Oz Choc - External Landscape Analysis and Corporate Strategy - Case Study Example

External Landscape In order to understand the problems and issues faced by Oz Choc, it is important to conduct an external landscape analysis within which the organisation is operating. The landscape is usually analysed on the basis of political, economic, socio-cultural and technological elements. It has been seen that every member of an organisation, right from the competitors to customers, and executives to employees, are influenced by the organisational landscape and respond accordingly. Therefore, it is necessary to study the organisational landscape carefully so that misleading interpretations are avoided (Ashkanasy et al 2000). This analysis of the external landscape would help Oz Choc to find out solutions to the deadlock created by international organisations and Commonwealth countries on procuring cocoa from Ivory Coast. Major industry players For understanding the issues faced by Oz Choc and creating strategies to overcome them, it is imperative to also consider the various players involved in the chocolate industry. It has been seen that in the current organisational landscape, the following industry players are influencing the industry: Australian Government, farmers, shareholders, workers, consumers, Commonwealth Countries, other competitors, United Nations, Government of Ivory Coast, French Government, various non-governmental organisations, fair trade bodies and other emerging cocoa producing countries and pirates. Political landscape The landscape in this case study outlines the regressive economic policies of a country, Ivory Coast, in a setting of a globalised modern economy. It says that the Ivory Coast government does not believe in the practice of free trade policies (Krugman & Obstfeld 2008). According to free trade policy, every trader is allowed to transact independently without any intrusion from the government. This policy helps in providing the traders and their partners with equal gain. However, the Ivory Coast government regulates the cocoa bean market and only pays a fixed price to the farmers. Further, it buys the product through the established local networks, resulting in monopolisation, which is defined as a practice to dominate the market by excluding the competitors completely (Motta 2008). This situation has been termed unacceptable by the Australian government and various other Commonwealth countries, who are considering launching a military action against Ivory Coast in the next six months. In case of a war, the chocolate industry is likely to suffer losses on various counts. First and foremost, it would lose out on about 43 per cent of its cocoa supply and therefore, may not be able to meet the demand for its products. This may result into the chocolate companies loosing its customers. Drucker (2007) believes that as a modern business has become a part of the society, any uprising affecting the society such as war or local unrest would also impact the industries working within the society in a major manner. Therefore, due to the war prices of cocoa may increase substantially, which would in turn impact the bottomline of the chocolate companies. Lastly, the war may continue for a long time, in which case these companies would have to source cocoa from other countries at higher prices. The consortium is also thinking of boycotting, establishing government legislation to put 'made by slaves' labels on products and ensuring international co-operation to improve the working conditions of the farmers. In case such labels are put on the products of the chocolate companies, these companies would incur not only severe financial losses but also loss of their reputation. Therefore, the Australian government and the Commonwealth countries are important incumbents in the political landscape, as their actions against the present Ivory Coast government would surely impact the bottomline and reputation of major chocolate brands. Further, the Ivory Coast government has been blamed for encouraging child trafficking and child labour in the country in a report by the United Nation. The report elucidates that around 15,000 children may be engaged as labours in the cocoa farms in the country. These children are not given proper food and are forced to work in dangerous conditions. United Nations has repeatedly asked chocolate companies to look into the matter. However, these companies have failed to respond on the issue citing that they are not liable for solving such problems as these companies already purchases cocoa from Ivory Coast above the international rate. Due to this improper or poor handling of the request of the United Nations by the public relations (PR) department, these companies even had to face aggression and animosity from various international non-governmental organisations as well. Further, the United Nations has called for an international boycott of all the products manufactured by such companies until they recognise the issue and solves it as a part of their corporate social responsibility (CSR). Johnston and Zawawi (2004) also believe that most of the ethical problems due to CSR issues that the company faces with the society and other stakeholders are because of poor PR practices. Inability to handle the crisis situation in an amicable manner has resulted into companies loosing their reputations. Further, these companies are expected to incur more trouble as UN is a global organisation and has various sanctioning power and authority. If the member countries boycott the products, the revenue target of these companies would suffer, and even impact their stock prices. Therefore, the UN plays a very important role in this political landscape. Another political landscape that might impact the chocolate industry is the Harkin-Engel Protocol, which is often termed as the Cocoa Protocol. This protocol, introduced by American representatives Eliot Engel and Tom Harkin, was signed voluntarily by the chocolate industry in September 2001 to put an end to child labour in the cocoa farms of West Africa (Bales 2008). However, most chocolate producing companies failed to ensure the implementation of the protocol, and therefore, the protocol was extended twice and would now end by 2011. Economic landscape The chocolate industry was also one of the few industries that did not get affected by the recent global downturn, and most chocolate companies still made positive sales (Bachmann 2009). The confectionery industry in fact recorded sales of around US$ 150 billion in 2008, which was 6 per cent higher than 2007. Over half of the sales are believed to come from the chocolate industry (Bernstein 2009). Further, even a National Confectioners Association (NCA) study also stated that the chocolate industry was able to survive the global downturn. Its Confectionery Industry Trend Report 2009 revealed that due to various innovations undertaken by the chocolate companies during the recession, the industry was able to withstand the downturn. It further stated that these innovative products would continue to help the companies to attract consumers. As per the study, around 88 per cent of the experts believed that healthy snacks were the most successful innovation marketed by the chocolate companies (Confectionery 2009). Therefore, most of the chocolate companies launched various innovative products targeting health conscious buyers. Many introduced chocolates with higher cocoa and antioxidant contents, while others created products that could enhance the skin of the consumers. The companies also highlighted on the healthy ingredients, such as vitamins and calcium, in their labels used in the products. This ensured that the consumers buying such chocolates are receiving the best value for their money. Even the premium chocolate brands recorded positive sales as they marketed their products by emphasising on the healthy and soothing ingredients (Bernstein 2009). Socio-Cultural landscape It has been witnessed that in the past few years, consumers from the developing countries such as China, Indonesia and India are increasingly becoming consumers of Western foods and snacks such as chocolates. As per a report released by Euromonitor, between 1998 and 2006, most of the consumers in these countries have showed growing preferences for impulse food products such as chocolates. In fact, Indonesia recorded the fastest increase in the consumption of such products. The report also revealed that in 2006, the confectionery sales in developing regions witnessed considerable growth. For instance, Eastern Europe recorded sales growth of 18 per cent, while the Asia Pacific region reported 9 per cent increase. The Latin American region in fact recorded a significant increase of 23 per cent in its confectionery sales. Thus, most of the chocolate companies are targeting these developing nations that have been accustomed to the taste of chocolate by customising their products as per the local dietary requirements and tastes (One sweet world 2007). Further, as discussed in the economic landscape, the chocolate industry has also launched various innovative products to attract health conscious consumers and increase their market share. This has not only ensured financial stability for the industry, but also enabled the companies to fulfil their social responsibilities by producing healthy products. A major social factor that is plaguing the global chocolate industry is the lack of fair trade policy in Ivory Coast, which produces around 43 per cent of the global cocoa production (Chanthavong 2001). However, lack of fair trade policy has resulted in market monopolisation by the local networks, aided by the Ivory Coast government. These farmers are only paid a fixed amount for their crops and do not have any bargaining power. These factors contributed towards the poor social, financial and health conditions of the Ivory Coast farmers. Technological landscape Zajas and Church (1997) believe that technology is an important external factor that influences the modern day businesses. Even when the company does not indulge in technological advancement of its product, it still remains a key element to exert influence over the company. Therefore, although, most chocolate companies do not invest into technological advancement for farming cocoa, they would be impacted by the technology used by the cocoa farmers. The use of advanced technology to produce cocoa by these farmers would ensure procuring quality cocoa beans for the chocolate industry. Further, it has also been found that producing cocoa in Australia is an expensive procedure. Since the 1960s a number of research activities are conduced to grow cocoa commercially in the country. However, due to the frequent changes in cocoa prices and the farming being labour intensive, the country was not able to develop cocoa farming fully and make it commercially viable (Lemin 2005). Therefore, due to the higher cost of producing cocoa in Australia, most Australian chocolate companies purchase cocoa from major cocoa producing nations such as Ivory Coast. References: One sweet world: demand in developing nations drives global confectionery revenues and creates a platform for future growth, 2007, Candy Industry, 1 June, viewed 9 March 2010, . Ashkanasy, NM, Wilderom, C & Peterson, MF 2000, 'Culture and Climate', Handbook of Organizational Culture and Climate, SAGE, pp. 84. Bachmann, H 2009, Chocolate Sales: A Sweet Spot in the Recession, Time, 11 April, viewed 9 March 2010 . Bales, K 2008, Ending Slavery: How We Free Today's Slaves, University of California Press. pp.191. Bernstein, J 2009, ‘Chocolate Satisfies Even in a Global Recession,’ EzineArticles.com, 26 July, viewed 12 March 2010, < http://ezinearticles.com/?Chocolate-Satisfies-Even-in-a-Global-Recession&id=2664978> Chanthavong, S 2001, ‘Chocolate and Slavery: Child Labor in Cote d'Ivoire,’ TED Case Studies, viewed 12 March 2010, . Confectionery: resistance to recession gives hope to other affordable indulgences, 2009, Datamonitor, 25 June, viewed 12 March 2010, . Drucker, PF 2007, The practice of management, Butterworth-Heinemann, pp. 167. Johnston, J & Zawawi, C 2004, Public Relations: Theory and Practice, Allen & Unwin, pp. 116 Krugman, PR & Obstfeld, M 2008, International economics: theory and policy, Pearson Education. Lemin, C 2005, ‘Cocoa: a potential new crop for Northern Australia?’ Queensland Government, 22 November, viewed 9 March 2010, . Motta, M 2008, 'Predation, Monopolisation and Other Abusive Practices,' Competition policy: theory and practice, Cambridge University Press. Zajas, JJR & Church, OD 1997, Applying telecommunications and technology from a global business perspective, Routledge, pp. 16. Read More