Porter Diamond model
According to marketing book Global marketing by Sven Hollensen, the Porter Diamond is defined as the characteristics of the home base that play a central role in explaining the international competitiveness of the firm- the explaining elements consist of; factor conditions, demand conditions, related and supporting industries and firm strategy. Also structure and rivalry, and change in government plays an important role.
For Day Chocolate is it important to create a competitive advantage, so these factors plays an incredibly important role. The elements are described below:
Factor conditions: Day Chocolate has a benefit because they buy their cocoa from Kuapa Kokoa, a small-scale cocoa farmer in Ghana. Ghana has numerous of cocoa plantations and the country conditions like the climate and people that have knowledge about cacao beans. All in all it gives an advantage in the production of cacao beans.
Demand Conditions: Day chocolate chooses to be a Fair Trade product while consumers are more and more aware of and open to the concept of Fair Trade. Consequently, the demand will only increase for Day Chocolate.
Related and Supporting Industries: Day Chocolate has different partners. It buys its cacao beans from Kuapa Kokoa. Chocolate Day has commitments with NGO twin trading and with The Body Shop. They share its ownership. Their milk chocolate recipe was developed with UK tastes in mind. Furthermore the support of charities Comic Relief and Christian Aid, Day chocolate has resulted in getting both Devine and Dubble listed in all the top UK supermarkets. Another helpful factor for Day Chocolate was that The Department for International Development guaranteed a bank loan. In other words, they have different supporting industries which combine into one big advantaged industry.
Firm strategy, structure and rivalry: Day Chocolate is a large, strong company, but also faces rivalry. Chocolate is a basic products and many firms produce and sell chocolate. However Chocolate Day distinguishes itself by using Fair Trade products, this is important because this is becoming an increasingly important subject for consumers, and government. Furthermore, Day chocolate supplies chocolate for own label products in Co-op and Starbucks in the UK, and by doing so becoming more popular.
Government: Day Chocolate has an official Fair Trade label licensed by International Fair Trade labelling Organisation (FLO). This gives Day Chocolate advantages, one being that they received a bank loan premium; to improve the quality of their lives. As a result the government invests in education and a good environment to increase production and income.
Customer equity: Day Chocolate has in different ways a lot of customer equity. Firstly, they sell Fair Trade products, which attracts a special group of customers and this group is increasing. So the customers only increase for Day chocolate. Furtermore, they sell high quality products which is very attractive for many of customers.
Day Chocolate is a large, growing company, which is why it is useful to make a SWOT analyse to create an overview of their strengths and weaknesses. This will be the internal study. To have an overview of their opportunities and treats calls for the external study.
Strengths: Day Chocolate has different strengths, the first being that they sell high quality products, with a luxury eradiation. Furthermore, they choose to sell Fair Trade products, which distinguishes Day Chocolate with its competitors. This makes Day Chocolate a strong brand.
Weaknesses: Day Chocolate choose to sell high quality Fair Trade products. By this aiming on a specific group of customers hecause not everyone has the opportunity to buy high quality and Fair Trade products.
The marketing mix is an overview of 4 factors; Product, price, place and promotion. This gives the strategic position of a company. Below there is an overview of the marketing mix for Day Chocolate.
Product: Product is the tangible object or intangible service what a company manufactures or produces. Day Chocolate produces Fair Trade chocolate with a high quality. The package of their products looks luxury that shows the high quality. Day Chocolate is a tangible product. Day Chocolate produces on a large scale and sells their two brands of chocolate, Devine and Dubble, in the top supermarkets of the UK. Aditionally they sell their own brands at Starbucks and Co-op.
Price: The price is the amount consumer pays for the product. Day Chocolate produces high quality and Fair Trade chocolate. They attract consumers that are willing to pay for high quality and Fair Trade. The amount of customers only increases because Fair Trade is becoming increasingly popular throughout the world
Place: Place refers to the place where product is purchased and to the distribution channel. Day Chocolate is supplied by Kuapa Kokoa, where they buy their cacao beans. The recipe of their milk chocolate is developed in the UK. Day Chocolate sells its products in all top listed UK supermarkets as well as independent supermarkets. Moreover, they have an own website where they sell their products.
Promotion: Promotion refers to all communication a company makes in order to sell their products. Day Chocolate has two important brands, namely Devine and Dubble. These brands are recognized as high quality and have a Fair Trade label. Moreover, their website has a luxurious appearance and the customer can find everything they want to know about the company there. This distinguishes Day Chocolate and its competitors. This attract a special segment of customers and this will increase in the future because Fair Trade products are becoming more popular.
A trend in the chocolate industry of recent years is healthy chocolate. Healthy chocolate is dark chocolate with more than 70 per cent cacao, this way the cocoa contains most antioxidants and are not cancelled out by the milk added, according to Alan Crozier, professor of plant biochemistry and human nutrition at the University of Glasgow. This is the reason why dark chocolate has been promoted the most in recent years. Furthermore, producers have added fruits to chocolate to give it even more healthy aspects.
Additionally, a recent trend is that the chocolate industry is becoming more focused on very specific market niches. For instance, premium chocolate is immensely popular. Premium chocolate is normally differentiated by putting more emphasis on sourcing and the production process, much like wine . This premium label also tends to go with the pursuit of quality.
Lastly, an upcoming trend is that consumers want the ethical alternative as they are becoming much more aware of the products they buy. Consumers are much more informed through the information on product packaging reading through the list of ingredients and sources as well as checking if the product has approval of environmentally aware organisations. Retailers are, in reaction to this new trend, becoming more ethically aware as well.
One of the opportunities that Day Chocolate has is paying great attention to how much cacao they put into their chocolate. Day Chocolate could, for example, put the cacao per cent on their packaging for consumers who want to know this. Furthermore, they could create an entirely new, healthy product line. Noticing that the product is Fair Trade and healthy, this is likely to be attractive to their current consumer segment: the concerned consumer. This would be the case because the product not only helps the third world countries but also the consumers themselves.
In relation to the market trends in the chocolate industry, another big opportunity for Day Chocolate could be to start producing Fair Trade premium chocolate. They could expand their market by developing many different original, yet premium tastes such as chocolate with exotic flavours or organic chocolate. The more choice there is, the more likely it is to attract more consumers.
Finally, another opportunity for the company is the fact that the Fair Trade market is growing due to the new upcoming of the ethic consumer. This will give Day Chocolate the opportunity to expand not only their range of products, but also to expand to different countries.
However, the growth of the Fair Trade market also brings threats. More and more companies learn that some of their consumers are able and willing to pay more in order to buy fair trade chocolate. The increase in sales leads to more turnover and profit. This in its turn may lead to more competition. Companies that are losing their customers to Fair Trade companies, such as Day Chocolate, might introduce their own Fair Trade line.
Moreover, the recent financial crisis is also a threat. This crisis affects the consumers in their pockets in such a way that buyers will tend to buy the cheaper chocolate as a substitute to the more costly Fair Trade chocolate. As a result this will affect the sales of Fair Trade products negatively.
Lastly, a threat is that chocolate is made from cocoa beans which grow on cacao trees. These trees are very delicate and sensitive. They respond very quickly to a change in climate or surrounding. Their soil must have both water retention properties and good drainage. Additionally, there are different kinds of pests, fungi and diseases which affect the trees. This makes the chocolate industry risky business as you cannot control all of these points completely.