Cadbury Dairy Milk Chocolate

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4. Marketing Environment

It is defined as “the actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful transactions with its target customers” (Kotler et al., 2013, p. 116). Cadbury needs to study and monitor the marketing (external) environment because it is an open system and the change in external environment will affect Cadbury internally. Cadbury needs to quickly know what is changing (reactive) in the marketing environment or if possible predict the change (proactive) and utilize the opportunity offered to full extent or tackle the threat caused by the change in the marketing environment.

4.1. Microenvironment

Kotler et al. (2013) explained microenvironment as “the forces close to the organisation that affect its ability to serve its customers” (p. 116). Originally, there are 6 micro environmental factors namely the company, suppliers, marketing intermediaries, competitors, publics and customers but in this report, only suppliers and customers will be discussed because Cadbury is a big confectionary manufacturer and so the suppliers are the most important factor while customers are important because they are the one making profit for Cadbury.

4.1.1. Suppliers

They are the ones that “provide the resources needed by the company to produce its goods and services” (Kotler et al., 2013, p. 117). Kotler et al. (2013) emphasized that supplier problems such as supply shortages or delays, labour strikes and other events can cost sales in the short run and damage customer satisfaction. Cadbury’s main supply is cocoa which is cultivated in Ghana. Matt Shattock, Regional President of Cadbury stated in Eyre’s article (2008, para. 7) “sustainable cocoa production is vital to Cadbury’s commercial success”. As a result, Cadbury launched a fund to help its cocoa suppliers in Ghana, after research suggested that average production in the region is currently 40% lower than potential yield (Eyre, 2008). This low of supply is bound to reduce the production of Cadbury’s chocolate especially Dairy Milk, Wispa, Flake and Buttons, as specified by Eyre (2008). This shows that the change in suppliers poses a threat for Cadbury.

Consequently, the price of cocoa per tones has risen from around USD 2,300 to USD 2,400 (International Cocoa Organization, 2013). This will impact on higher production cost, since African countries; mostly Cote D’Ivoire and Ghana provide about 70% of the world’s cocoa (Eyre, 2008). This may decrease the cocoa supply for Cadbury and will result in either Cadbury’s product increase in price or a reduced profit margin. The competition for the cocoa (supply) for the whole chocolate confectionery industry will be more intense and may cause the price of cocoa to rise until it reaches a new market equilibrium. As a result for increase in cost of production, some chocolate confectionery firm may choose to leave the market which may be an opportunity for Cadbury to increase its market share.

4.1.2. Customers

As mentioned before, consumers are getting more and more health conscious these days. As a result, they are ‘forcing’ the confectionery industry to lower the sugar, fat and calories content in order to attract their attention. Cadbury is also ‘forced’ to make reduced-sugar chocolate and also reveal its nutrition fact to ensure customer about their product meeting their health requirement. The change in consumers’ way of thinking may create an opportunity for Cadbury to make more and more chocolate which benefits health, or a threat as if Cadbury do not react fast enough, they will lose some of their customers. The confectionery industry may choose to follow the trend or target niche market which prefers sweet and creamy chocolate.

4.2. Macroenvironment

“The macroenvironment consists of the larger societal forces that affect the whole microenvironment” (Kotler et al., 2013, p. 116). Essentially, there are 6 macro environmental factors namely demographic, economic, natural, technological, political and cultural forces. However, only demographic and economic forces will be discussed in this report, since demographic is essentially current and potential customer and economy affects the disposable income of Cadbury’s customer.

4.2.1. Demographic

Kotler et al. (2013) mentions “demography is the study of human populations in terms of size, density, location, age, sex, race, occupation and other statistics” (p. 120).

The average annual number of births in 2013 is 19.14 births per 1,000 persons. This rate results in about 252 worldwide births per minute. In the year 2000, the birth rate was 22 births per 1,000 persons. This shows that the birth rate of the world has been decreasing slowly throughout the years (IndexMundi, 2013). As a result, the number of customers buying Cadbury chocolate is decreasing throughout the years. This will affect the total sales in quantity for Cadbury as well as the whole chocolate confectionery industry. The decreasing market size forced the competition level in the world to be more intense. This means that companies must improve their marketing mix (product, price, promotion & place) to meet the competition.

However, the decrease in birth rate also encourages head of the family to spend more on their children. In long run, decrease in birth rate may not be a threat but an opportunity for Cadbury if it can improve its marketing mix and provides more value to satisfy customers’ need and want since higher value means competitive advantage.

Less birth rate may results in decrease in demand. As a result, some confectioner with weaker brand may choose to leave the market because they must provide more discounts to sell their chocolate and also compete with confectioner with strong brand or target premium chocolate market.

4.2.2. Economic

Kotler et al. (2013) explains, “the economic environment consists of factors that affect consumer buying power and spending patterns” and “total buying power depends on current income, prices, savings and credit” (p. 131).

In 2011, the annual disposable income per household in Indonesia reached Rp60.6 million (US$6,901), signifying an average growth rate of 5% per year during 2006-2011. Consumer expenditure is also growing rapidly at an average of 4.7% per year during 2006-2011 (Euromonitor International, 2012). According to Trading Economics (n.d.), the average inflation rate from 1997 until 2013

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