Economic Analysis of International Cocoa and Chocolate Market Essay Example
Economic Analysis of International Cocoa and Chocolate Market
In the last 20 years various forces underlying chocolate market changes the market structure, which influences the market structure of cocoa beans, the most important raw materials for chocolate production, evidently. In this essay I will discuss the changing market structure of both markets, and the strategies that chocolate and cocoa producers employed to face challenging from the market. In addition, cocoa industry in most of cocoa planting countries plays a significant role in export revenue; hence, this essay will also analyze the effect of increasing demand for chocolate, fair trade, and policies on those regions from the macroeconomics point of view.
Before looking into the pricing and production decisions of the firms that operate, I will demonstrate the structure of chocolate and cocoa market primarily. The characteristic of chocolate market shows that it has a monopolistically competitive market structure. Many companies find their profits are constrained by tight price in the market (The Economist: Britain: Stuffed; Chocolate 2004, p. 29), which indicates the sever competition within the industry. Admittedly, some companies have a dominated status in the chocolate market, say, Kraft, Mars, Nestlé, Ferrero and et cetera. Yet some other chocolate firms that compete with those big brands account for a certain market share. Besides, unlike heavy industries which need considerable initial capital to set up a company, it does not cost much to start a chocolate business, and the producing process is much easier. Therefore, there is freedom of entry of new firms into the chocolate industry. Lastly, the product differentiation for chocolate is another evidence for chocolate market belonging to monopolistic competition. Different tastes of chocolate provide more choices to buyers, and in latest years other characteristic are vying for consumers’ attention, such as products with a fair trade label,
In the last 20 years various forces underlying chocolate market changes the market structure, which influences the market structure of cocoa beans, the most important raw materials for chocolate production, evidently. In this essay I will discuss the changing market structure of both markets, and the strategies that chocolate and cocoa producers employed to face challenging from the market. In addition, cocoa industry in most of cocoa planting countries plays a significant role in export revenue; hence, this essay will also analyze the effect of increasing demand for chocolate, fair trade, and policies on those regions from the macroeconomics point of view.
Before looking into the pricing and production decisions of the firms that operate, I will demonstrate the structure of chocolate and cocoa market primarily. The characteristic of chocolate market shows that it has a monopolistically competitive market structure. Many companies find their profits are constrained by tight price in the market (The Economist: Britain: Stuffed; Chocolate 2004, p. 29), which indicates the sever competition within the industry. Admittedly, some companies have a dominated status in the chocolate market, say, Kraft, Mars, Nestlé, Ferrero and et cetera. Yet some other chocolate firms that compete with those big brands account for a certain market share. Besides, unlike heavy industries which need considerable initial capital to set up a company, it does not cost much to start a chocolate business, and the producing process is much easier. Therefore, there is freedom of entry of new firms into the chocolate industry. Lastly, the product differentiation for chocolate is another evidence for chocolate market belonging to monopolistic competition. Different tastes of chocolate provide more choices to buyers, and in latest years other characteristic are vying for consumers’ attention, such as products with a fair trade label,