseases issues (Worldatlas.com
2018).
 Political: The government of Peru has helped farmers to move from the drug market to
chocolate market. Authorities like U.S. Agency for International Development (USAID),
the Government of Peru, and the PIMCO Foundation is providing help for the growth of
the industry.
 Economic: In both the countries the industry do not make a mark as there is not many
people associated with the industry.

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 Social: Considerable lack of knowledge among the farmers is one of the major reasons
for low production in Peru. Whereas in Mexico because of the low production the
farmers are moving to more profitable crops.
 Technological: Technologies have been implemented in order to improve the quality as
well as the rate of production in the industry.
 Environmental: There have been environmental issues in the countries regarding this
industry.
 Legal: As the government of the countries is supportive the legal restrictions are for the
improvement of the industry.
3. Brazil and Cameroon
Disease has been one of the major reasons for the reduction of cocoa production in
Brazil. On the other hand, the unfavorable weather conditions of Cameroon have been one of
the major reasons for the production decline. These countries are still among the top of the
producers in the world (Worldatlas.com 2018).
 Political: In Cameroon there is lack of management in the industry form the government
and authority but the situation has been recognized and improvement is in progress.
Whereas the government of Brazil has been also supportive.
 Economic: Though agriculture is a large part of the economies of these countries, cocoa
production is not very significant. Brazil also imports cocoa from Ghana.
 Social: Agriculture forms a major part of the livelihood of the population of these
countries.
 Technological: the technological infrastructure is comparatively weaker in these
countries but there is urge to learn and improve among the people as well as the

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government. There are government funded research centers that deal with the barriers in
production
 Environmental: weather conditions are one of the major hindrances in Cameroon.
 Legal: With the help of several rules and regulations the government tries to protect the
interest of the farmers (Teixeira 2016).
4. Ghana and Nigeria
These two countries are one of the largest producers of cocoa in the world. Some
of the production issues that are faced are lack of consistency in the process of cultivation
and harvesting of the crops (Worldatlas.com 2018). This indicates lack of management
and control on the industry by the authorities as most of the time it has observed that
there is lack in following the recommendations that has been indicated. Ghana is known
for its cocoa in the world (Goldberg 2015).
 Political: there is a stable political scenario in the countries and the governments are
supportive. There have been several authoritative institutions in the country to ensure that
there is proper regulation, yet there is lot of scope of improvement and development in
the industry.
 Economic: A significant amount of people are employed in this sector hence making this
crop a major cash crop for both the countries. It is significant in the economy as the
export of the cocoa beans ensure a lot of foreign exchange(Afoakwa 2014).
 Social: Agriculture forms a major part of the livelihood of the population of these
countries.

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 Technological: The government has employed research and development institutions in
Ghana to help improve the process from cultivation to post harvest support.This is also
the case of Nigeria.
 Environmental: Sustainable approaches with the help of technological advances are some
of the improvements in the industry that has taken place in the last decade.
 Legal: The government of these countries has legal freedom of trade and commerce. This
not only helps from the business aspect it also motivates and encourages the farmers and
the families who are employed in this industry (Ford et al. 2014).

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Part 2: Cargill
The company was established 150 years ago and now there are almost 155,000 people
working for the organisation. Headquartered in United States the company has expanded its
operations to over 70 countries in the long running reputed span of operation. Food and beverage
is one of the sections of the products and services that are offered by the company. The company
has almost 50 years of experience in the chocolate and cocoa industry and is one of the leading
organisations in the market.The company has several holdings and subsidiaries in several
industries that it operates (Cargill.com2018).

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Figure: Financial highlights of the Company
(Source: Cargill.com2018)

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Industry analysis with Porter’s five forces will help in identifying some of the dynamic in the
industry and will also help in recognizing the shortage of cocoa production
New entries in the market
There has been research and speculation regarding the fall of the production of cocoa
beans in a global front. In this situation it is disadvantageous for a company to enter the market
as the supply of the most important raw material will be low (Ford et al. 2014). Another major
barrier in this industry is the cost of initial investment which is required in order to set up the
company. There is significant amount of investment from logistic perspective as well as form the
supply end. On the other hand, a new company in this industry can be major threat to the existing
industry as they might have new ideas and innovations which might help them take a significant
place in the industry (Huang et al. 2015).
Bargaining Power of Suppliers
The anticipated shortage of the supply in cocoa production the position of the suppliers
have become significant in the industry. The switching cost of the companies in this industry has
reduced thus increasing the bargaining power of the suppliers (Ford et al. 2014). There are also a
number of suppliers in the international platform (Mathookoand Ogutu2015).
Bargaining Power of Buyers
As there are several companies already existing in this industry the switching cost of the
buyers are high.If they do not like a product of any of the companies they can easily switch to an
alternative form another company in the same industry (Srivastava et al. 2013).
Threats of Substitute Products or Services

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Any sweet or dessert items which are used for consumption can be a substitute for the industry.
Sugar confectionary items are the major substitute to chocolate products (Ortega et al. 2014).
Competition in the market
There is intense competition in the chocolate industry players like Mars, Nestlé, Mondelēz
International etc are some of the prominent companies (Dobbs 2014).

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Reference list:
Afoakwa, E.O., 2014. Cocoa production and processing technology. CRC Press.
Cargill.com., 2018. Cargill At A Glance. [online] hersheys.com. Available at:
https://www.cargill.com/about/cargill-at-a-glance[Accessed 31 Mar. 2018].
Cargill.com., 2018. Cargill Cocoa & Chocolate. [online] hersheys.com. Available at:
https://www.cargill.com/food-beverage/cocoa-chocolate[Accessed 31 Mar. 2018].
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), pp.32-45.
Ford,, T., Vit,, J., Neate,, R., Branigan and, T. and Saner, E., 2014. The cocoa crisis: why the
world’s stash of chocolate is melting away. [online] Theguardian.com. Available at:
https://www.theguardian.com/lifeandstyle/2014/nov/21/cocoa-crisis-world-chocolate-stash-
melting-away [Accessed 31 Mar. 2018].
Goldberg, S., 2015. Ghana’s Inept Policies Driving Cocoa Shortage. [online]
Wallstreetdaily.com. Available at: https://www.wallstreetdaily.com/2015/06/29/ghana-cocoa-
shortage/ [Accessed 31 Mar. 2018].
Huang, K.F., Dyerson, R., Wu, L.Y. and Harindranath, G., 2015. From temporary competitive
advantage to sustainable competitive advantage. British Journal of Management, 26(4), pp.617-
636.

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Indonesia-investments.com., 2018. COCOA. [online] Indonesia-investments.com. Available at:
https://www.indonesia-investments.com/business/commodities/cocoa/item241? [Accessed 31
Mar. 2018].
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in Kenya.
International Journal of Educational Management, 29(3), pp.334-354.
Ortega, A.G., Jalón, M.L.D. and Menéndez, J.Á.R., 2014. A strategic analysis of collective urban
transport in Spain using the Five Forces Model. Investigaciones Europeas de Dirección y
Economía de la Empresa, 20(1), pp.5-15.
Srivastava, M., Franklin, A. and Martinette, L., 2013. Building a sustainable competitive
advantage. Journal of technology management & innovation, 8(2), pp.47-60.
Teixeira, M., 2016. Brazil cocoa output to recover in 2016/17, industry eyes expansion. [online]
reuters.com. Available at: https://af.reuters.com/article/commodities07News/idAFL8N1DQ46D
[Accessed 31 Mar. 2018].
Worldatlas.com 2018. Top 10 Cocoa Producing Countries. [online] Worldatlas.com. Available
at: https://www.worldatlas.com/articles/top-10-cocoa-producing-countries.html [Accessed 11
Mar. 2018].