Practise Edexcel Business questions on market segmentation, applying customer characteristics and target groups to product and marketing decisions.
Sources for use with Extract A The global chocolate market Chocolate is a multi-billion-dollar market and is expected to reach high levels of growth within the next few years. Rising incomes in many countries and the widespread availability of chocolate are leading to increased demand. However, uncertainty in the supply of cocoa, which is the main ingredient in chocolate, is likely to raise the cost of producing chocolate. This may be a major challenge for chocolate retailers. There are suggestions in the media that there are health benefits from consuming chocolate, particularly dark chocolate that contains a larger proportion of cocoa. Analysts believe that as well as increased demand for dark chocolate, other areas of growth will be:
· festive chocolate
· seasonal chocolate
· organic chocolate
· fair-trade chocolate
The global chocolate market is segmented by type and sale frequency. Based on chocolate type, the market is classified as milk chocolate, dark chocolate, and white chocolate. The milk chocolate segment remains the largest selling chocolate. Based on sale frequency, the market is categorised as daily chocolate, premium chocolate and seasonal chocolate.
Extract B The top five global chocolate manufacturers (2018)
| Company | Revenue 2018 ($USbn) |
|---|---|
| Mars Wrigley Confectionery (USA) | 18.00 |
| Ferrero Group (Italy) | 12.40 |
| Mondelēz International (USA) | 11.80 |
| Meiji Co Ltd (Japan) | 9.70 |
| Hershey Co (USA) | 7.80 |
Extract C Working at Ferrero The Ferrero Group, a family run business, started in 1946 and today is one of the largest chocolate companies in the world. Employees are referred to as ‘family’ . All employees, from the day they start, are expected to involve themselves in all aspects of the business. Employees receive a competitive wage. Ferrero provides employees with extensive training programmes including on-the-job training and management support. Ferrero shows its employees respect, helps them grow in their careers, asks them for suggestions and welcomes their feedback.
Assess the advantages of market segmentation to a business in the chocolate market.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation – indicative content
• Segmentation is dividing the market into groups of people with similar
attributes or common characteristics.
• The global chocolate market is segmented in a number of ways such as type of chocolate, sale frequency, organic and seasonal chocolates.
• Focusing on specific market segments allows a company such as
Ferrero to analyse segments of the markets and tailor products to
meet the particular needs of those customers.
• Market segmentation helps to direct advertising and promotion to
specific groups of customers, e.g. those looking for health benefits,
and therefore help to make marketing more effective.
• Market segmentation can help chocolate suppliers to identify
underserved customers, such as those seeking organic and fair-trade
chocolate, which provide the opportunity to increase sales.
• It helps a company to focus on the most profitable and productive
segments of the market to increase revenue and profitability.
• However, segmentation increases costs. When a company attempts to
serve different groups of customers the cost of production rises as
well as research, promotional and distribution costs.
• By focusing on providing niche chocolates there is a danger that this
specialisation could lead to problems if consumers change their
purchasing habits significantly.
• The market segments identified may be too small, e.g. organic
chocolate, and may not generate sufficient sales to be viable/profitable
for the business.
| Level | Mark | Descriptor |
|---|---|---|
| 0 | A completely inaccurate response. | |
| Level 1 | 1–2 | Isolated elements of knowledge and understanding – recall based. Weak or no relevant application to business examples. Generic assertions may be presented. |
| Level 2 | 3–4 | Elements of knowledge and understanding, which are applied to the business example. Chains of reasoning are presented, but may be assertions or incomplete. A generic or superficial assessment is presented. |
| Level 3 | 5–7 | Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s). An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of competing arguments. |
| Level 4 | 8–10 | Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. A coherent and logical chain of reasoning, showing cause(s) and/or effect(s). Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information and shows an awareness of competing arguments/factors, leading to a supported judgement. |