Business Economics Report: Analysis of Choco Chocolate's Market

This business economics report analyzes the market for Choco Chocolate, focusing on factors impacting the company's operations. It examines production costs, macroeconomic influences, demand elasticity, and competitive dynamics within the UK chocolate industry. The report delves into market segmentation, pricing strategies, and the impact of government policies, such as taxes on sugar, on chocolate sales. It highlights global opportunities, particularly in Asia Pacific, and assesses the competitive landscape, including key players like Mondelez. The analysis covers currency markets and the role of supply in influencing demand, concluding with the importance of strategic decision-making for Choco's success in the global market.

BUSINESS
ECONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
ANALYSIS......................................................................................................................................1
A..................................................................................................................................................1
B...................................................................................................................................................1
C...................................................................................................................................................2
D..................................................................................................................................................2
E...................................................................................................................................................3
F...................................................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Business economics is that part of company which analyses the impact of micro and
macro factors impacting upon operations of a firm at large scale (Ward and Begg, 2016). The
demand and supply of goods and products of company gets affected by these factors and so,
economic elements must be considered. It is also important for company that they are managing
their operations at the time of recession for which they must be making marketing strategy.
Company name- Choco
Product- Chocolates
ANALYSIS
A.
There are mainly 2 types of cost of production including fixed and variable former is sum
of rent, depreciation and normal profit and this all together is called as overheads (Stiglitz, 2017).
While latter one is that of direct cost like expenses of fuel and raw materials which keeps on
changing with production. The cost of production will be that of marginal cost, raw material,
energy and labour cost as Choco which aimed at selling their chocolate products within domestic
and global market. The expectation of macroeconomic development at second half of 2016 needs
to be considered for chocolate products. There was expectation that economic growth is low at
inflation rate at 0.1% and unemployment to 5.3%.
B.
The good X is known as chocolate product for Choco which is the company whose
demand and supply will be very high even at the time of recession within country. The price
elasticity of chocolate is inelastic as there are no substitutes available for this product within
market and it is also called as addictive in nature (Summers, 2014). While the demand for
chocolate is influenced by consumption which is elastic to -1.99% and income is inelastic to
0.12%. Cross elasticity of demand is that which measures the response of other products with
demand in quantity of related product which is either substitute or complementary goods. As
chocolate is having no substitute so, the cross elasticity will be positive. While the
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complementary product for chocolate is like that of Hershey or syrup as well so it will be
negative crosses elasticity denoting 2 products.
C.
Within the UK chocolate industry, there are many barriers to entry which are contributing
to structure of market as there is capital requirement for starting business of chocolate. Chocolate
is highly consumed product within consumer around world which is also having higher demand.
As in world there is always high demand of chocolates within all age group meanwhile there is
also awareness for increasing health benefits linked with cocoa rich dark chocolate (Jia,
Mustafee and Hao, 2016). So, the competitor of Choco is also laying more attention and stress on
increase in production and marketing of cocoa rich dark chocolate only. The strategy of
competitor will be increasing selling of this type of chocolate which is popular and also healthy
in its own respect. For Choco, it is required that management is producing and selling the same
cocoa rich dark chocolate but the marketing strategy must be different. As the competitor is not
selling their chocolates through online channels but Choco must be doing the same.
This is the global opportunity for Choco mainly within the areas of Asia Pacific where
demand of customers in regard to chocolate is very high including likes that of Japan, Korea and
India. So, Choco should be planning to implement their selling and production of cocoa dark
chocolates within these countries as well. In respect to competitors of Choco production and
selling of chocolate for higher income must be there within other countries of world that have
higher demand and production at low cost.
D.
There are number of competitors for company within the chocolate sector like that of
Nestle, Ferrero group, Kraft food and Hershey Food which are operating all around the world.
There are mainly 3 types of segments of global chocolate market like that of dark, milk and
white which are mostly preferred by customers. So, the market segments for Choco on which
they need to focus are that of Asia Pacific, Europe and North America. Market segmentation is
that process which helps company to divide their customers into various groups based on some
common characteristics. It is mainly created in way similarly of the marketing strategies which
company chose to target the customers so that their marketing is done.
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Choco should be choosing all age groups of people for their target as all types of
customers like to eat chocolates. But, for this, company needs to know the size of market so that
it will help them to divide and segment whole market based chocolate habits. Within the
Chocolate industry of UK, Mondelez is the leading company whose value of share is increasing
by 1% in 2017 (British chocolate exports grow worldwide, 2018). So, Choco will be competing
with Mondelez UK based on demand and pricing strategy as well.
Pricing strategy is the process used to determine value of product which customers need
to pay to company but not based on cost of production (Squicciarini and Swinnen, 2016). These
pricing strategies are used by companies so that they could be able to set same type and level of
price of their product for customers. There are mainly 4 types of pricing strategies which are
used by any company in way of setting their price of products. Premium pricing is when
company is introducing different products which are having competitive advantage over other
products. This is generally kept at high price in the beginning phase and then lower down which
will affect sales and growth of competitors of company. But, for Choco, this type of strategy
does not suit as they aim at increasing their share of product in market so, using penetration
pricing is suitable for them. This type of strategy helps company to offer low price of product
initially by which they can easily gain higher ratio of customers as compared to that of
competitors. With the help of this type of pricing strategy, Choco will be at risk of generating
loss at initial stage but then after capturing the market, it will be easy for them to penetrate into
market.
E.
Supply of the product will be largely create demand of that products as per Say’s law. So,
if Choco is creating and producing higher amount and number of chocolates and distributing
them then only, demand for commodity will increase. In way of creating demand for product,
company must be making their own efforts in marketing strategies and communicating same to
customers (Beg, Ahmad and Bashir, 2017). They must be promoting their cocoa rich dark
chocolates through various channels in their target segments of market like that of Asia Pacific,
Europe and North America. Since the time when company started to deliver these chocolates to
these countries globally, there was subsequently increase in demand of their products all across
the world.
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During the time of recession, there was not much difference within demand of cocoa rich
dark chocolates. As the demand of chocolates is income inelastic which means that change in
price of product will not cause change in its demand. Demand for chocolates of UK is increasing
all across world as production of cocoa and sugar is about £1.1 billion within the UK economy
(Camargo, Nhantumbo and Kanninen, 2018). There are many countries in world which are
implementing taxes on high calorie, sugar and fats in recent year which are certainly having
significant impact on sales of chocolates. In the year 2014, Mexico was having high calorie food
which is around 8%. This impacted the purchase and sale of chocolate and other food containing
sugar as well (Taxation could have big impact on future chocolate sales, 2018). It is estimated
that India, France and UK are having approximately 18% of total sales of chocolate from all
around the world. These taxes are levied by government of various countries in the views of
reducing obesity and promoting healthier diets for overweight adults. So, these tax policies of
government will be affecting the demand and sales of chocolates to a high extent within several
other countries.
F.
Currency markets are those in which all participants of various countries of world buy
and sell different currencies of other countries. These participants mainly involve like central
bank, corporations, hedging firms, banks, investors, forex brokers and investment management
firms. Within one scenario that deal with perfect competition in chocolate industry of UK as
there are number of sellers of chocolate and many buyers as well. In this, all firms will be
making decision of quantity of products which they need to produce. At which profit of firm will
be equal to total cost less the total revenue P= TC-TR (Poelmans and Swinnen, 2016). The
recent development in currency markets includes that of technological advancements which
made possible for the real time transaction of huge amounts. Then changes in liberalisation
policies of countries that made international trade easier and fast is another modification.
Involvement of theory and practice of finance also allow and resulted in development of
financial instruments and derivative products. Competitiveness in price of products includes
setting up of price of products same as that of competitor is having.
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CONCLUSION
From the above report it is concluded that business economics is very much essential as
this deals with market economies along with management’s role with planning and strategic
decision making. For Choco which is selling chocolates all around the world it is very much
essential that they are planning properly in way of delivering good service to all customers of
country and nationwide level.
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REFERENCES
Books and Journals
Beg, M.S., Ahmad, S. and Bashir, K., 2017. Status, supply chain and processing of cocoa-A
review. Trends in Food Science & Technology. 66. pp.108-116.
Camargo, M.C., Nhantumbo, I. and Kanninen, M., 2018. Greening the Dark Side of Chocolate:
A Qualitative Assessment to Inform Sustainable Supply Chains. Environmental
Conservation. pp.1-8.
Jia, F., Mustafee, N. and Hao, L., 2016. Investigating the feasibility of supply chain-centric
business models in 3D chocolate printing: A simulation study. Technological Forecasting
and Social Change. 102. pp.202-213.
Poelmans, E. and Swinnen, J., 2016. A brief economic history of chocolate. The Economics of
Chocolate, Oxford University Press, Oxford. pp.11-42.
Squicciarini, M.P. and Swinnen, J.F. eds., 2016. The economics of chocolate. Oxford University
Press.
Stiglitz, J.E., 2017. The overselling of globalization. Business Economics. 52(3). pp.129-137.
Summers, L.H., 2014. US economic prospects: Secular stagnation, hysteresis, and the zero lower
bound. Business Economics. 49(2). pp.65-73.
Ward, D. and Begg, D., 2016. Economics for business. McGraw-Hill.
Online
British chocolate exports grow worldwide. 2018. [Online]. Accessed through:
<https://www.confectionerynews.com/Article/2018/04/04/Cocoa-chocolate-and-sugar-
confectionery-worth-1.1bn-to-UK-economy>.
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Taxation could have big impact on future chocolate sales. 2018. [Online]. Accessed through:
<https://www.confectionerynews.com/Article/2016/11/04/Taxation-significant-impact-
on-future-chocolate-sales>.
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