Assess pricing choices through differentiation, PED, competition, brand strength, product life cycle, costs, profit needs and the intended market position.
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 ($USbn) |
|---|---|
| Mars Wrigley Confectionery (USA) | 18.00 |
| Ferrero Group (Italy) | 12.40 |
| Mondelēz International (USA) | 11.80 |
| Meiji Co Ltd (Japan) | 9.70 |
| Hershey Co (USA) | 7.80 |
Extract C Working at Ferrero The Ferrero Group, a family run business, started in 1946 and today is one of the largest chocolate companies in the world. Employees are referred to as ‘family’ . All employees, from the day they start, are expected to involve themselves in all aspects of the business. Employees receive a competitive wage. Ferrero provides employees with extensive training programmes including on-the-job training and management support. Ferrero shows its employees respect, helps them grow in their careers, asks them for suggestions and welcomes their feedback.
Extract B The top five global chocolate manufacturers (2018)
| Company | Revenue 2018 ($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 |
Analyse two factors that are likely to determine the pricing strategy used by chocolate manufacturers.
Knowledge 2, Application 2, Analysis 2
Knowledge
Up to 2 marks for defining pricing strategy, e.g.
- a method used by a business when deciding (1) the price at which a
product is sold (1).
OR
For giving two factors that may determine the pricing strategy, e.g.
Application
Up to 2 marks for answers contextualised to the chocolate market, e.g.
- there is a high level of competition in the global chocolate market
from manufacturers such as Mars and Ferrero (1)
- cocoa is the key ingredient in the manufacture of chocolate
products, and due to uncertainty in the market the cost of cocoa is
likely to increase (1).
Analysis
Up to 2 marks for reasons / causes / consequences for the chocolate
market, e.g.
- this may lead manufacturers to use a competitive pricing strategy
due to the large number of substitutes (1)
- this may lead the chocolate manufacturers to use a cost-plus
strategy due to rising input costs (1).
(6)