A Case Study Of Mondelez

A case study of Mondelez

AN EXPOSURE ANALYSIS TO THE GLOBAL SHORTAGES IN COCOA PRODUCTION

PREPARED FOR MONDELEZ INTERNATIONAL

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A case study of Mondelez

AN EXPOSURE ANALYSIS TO THE GLOBAL SHORTAGES IN COCOA PRODUCTION

PREPARED FOR MONDELEZ INTERNATIONAL

Synopsis of the Company

Headquartered in East Hanover, NJ, Mondelez International

is a beverage, food, and

confectionary multinational organization. The company is among the largest in the confectionary

industry with reported annual revues of close to $26 billion by 2016 (Statista, 2018, p. 1). The

organization has several subsidiaries, such as Douwe Egberts, Freia, Nabisco, Cadbury, Opavia,

Enjoy Life Foods, and Pascall among others.

The Company’s Holdings Current Market Position

Mondelez International

is among the largest in its industry. In fact, the organization has

managed to produce its greatest industrial influence through the production of chocolate. In

2012, the company’s market share of the chocolate industry was approximately 14.4%. However,

its dominance reduced in 2016 when the company commanded only 13.6% (Statista, 2018, p. 1).

It suggests that from 2012 to 2016, the company has been controlling 13.8% of the chocolate

industry as figure 1 indicates. The visual indicates that the organization’s market dominance has

been declining over the period during which the analysis occurred.

A case study of Mondelez

Figure 1: the global market share of Mondelez International

from 2012 to 2016. Adapted from Statista (2018, p. 1)

Porter’s Five Forces

Michael Porter discovered five forces, which he considered as having significant

influence on the productivity of organizations. He developed a framework that companies around

the world can use to determine their positions relative to their operating environments. The

subsequent parts of this essay analyze Mondelez International

in relation to threats of new

entrants, bargaining power of suppliers, bargaining power of buyers, threat from substitute

products, and rivalry from existing firms in the industry, as Porter discovered in this model.

Threats of New Entrants

The fact that the market is open for other organizations to enter means that Mondelez

has the pressure to match the challenges in innovation, novel approaches to doing things, and the

need to keep up the marketing strategies of the organization. The new entrants could force the

organization to adopt new pricing strategies, lower the costs of production, and provide new

value propositions to its clients.

Bargaining Power of Suppliers

A case study of Mondelez

Approximately each company within the confectionary industry has multiple suppliers

(Armstrong, 2015; Data Hero, 2015). Some of the suppliers are dominant within the market

compared to others, which means that they have significant control of the prices of the products

that they supply to companies such as Mondelez

. Specifically, the firm has been struggling to

maintain a steady supply of cocoa, which is the primary raw material in the production of its

confectionary products. The fact that suppliers of this factor input are quite strong within the

market has always meant that the organization cannot control their prices in the manner that they

would have wished. The reducing volumes of cocoa production around the world suggest that the

company is likely to struggle with its suppliers since such trends bolster their bargaining power

(Leake, 2010). Therefore, the effect of the bargaining power of the suppliers has been reduced

profitability of Mondelez

Bargaining Power of Buyers

Consumers of confectionary products are quite demanding since they always want to

obtain the best products at the least possible prices. In addition, confectioners, such as

Mondelez

are obliged to research the markets for consumer tastes and preferences if their

products have to be appealing to their target markets (McDaniels & Gates, 2013). In this case, it

suggests that the bargaining power of consumers is quite strong for Mondelez

, which has to

always adjust its production according to the market trends.

Threats of Substitute Products

Companies that adopt vigorous marketing strategies dot the industry in which the firm

operates, which means that substitute products would have significant effects on the profitability

of Mondelez

. For example, some of such companies have profound pricing strategies that could

A case study of Mondelez

be difficult for the organization to adopt. In this case, corporation is likely to have trouble

sustaining its profitability as it has been realizing since 2012 to 2016, as indicated in figure 1.

Rivalry among Companies

Mondelez International

operates in a quite competitive environment. The intense

competition in the market suggests that companies have always strived to put keep their prices

down. The effect of competitive rivalry in the industry can be read from figure 1 that suggests

declining market control by the firm.

Implications of the Five Forces Analysis

The analysis indicates that Mondelez

International

operates in a competitive industry in

which consumers and suppliers have significant influence on productivity. The dropping levels

of global cocoa production, for example, suggest that organizations in the industry should strive

to control their supplies. It is recommendable that Mondelez International

has already moved a

step towards this initiative by enabling farmers in Ghana to deal with the climatic challenges that

affect the production of Cocoa (Goldberg, 2015). The organization might want to complement

this approach with the adoption of smart production technologies that would put the operational

costs as low as possible.

A case study of Mondelez

References

Armstrong, A. (2015). 'Chocfinger' hedge fund Armajaro faces exodus of senior

partners. Telegraph.co.uk. Retrieved 29 March 2018, from

https://www.telegraph.co.uk/finance/commodities/11791286/Chocfinger-hedge-fund-

Armajaro-faces-exodus-of-senior-partners.html

Data Hero (2015). A World Cocoa Shortage? That’s Bitter News for Chocolate Lovers.

Retrieved 29 March 2018, from https://datahero.com/blog/2015/03/24/a-world-cocoa-

shortage-thats-bitter-news-for-chocolate-lovers/

Goldberg, S. (2015). Cocoa Shortage in Ghana Driven by Inept Policies. Retrieved 29 March

2018, from https://www.wallstreetdaily.com/2015/06/29/ghana-cocoa-shortage/

Leake, C. (2010). Choc-finger: The real-life Willy Wonka who's bought £658m of cocoa beans.

Retrieved 29 March 2018, from http://www.dailymail.co.uk/news/article-1295608/Choc-

finger-Meet-real-life-Willy-Wonka-Anthony-Ward-whos-just-bought-incredible-658m-

cocoa-beans-.html

McDaniel, C., & Gates, R. (2013). Marketing research. Singapore.

Statista (2018). Mondelez International: market share of the global chocolate market 2016.

Retrieved 29 March 2018, from https://www.statista.com/statistics/650162/mondelez-

international-market-share-of-the-global-chocoloate-market/

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