Strategic Management of Barry Callebut - Case Study Example

Authentic Learning Case Study Assignment---Big Chocolate  1.0. Introduction The scope of strategic management has widen and an understanding of a given practices needs critical analysis of supply chain. This case evaluates world cocoa industry with a view to finding their production situations. Furthermore, the study takes a case study on Barry Callebut to assess factors that have contributed to the impending 15-year chocolate production shortage. 2.0. Cocoa Production Situations--- Côte d'Ivoire, Indonesian and Dominican Republic Technological factors, including growing demographic shift to taking up production technologies has ensured that these countries diversify their production thus improving their production by at least, 5 percent annually according to Vaast and Somarriba (2014). In particular, according to Department of Cocoa of the Dominican Republic (2012) the production grew between 17-24 percent between 2009 and 2011. In the same order, the volume of production in Côte d’Ivoire and Indonesian has been on increase with volume of exports increasing by at least 15 percent annually (International Cocoa Organization 2013). However, to analyse and monitor the external marketing environment (macro-environment) that have impacted on the three countries, Political, Economic, Social, Technological, Environmental and Legal (PESTEL) analysis is as shown below. P Current and future political environment remain positive for the production of cocoa in the three countries E Home economy and general taxation have been favourable especially in Dominican Republic S Life style trends and demographics have positively affected production as more and more people prefer cocoa T Competing technology development has negatively affected production as funding has been an issue especially in Côte d'Ivoire E Environment is accompanied by the industrial organisation approach to determine competitive advantage L Losses in profit and marketing, as well as losses in terms of damaged company reputation have affected production in Côte d'Ivoire and Indonesian 3.0. Cocoa Production Situations--- Peru and Mexico Beginning with Peru, cocoa production has been on increase going by the recent data from Peruvian confectionary market which gave a fairly strong rate between 2006 and 2010. Peru has registered strong sales value more so on chocolate categories (Chery 2015). While Confectionery Report in Peru indicates that production of Cocoa is likely to drop in the coming years, marketing strategies adopted by cocoa companies indicate positive trend in exploring newer markets especially in developed countries (Läderach et al. 2013). Production is furthermore expected to grow in Peru owing to the fact that confectionery market was projected to grow by 3.8% in 2012 to reach a value of $370.2 million. The situation in Peru is similar to that in Mexico with production of Cocoa growing by at least 15 percent annually (Holguín-Salas et al. 2015). According to the country’s chocolate confectionary market, Mexico has succeeded in its marketing approach that has seen improvement in sales when it comes to molded bars, chocolate straightlines, chocolate countlines and boxed chocolate. P Marketing decisions are strongly affected by political decisions and regulation including capping E The economy is transforming at considerable pace and account for the largely unpredictable and uncertain environment S Consumer buying patterns has positively affected cocoa productions in both countries T With Mexico and Peru focus on the rapid implementation of cloud computing, most of productions are expected to increased E Both countries are grasping with globalisation meaning that the environment which needs to be assessed for strategic business decision making is continuously expanding L There have been reduction of entry barriers driven by the industry deregulation 4.0. Cocoa Production Situations--- Brazil and Cameroon Recent reports have indicated stable and favourable production situations of cocoa in Brazil and Cameroon. Specifically, it is reported that Brazilian chocolate confectionery market grew by 6.7% in 2014 to reach a value of $5,116.3 million (Holguín-Salas et al. 2015). This is a factor that indicates that the production situation is not only positive but the product design model therefore allows focusing efforts and consolidating specific expertise around the product and not the function, which brings in a more focused set of skills and experiences that necessitate processes of marketing. Putting this argument correctly, marketing strategies in the country help in identifying unstructured or unformulated processes within production processes and as a result, streamline them for the needed volumes of production. The situation is different in Cameroon though. Other than damages caused by Black pod Cocoa, the country has experienced a number of marketing constraints that have affected production processes (Sonwa et al. 2016). P Political instability in Cameroon strongly affected decisions unlike Brazil E Stable economy in both countries to support production processes S Shift of taste and preferences from other beverages to cocoa which has positively affected cocoa productions in both countries T There is rapid implementation of technology in production thus increasing volume of production E The environment still needs strategic assessment for strategic business decision making L There have been reduction of entry barriers driven by the industry deregulation 5.0. Cocoa Production Situations--- Ghana and Nigeria The levels of production and marketing strategies that these countries use have further been complicated by increased competition due to reduction of production barriers in other countries such as Dominican Republic. Comparing the two countries, Ghana’s production situation is slightly better than Nigeria by a margin Sonwa et al. (2016) term as ‘9-12 percent.’ Currently, marketing is not done to meet specific needs of foreign markets since companies producing and exporting cocoa in both countries are not working alongside their downstream partners; a factor that not only affect productions but not auguring well with their continued innovation in production processes. On the other hand, cocoa production processes do not benefit much from marketing approaches taken since both countries highly depend on income from its sales rather than diversifying their line of production. This move affects approaches taken to market their cocoa products thus forcing Ghana and Nigeria production to operate an asset-heavy strategy. Furthermore, processes of marketing should be streamlined to focus on growth and sustainability. Addae (2014) found that the two countries have not embraced production diversification in their productions. P Systems of government have significantly affected production in Nigeria though Ghana have experienced stable political environment E Both countries have had stable economy to support production processes S There have been poor purchasing power from the two countries has the growth in economy is not felt by the larger population T There is rapid implementation of technology in production thus increasing volume of production E The two countries are facing stiffer competition from other substitute products thus creating unfavourable production environment from cocoa L Both countries have not ratified legal measures that positively affect processes of production 6.0. Barry Callebut---Factors Contributing to the Impending 15-year Chocolate Production Shortage One of the strongest areas of operation is that the Company has managed to diversify its product base with the aim of appealing to a wide range of customers. However, this approach has done little to save the Company from the impeding 15-year chocolate production shortage. Critically analysis of the Company’s operation indicates that the following are key factors. 6.1. Product Design Model The 14 chocolate products that the Company currently offers are not specific to the needs in the market. Current market position requires that product design model should be made in such a manner that it allows focusing efforts as well as consolidating specific expertise (such as efforts from Dirk Poelman, Chief Operating Officer) around the product but not function as it is the case currently. Currently, the level of competition is stiff and some of its products such as Baby Food Cocoa Powder or Cocoa Products may be driven out of the market if they do not apply Porter’s five forces that will help them the competitive intensity and thus attractiveness of their chocolate products. Threat of substitute products is one of Porter’s forces that have significantly made the company to face the shortage thus calling for redesigning of their product model (West et al. 2015). Again, the Company has focussed more on their ‘Cocoa Leadership project’ at the expense of their product design. 6.2. Constantly Changing Business Environment Dependence on Europe revenue and dependence on specific product are two of weaknesses that have been identified in the company. According to Payne and Frow (2014) this factor is brought by a company that fails to embrace constantly changing business environment. This view is supported by its current group that has failed to balance between research and development and cost of manpower thus failing to deal with Porter’s consideration of competitors in the industry, specifically Cadbury as a company that offers almost every product the Company offers. While research and development (R&D) have been succinctly undertaken by the Company in dealing what Porters found to be ‘power of suppliers and power of customers’ it fails to capture the changing business environment. Chief Executive Officer and Andreas Jacobs provides structure on how to become leaders in sustainability but leadership in the organisation has not been well formulated to deal with changing business environment thus the Company’s impending 15-year chocolate production shortage is due to its inability to increase bargaining power of consumers, suppliers and buyers. 7.0. Conclusion The aim of this paper was to critically analyse strategic management and supply chain concerning different cocoa producing countries and specifically, Barry Callebut. We found that Porter’s forces have significantly affected the extent to which companies engage in marketing. We conclude that marketing approaches taken influence sales rather than diversifying line of production. References Addae, S., 2014. The Cocoa Certification Program and Its Effect on Sustainable Cocoa Production in Ghana: A Case Study in Upper Denkyira West District (Doctoral dissertation, KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY, KUMASI). Chery, W., 2015. Factors Influencing Sustainable Cocoa Production in Northern Haiti (Doctoral dissertation, Louisiana State University). Department of Cocoa of the Dominican Republic. 2012. “Commercialization Report, Year 2011/2012”. Holguín-Salas, A., López-López, D., Corkidi, G. and Galindo, E., 2015. Foam production and hydrodynamic performance of a traditional Mexican molinillo (beater) in the chocolate beverage preparation process. Food and Bioproducts Processing, 93, pp.139-147. International Cocoa Organization. 2013. Quarterly Bulletin Agroforestry systems, 88(6), pp.947-956. Läderach, P., Martinez-Valle, A., Schroth, G. and Castro, N., 2013. Predicting the future climatic suitability for cocoa farming of the world’s leading producer countries, Ghana and Côte d’Ivoire. Climatic change, 119(3-4), pp.841-854. Payne, A. and Frow, P., 2014. Developing superior value propositions: a strategic marketing imperative. Journal of Service Management, 25(2), pp.213-227. Sonwa, D.J., Weise, S.F., Nkongmeneck, B.A., Tchatat, M. and Janssens, M.J., 2016. Structure and composition of cocoa agroforests in the humid forest zone of Southern Cameroon. Agroforestry Systems, pp.1-20. Vaast, P. and Somarriba, E., 2014. Trade-offs between crop intensification and ecosystem services: the role of agroforestry in cocoa cultivation. Agroforestry systems, 88(6), pp.947-956. West, D., Ford, J. and Ibrahim, E., 2015. Strategic marketing: creating competitive advantage. Oxford University Press. Read More