PEST and competitive analysis facing by confectionery organisations

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Summary

This report defines the PEST and competitive analysis facing by confectionery organisations. The international organisation's Cadbury and Nestle are the organisations where the leaders of confectionery food. This report will discuss the strategy using by these two companies and their mission, what are their objectives and how can they achieve their goal?

Introduction

The UK confectionery market forms part of the food industry and was valued at £5.54bn 2001. Sales have increased over a number of years. Although not an essential purchase, confectionery is bought by the majority of the population. Changing eating habits have led to increased levels of snacking and grazing and, as a highly accessible and desirable food, confectionery has been able to capitalise on this trend. There are two main sectors in the market - chocolate confectionery and sugar confectionery.

The UK market is relatively mature. As a consequence, there is little scope for market growth. The predominant trend among the leading companies is to expand through brand extensions rather than new product offers. Confectionery is an impulse market, which means that strong brand identities are of key importance. Creating new products by extending established brands carries lower risks than launching new ones, because the products have a head start in the market. Limited editions, where items are offered in new variants for short periods of time, are also favoured. Although this type of activity can maintain interest in the market, the actual growth potential is limited. Sectors that have expanded since the late 1990s include boxed chocolate. The market has grown since the introduction of the new twist-wrap selections, including Celebrations (Mars UK Ltd), Miniature Heroes (Cadbury Schweppes PLC) and All Stars (Nestle holdings UK PLC). Other new and growing sectors include organic chocolate and sugar-free confectionery. Dental gums have built on the success of sugar-free chewing gums. The UK confectionery market is dominated by three groups - Cadbury, Mars and Nestle All are internationally-trading companies with a large portfolio of strong brands, supported heavily by advertising and promotion. Medium-sized companies in the sector tend to have a more limited brand offer, but they also trade on at least a national level, in order to maximise the returns on brand investment. Children are a major consideration in the confectionery market. According to the consumer research commissioned for this report, 44% of adults aged 18+ buy most of the chocolate and sweets for the children in their family, and 29% agreed that most of the confectionery they buy is chosen by the children in their family. Seasonality and specific events are still important to the confectionery market. Trade research shows that almost 40% of chocolate sales takes place in the first quarter of the year, which itself can be divided into Easter and Spring occasions such as Valentine's and Mother's Days. Around 8% of UK chocolate confectionery is purchased in the two weeks prior to the Easter weekend - and most of that is in the last few days. The Christmas confectionery market - defined as sales of boxed chocolates (bulk and ordinary), novelties and selection packs between September and December - reached £640m in 1998; this was 2.2% up on 1997, following a 9% increase from 1996.

Macro Environment

The business strategy of macro environment consists of the larger society forces that affect the microenvironment- Political, Economical, Social, Technological, (PEST) analysis. A pest analysis focuses on external factors, breaking them down into a number of categories. By doing this it allows businesses to identify what changes the outside world may hold for the organisation in the foreseeable future Businesses usually produce a pestle analysis to inform strategy development and to minimize any potential damage and maximize the advantages By producing a pestle analysis you are not guaranteed success, but by not doing so will almost certainly result in business failure.

Political Environment

Business Strategy's decisions are strongly affected by developments in the political environment. The political environment consists of laws, government agencies, and pressure groups that influence and limit various organisations and individuals in a given society. Political decisions can affect the confectionery companies for the good and the bad, because if taxes increase, therefore consumers decrease and sales of stock decrease. However if taxes decrease the likelihood is that consumers will buy more. The confectionery has been criticised for unhealthy products with high levels of sugar in chocolate and an advertising campaign for health eating has been launched.

The confectionery market operates within the wider food industry and, as such, is subject to stringent regulation. There are a number of regulations affecting cocoa and cocoa products, including the following: The Cocoa and Chocolate Products Regulations 1976, The Cocoa and Chocolate Products (Amendment) Regulations 1982, The Food Safety Act 1990 and The Food Labelling Regulations 1996. There have been ongoing disagreements between the EC and the UK regarding the definition of milk chocolate. It is likely that the EU will introduce new regulations for UK produces like Nestle. Raw Materials for example coco supplied by countries like South Africa so if war breaks out supply could be short and cut back on production. There could also be imports restrictions bought in by the government.

If the government continue to not lower petrol taxes, it could result in another petrol crisis, which has a knock on effect the distribution chain, and stops factory workers from getting to their work place, putting a halt on production.
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There could be bans, quotas or a high tariff on imports into other countries i.e. there where strict standards that English chocolate had to meet before it could be imported into Holland a few years ago.

Economic Environment

Analysis of the economic environment will centre on changes in the macroeconomic and their effects on business and consumers. It is important to remember that, because governments intervene in the operation of all countries' economies. The regulation of a national economy is brought about by two key policy instruments, alongside influences- fiscal policy and monetary policy. These policy ...

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