Some of the cooperatives involved with cacao production in the Ivory Coast have been going bankrupt because the members are not able to sell their crops for a high enough price to cover their operational costs of growing their crops and operating their facilities. Because of this, Andy is considering investigating of marketing fair trade chocolate brands. He is looking into incorporate and internationalize a new line of chocolate that would be available in central Europe countries with an emphasis on Belgium.
With Andy’s new plan, there will be issues that will arise. These include political and legal issues as well as others. One important factor is that Belgium contains hundreds of chocolate manufacturers already. This could make entry into the Belgium market difficult for his company because these other hundreds of manufacturers are already established and known for their products. Political issues are another concern to be considered. Whether or not the government of Belgium will allow another company, especially an outside company to enter the competitive market of chocolate production in their country. Andy will need to be aware of legal ramifications of operating in Belgium, the same as operating in other new countries. In order to forecast profits, items such as tariffs and taxes will need to be considered.
There are other sources of cacao are available for Andy which may make it less expensive to produce his chocolate brands. One area that may be worthy of looking is in South America. Peru alone has 17 cooperative members of the Fair Trade Cocoa Cooperative. Overall, Fair Trade USA reports that there are 25 cooperative members in South America.
Considering South America will also force Andy to consider external and internal issues. One large issue is child labor laws. While the United States and many European countries have stringent laws with regards to child labor, many countries in South America simply overlook the issue. Children in many poor countries are forced to work long hours for little or no pay and are actually sold into slavery to work in facilities.
South America is a large player in the cocoa and cacao industry which would make the product readily available. Extensive research must be conducted on how difficult it may be to export the crop out of the country and what tariffs would be imposed in doing so. Additionally, he must consider the quality of the product he will be utilizing in his production of chocolates. After all, he would not want to be supplied with a product that is not first quality which would affect his finished product quality. If he were to produce and market a chocolate brand that was not as desirable as the competitors’ products, he will have wasted time and money in a non-profitable venture and will not have improved his company but most likely damaged its reputation making it difficult to compete in the industry at all.
There are many factors to consider for Andy with regards to where to buy the cacao and where to market the product. If Andy performs market research and analysis carefully, he will be able to effectively enter a new market and be profitable.
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