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Chocolate industry Essay

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Updated: May 31st, 2019

Introduction

In order to be profitable in international business, it is vital for one to examine the micro and macro factors prevalent within a chosen business environment. This would help in anticipating challenges and in curving out a business strategy needed in order to succeed in that nation. The country chosen for this purpose is Singapore.

Justification of choice

Minimal barriers to entry

Singaporean Immigration laws are some of the most business friendly around the world. This would allow investors and businessmen in the chocolate business to enter the country easily and without major hurdles.

Expatriates often consider this as the best place to work and live in so it would be a great place to establish the manufacturing plant. Additionally, business regulations are not too tough in this country.

If one has to import a food product from the international environment, one would not be expected to pay import duties unless the product is alcoholic (Australian Government, 2010).

Such a policy is a big incentive for the proposed business because cocoa (an essential raw material in chocolate manufacture) will be sourced from the Caribbean so it is essential to select a country that will not impose heavy import duties on the same.

Most foreign investors in the country are not required to follow certain distribution channels once in Singapore. It is expected that manufacturers should have their own warehouses, cargoes and networks. This would ascertain that they can easily take the commodities to the consumers without overly dealing with other intermediaries.

Economic conditions

As stated earlier in the industry analysis, the best place to start a chocolate business would be one which has a high GDP and high prospects for economic growth in the future.

Currently, Singapore is ranked third by the International monetary Fund’s 2010 economic index. It is ranked 4th by the CIA word factbook and is position 5 by the World Bank in terms of its GDP.

Therefore, this would be an ideal society for the proposed chocolate business because any country’s GDP is indicative of its purchasing power (CIA, 2011).

Chocolate is a luxury item that may not be easily purchased by poorer nations. Singapore has 0% of its population living below the poverty line and over 90% of all Singaporeans live in urban areas. Consequently, their economic conditions illustrate that they would easily buy the product (World Economic Forum, 2011).

Additionally, Singapore also boasts of an immensely successful free market economy and is recognised as the least bureaucratic nation to do business in South East Asia. This has been made possible by the low instances of corruption and the government enabled programs that have been instated in order to prevent or capture the vice before it gets out of hand.

Its Ministry of trade and Industry has contributed towards these indicators by taking charge of economic growth, developing industries and by creating the right environment for fostering entrepreneurship.

Furthermore, the country has set up a Standards Productivity and Innovation board (SPIB) to accredit and develop standards for businesses while at the same time help them to reach markets and compete effectively internationally.

In fact, transparency in Singapore is taken so seriously that government tenders and quotations are posted publically at an ebusiness portal. Such initiatives indicate how straight forward and fair business practices are. Singapore also has a Corrupt Practices Investigation Bureau which was formed in order to ensure that the business sector is corruption free.

It appears these institutions are doing their jobs very well because international rankings illustrate that Singapore is the fifth least corrupt nation and the first in Asia. Naturally, such a country would minimise the difficulties that an overseas manufacturer would have if one was trying to establish oneself in such a country.

Since Singapore has set up itself as one of the leading IT hubs in the region then it would be easier for this chocolate manufacturing company to register and get licenses there. That would greatly minimise resources and time wastage as is the case with other economies in the region.

Infrastructural conditions in the country are great. The government has built a vast transportation and road network, airline hubs and strong telecommunication facilities. All these factors indicate that the proposed company will be in a position to import raw materials easily owing to these airline hubs.

These materials would easily reach the point of manufacture because of the favourable transport and communication networks. Since some of the ingredients in chocolate are perishable then it would be best to move that produce as quickly as possible and this is very achievable in Singapore.

Most commodity prices in Singapore are relatively stable and this would be advantageous to the proposed business because it will be possible to plan for the future as well as make strategic plans or do business forecasts based on past performances.

In terms of the industrial sector, Singapore is known for its production of chemicals, rubber, processed foods and petroleum refining. This industry accounts for 25% of the entire GDP and thus places the country as 3rd in the world (CIA, 2011).

It would be ideal to set up a production plant in Singapore because the technological and equipment advances needed in the chocolate industry can be easily located or found there.

The country’s strong history in industrial manufacture is indicative of the fact that all the processes needed in order to make industries succeed are already in place and they are likely to do well in the future.

The presence of about seven thousand multinational corporations in Singapore testifies to the feasibility of bringing in foreign investments into this nation (Dycke, 1997). Besides, Singapore’s products are associated with excellence so it would be likely that if the chocolates were produced in that nation then the world would respect them since they are synonymous with quality.

It should be noted that the chocolate industry depends more on availability of advanced technology rather than cheap labour. When compared to other Asian economies like China and Vietnam, labour costs in this country are relatively high.

One would therefore find it difficult to minimise production if one was dependent on this component. However, because chocolate manufacture is not heavily reliant on cheap labour then it would still be alright to do business there.

It was also explained earlier that innovation and creation of new chocolate recipes will be vital to the success of any chocolate business in the industry. A survey carried out by Boston Consultancy group found that Singapore was the top most innovative nation of the world.

They focused on 110 countries and came to that conclusion after intense analysis. This innovative culture will work well for the chocolate industry because it will give the company a competitive edge and will also ensure that all the products put forward are ahead of competitors in the market.

Food and confectionary production is regulated through the food and hygiene safety standards. Any imported foods are normally taken through a rigorous process authorised and implemented by the Food advisory committee.

It is only this group which will allow the distribution of goods to manufacturers. Consequently, those standards will ensure that the chocolate manufacturer only accesses clean and safe milk for use in its processes. This will keep the taste of the product consistent and it will also protect consumers from diseases.

Market features

Singaporeans operate under the principle of “Kiasu”. This loosely translates to ‘never accepting defeat’. In Singapore, citizens have a material culture which causes most people to work hard in order to purchase more.

These qualities are essential for products such as chocolate because they denote some form of indulgence which is often possible when the concerned consumer feels as though he or she deserves that particular treat. Chocolates often do well in cosmopolitan cultures and this country is one such society.

Most areas have elaborate shopping malls, resorts and large supermarkets (Krummel et. al., 1997). Chocolates are best sold near the counter in retail chains so as to increase impulse buying or to draw in certain consumers. In order for the proposed business to do well then it should be set up in a country that is rich in such stalls.

That would increase the rate of product movement and thus boost sales of the commodities nationally. Previously, the country was known for its smaller traders but now the population is illustrating a preference for supermarkets because they are considered a lot cleaner and synonymous with high quality products.

Nonetheless, not all small traders have been eradicated; they still sell confectionaries and food items like chocolate and can be crucial components of the distribution system. These small traders mirror some aspects in supermarkets like displaying sweet and fast moving products like chocolate at the front.

The proposed company can advise such traders to exhibit their items near their windows so that customers can be easily attracted to them.

About 70% of all households utilise broadband thus illustrating that Information technology infrastructure is quite strong in Singapore.

Since e-commerce would be a great way to save on distribution and marketing expenses of the chocolate industry as stated in the previous industry analysis then this country would be great. The products can be made and sold to Singaporeans through a relatively cheap method which connects a vast number of citizens.

The country also has very complex distribution channels stemming from its historical preferences. Most people were private traders who would get merchandise from different parts of the world and sell them to specific target markets.

Essentially, this implies that the distribution channels are not as straight forward. While some people may look at such a scenario as a problem, it is possible to tap into that missing component in order to have a marketing advantage. The concerned company can set up its own distribution channel which would be run efficiently and professionally.

Marketing and promotional concepts in this country are crucial in the success of new players. The chocolate manufacturer can start with a very strong and captivating marketing campaign and then follow this up with frequent reminders about the brand so that consumers can keep remembering the product.

Unlike other western nations like the US, Singapore is not saturated with marketing battles. The population would still notice a campaign involving a certain new product and would actually respond well to it at all levels.

Another important demographic factor that had been cited in the industry analysis concerning the chocolate industry was prevalence of a young population. It was explained that older members are more concerned about their health and would not want to purchase a product that was risky to their health.

The world CIA factbook shows that the average age in this country is 41(CIA, 2011). In other words, there is an ageing population.

However, this issue might not be such a disadvantage for the proposed chocolate company because unlike western states, most citizens in Singapore are not as weight conscious. Furthermore, the younger population is quite aggressive and would still provide a ready market for the commodities.

Another issue that may be considered as a barrier in this nation is its relatively small population size. There are about four million people in the country thus placing Singapore as the 117th most populated nation in the world (CIA, 2011).

The lack of a large population size is not necessarily a problem for the chocolate manufacturer because one only has to select the right marketing strategy. In certain circumstances, chocolate may be sold as a niche product while in others one can select the mass market.

If the population is affluent then chocolate would not be considered as an unaffordable or unnecessary treat. If a mass market approach is used then almost all members of the population can be targeted for this campaign and this would ensure high returns.

In fact, it is better for a country to have a small population that can purchase the product rather than have a large one with only few people who can buy it. If there is a trade off between population size and spending power then spending power would definitely come first.

Conclusion

Singapore was chosen as the ideal country for the proposed business because it has; minimal barriers to trade, a strong FDI and economic environment and has the right social cultural mix.

Singapore does not impose import duties on food items and neither does it has strong immigration laws thus implying that it has minimal barriers to trade; a foreign investor would not encounter too many obstacles during entry and exit of goods and items into the country.

The country has a strong FDI and economic environment because it the third richest nation of the world. This means that consumers have high purchasing power and would provide a ready market for chocolate. The area is not bureaucratic and has very low corruption.

Transparency is always a good indicator of how favourable a country is for international business hence this proposed business. Infrastructural strength is yet another economic indicator of the feasibility of this country for chocolate manufacture since perishable raw materials like milk need fast and efficient transport systems.

Prices are immensely stable in this country and technological development favours a technologically dependent industry like chocolate manufacture.

Social cultural factors such as prevalence of broadband internet, the materialism culture and cosmopolitanism will contribute towards the purchase of chocolates once manufactured in this country. All these factors will contribute towards a successful chocolate manufacturing venture in Singapore.

The country meets almost all micro and macro industrial needs. Its shortcomings like small population size can be easily overcome through a sound marketing and strategic plan.

References

Australian Government (2010). Food and beverage to Singapore: Trends and opportunities Web. Australian Trade commission website. Available from .

CIA (2011). The World factbook: Singapore [online]. CIA website. Available from .

Dycke, A. (1997). Country Analysis: a framework to identify and evaluate the national business environment. Harvard: Harvard Business review.

Krummel, D., Apgar, J., Seligson, F. (1994). Patterns of chocolate consumption.

American Journal of clinical Nutrition, 60(7), 1060-1064.

World Economic Forum (2011). Global competitiveness. Global competiveness report 2010-2011, 3 June.

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IvyPanda. 2019. "Chocolate industry." May 31, 2019. https://ivypanda.com/essays/chocolate-industry/.

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