Integrated Business Management
Executive Summary
This case study is based on the legal and commercial position of Choc Deluxe. The USP of this small scale specialist chocolate company was the quality. In the global industry of eighty-billion dollars, Choc Deluxe was a player. An issue emerged concerning to the availability of cocoa, which is the key ingredient in chocolate-making. There was a large order in hands of Choc Deluxe of supplying chocolate bars to a top-end department store for Christmas. However, the issue was that the order cannot be met effectively due to unavailability of Criollo cocoa. In such situation, the executive management of Choc Deluxe decided to use carob as a chocolate substitute for twenty percent of their product range. Customer’s complaints regarding the bad taste of the chocolate flooded into customer service department of Choc Deluxe, soon after Christmas. Poor sales were resulted, since the taste of supplied chocolate was negatively impacted due to the partial replacement of cocoa by carob. There was a correlation between loss of sales and the inclusion of carob. This paper will present an overview of things that are currently happening in the cocoa market and their impact on the production of chocolate products by established companies. Furthermore, it will present an internal process map for the production of the chocolate bars. In the end, it will present a case of how the view of quality of customers and the operations function might differ in respect of the chocolate bars.
Introduction
This case study is based on the legal and commercial position of Choc Deluxe. The USP of this small scale specialist chocolate company was the quality. In the global industry of eighty-billion dollars, Choc Deluxe was a player. An issue emerged concerning to the availability of cocoa, which is the key ingredient in chocolate-making. There was a large order in hands of Choc Deluxe of supplying chocolate bars to a top-end department store for Christmas. However, the issue was that the order cannot be met effectively due to unavailability of Criollo cocoa. In such situation, the executive management of Choc Deluxe decided to use carob as a chocolate substitute for twenty percent of their product range.
Customer’s complaints regarding the bad taste of the chocolate flooded into customer service department of Choc Deluxe, soon after Christmas. Poor sales were resulted, since the taste of supplied chocolate was negatively impacted due to the partial replacement of cocoa by carob. There was a correlation between loss of sales and the inclusion of carob. This paper will present an overview of things that are currently happening in the cocoa market and their impact on the production of chocolate products by established companies. Furthermore, it will present an internal process map for the production of the chocolate bars. In the end, it will present a case of how the view of quality of customers and the operations function might differ in respect of the chocolate bars.
Question 1
Each year, around 3.5 million tonnes of cocoa are produced. However, by year 2020, growth demand of thirty percent is forecasted by the industry due to anticipated economic recovery in the rich North and rising incomes in emerging markets, such as, China and India (Goodyear, 2013). This must be good news for both businesses and farmers. However, in order meet the demand, sufficient supply may not be provided by the industry due to disregard and complacency for the livelihoods of more than 5 million small scale family farmers that grow ninety percent of cocoa of the world.
Many factors have influenced the prices of cocoa, such as, political instability in producing countries, disease and pests and extreme weather. Prices slumped to a twenty-seven year low of around 714 dollars a tonne were witnessed by the oversupply of beans in year 2000. However, in year 2011, the prices rocketed to a thirty-two year high of 3,775 dollars a tonne. Farmers are unable to capture their fair share due to rise in cocoa prices. Depending on the percentage of cocoa content, 3.5 percent to 6.4 percent of the final value of a chocolate bar is received by the growers in West Africa.
In comparison to it, the share of retailers increased from twelve percent to seventeen percent and manufacturers share increased from fifty-six percent to seventy percent. Poverty and low productivity results in farming communities due to low prices paid to farmers (Daviron & Et.al, 2005). Out-dated farming methods are used by farmers. The industry is being abandoned by many cocoa farmers due to increasing prices of food.
The Impact of the Cocoa Market on the Production of Chocolate Products by Established Companies
In West Africa, fifty-one is currently the average age of cocoa farmers, since most of their children are heading for the cities in the hope of finding a better livelihood and are switching to more profitable rubber production (Órla & Ryan, 2011). Across the industry, this had led serious concerns regarding the long-term sustainability of the supply chain, which means, chocolate bars cannot be produced as there are no cocoa farmers. This can lead established companies to use carob as a chocolate substitute, for example, Choc Deluxe decided to use carob as a chocolate substitute for twenty percent of their product range.
Question 2
The Internal Process Map for the Production of the Chocolate Bars by Choc Deluxe
Identification of the Stage at which the ‘Problem’ Occurred
The first stage at which the issue occurred was the unavailability of criollo cocoa to meet the order. It was the main ingredient used in chocolate-making. Carob was used as a chocolate substitute and this decision was implemented by the executive management of Choc Deluxe. Positive taste testing reviews provided by the marketing department through its research with focus groups was considered as a basis by the management. To show the additional use of carob, the description of product packaging was amended in very small letters. The customer service department of Choc Deluxe was flooded by customer complaints, soon after Christmas, regarding the horrible taste of the chocolate.
Receiving of un-original product was the claim made by the store buyer. She threatened the company with all negative publicity and kinds of legal action. Within just a month of product launch, the average sales of the company declined by thirty percent. Poor sales resulted as the taste of the chocolate bars was negatively impacted by the partial replacement of cocoa. There was a correlation between the lost sales and the inclusion of carob. Tests on the chocolate bars revealed that eighty percent of the chocolate bar was carob and only twenty percent of real cacao. Traces of nuts were also found within the chocolate, which was not specified on the chocolate wrapper in the list of ingredients.
Things that must have been done to avoid it
Before using carob as a chocolate substitute, the management should have understood that carob is alkalizing for the human body. Carob is not as flavourful as chocolate as the unsweetened carob power may be naturally sweeter in comparison to cocoa powder (Fadel & Et. al, 2006, pp. 125). Since carob powder is naturally sweeter than cocoa, therefore, less sugar is required in baking with carob. Different plants of carob have different flavours. Furthermore, more in-depth research must have been conducted by the marketing department. The product packaging should have clearly shown the additional use of carob, i.e., in large letters.
The management of the company must have considered the legal possibilities that could have been driven in case of using carob as a chocolate substitute (Julie & Et.al, 2012, p. 157). If there were nuts used within the product then the product packaging should have clearly mentioned it in the ingredient's list of the product.
Question 3
The Concept and Importance of Quality
The totality of characteristics and features of a service or product that bears to satisfy implied or stated needs is referred to as quality. In manufacturing terms, the quality is a state of being free from significant variations, deficiencies, defects or a measure of excellence. Quality is defined as ‘fitness for purpose’ and as the superiority or non-inferiority of something, it has a pragmatic interpretation in manufacturing, engineering and business. Different people may have different perspectives regarding the quality. Quality is a subjective, conditional and perceptual attribute. In a business context, there are five aspects of quality, i.e., quality assurance, quality management, quality control, checking and producing (Ruben Chumpitaz & Paparoidamis, 2007, pp. 836).
In business context, the perception of the degree to which the service or product meets the expectations of the customers is referred to as product quality (Kannan & Et.al, 2005, pp. 153). The central aspect of a product that involves attributes, like, attractability, serviceability, reliability and safety and is determined by the consumer is known as product quality. The business landscape has changed significantly. Quality has become an important perspective to many business leaders. Quality has always been a big issue in almost every part of a business. In a business, failure or success is affected by quality.
The OM’s View of Quality of Chocolate
I have taken the case of Cadbury in order to define how the customer’s view of quality and the operations function may differ in respect of the chocolate bars. A “right first time” culture is maintained by Cadbury that consistently embraces food safety and quality. Audited quality management systems are operated within the organisation that improves processes to deliver on the continuous basis (Robert, 2005, pp. 511). Total quality management is used by the company to monitor the production process. The products, workers and machines, are monitored by supervisors of the company.
The concept of Six Sigma is being used by the company. In order to make the improvements sustainable, sigma helps the company in managing the issues related to change management (Dahya & Et.al, 2007, pp. 535). Issues related to quality of chocolate can result if there are any lapses in the quality control at any of the stages, such as, not getting proper consistency, over roasting, and no proper drying. The archenemies of chocolate are storage, improper packaging, extreme temperatures and water.
The Customer’s View of Quality of Chocolate
On-going discussions are maintained with customers by Cadbury. The brands of the company are made widely available to its customers. In order to meet the needs of customers for high-quality and attractive products, the company works in partnership with them. Because the business of Cadbury operates on a global scale and its products are sold worldwide, the company has over millions of customers. Good-quality chocolate and cheap prices are two needs and wants of customers of Cadbury (Conor, 2009, pp. 64). Good quality chocolate is demanded by customers; else they will not purchase the product. Good quality chocolate is an important want and need for customers. The aims of the company are greatly influenced by its customers due to the quality of chocolate and the pricing of products. These things are required by the customers; therefore, they are part of the aims of the company.
The Other Departments Involved in these Perceptions and Controls
The other departments involved in these perceptions and controls are supply chain management and total quality management, as after the product has been produced, it goes through these departments. Some of the quality management practices that have been maintained by Cadbury are: working with business partners and supply chain, assigning clear management accountability, guaranteeing that consumers and customers come first, pathogen testing system, good manufacturing practices (GMP), and HACCP (Mortimore & Et.al, 2013). Guidelines that outline the aspects of production that will affect the quality of chocolate are known as GMPS.
Rather than finished product inspection, means of prevention are referred to as HACCP. Total quality management is being used by the company currently. The TQM department of the company ensures that they are listening to customers, resolve their complaints and the product is appealing and tastes good to them (Sekumade, 2013, pp. 55). Around forty-thousand suppliers are maintained by Cadbury worldwide. The company responds to suggestions of its suppliers and is in regular dialogue with them. Against a set of standards, like, ethical labour practices and environmental protection, the potential suppliers are evaluated by the company.
Conclusion
Before using carob as a chocolate substitute, the management of Choc Deluxe should have understood that carob is alkalizing for the human body. Carob is not as flavourful as chocolate as the unsweetened carob power may be naturally sweeter in comparison to cocoa powder. Since carob powder is naturally sweeter than cocoa, therefore, less sugar is required in baking with carob. Different plants of carob have different flavours (Honea & Et.al, 2013, pp. 223). Furthermore, more in-depth research must have been conducted by the marketing department. The product packaging should have clearly shown the additional use of carob, i.e., in large letters. The management of the company must have considered the legal possibilities that could have been driven in case of using carob as a chocolate substitute. If there were nuts used within the product then the product packaging should have clearly mentioned it in the ingredient's list of the product.
Recommendations for the Future
Fair trade can be part of a solution for many chocolate companies and Choc Deluxe. Significant amounts of Fair Trade premium funds can be generated through fair trade sales. These fair trade premium funds can then be used by cocoa farmer organisations to invest in their communities, businesses and farms (Emmanuel Ohene, 2007, pp. 290). A significant amount of fair trade was received by fair trade cocoa producer organisations in year 2011. To support farmers and producer organisations in terms of strengthening their business, this money is increasingly being used. For instance by investments in better facilities for crop processing, transport, storage, and collection and by investing in replacement of old cocoa trees to increase productivity. To support improvements in processing and production, more than half of fair trade premium expenditure is being invested in organisational development or business.
Works Cited
Afoakwa, Emmanuel Ohene, Alistair Paterson, and Mark Fowler. "Factors influencing rheological and textural qualities in chocolate–a review." Trends in food science & technology 18.6 (2007): 290-298. Retrieved from: http://www.sciencedirect.com/science/article/pii/S0924224407000489
Caceres, Ruben Chumpitaz, and Nicholas G. Paparoidamis. "Service quality, relationship satisfaction, trust, commitment and business-to-business loyalty." European Journal of Marketing 41.7/8 (2007): 836-867. Retrieved from: http://www.emeraldinsight.com/journals.htm?articleid=1616087&show=abstract
Carroll, Conor. "Defying a Reputational Crisis–Cadbury's Salmonella Scare: Why are Customers Willing to Forgive and Forget&quest." Corporate Reputation Review 12.1 (2009): 64-82. Retrieved from: http://www.palgrave-journals.com/crr/journal/v12/n1/abs/crr200834a.html
Dahya, Jay, and John J. McConnell. "Board composition, corporate performance, and the Cadbury committee recommendation." Journal of Financial and Quantitative Analysis 42.03 (2007): 535-564. Retrieved from: http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=4207896
Daviron, Benoit, and Stefano Ponte. The coffee paradox: Global markets, commodity trade and the elusive promise of development. Zed books, 2005. Retrieved from: http://books.google.com/books?hl=en&lr=&id=mwpAO0J9ojgC&oi=fnd&pg=PR8&dq=The+Overview+of+Current+Situation+of+Cocoa+Market&ots=iDWLJx4UL6&sig=IXnXD6V_nz_xP_Bp932hUkuITL0#v=onepage&q=The%20Overview%20of%20Current%20Situation%20of%20Cocoa%20Market&f=false
Fadel, Hoda HM, et al. "Cocoa substitute: Evaluation of sensory qualities and flavour stability." European Food Research and Technology 223.1 (2006): 125-131. Retrieved from: http://link.springer.com/article/10.1007/s00217-005-0162-3
Fitzgerald, Robert. "Products, firms and consumption: Cadbury and the development of marketing, 1900–1939." Business History 47.4 (2005): 511-531. Retrieved from: http://www.tandfonline.com/doi/abs/10.1080/00076790500132977?journalCode=fbsh20#.U1Gla6Igzcs
Goodyear, D. “The future of chocolate: why cocoa production is at risk.” The Guardian (2013). Retrieved from: http://www.theguardian.com/sustainable-business/fairtrade-partner-zone/chocolate-cocoa-production-risk
Honea, Heather, and Sharon Horsky. "The power of plain: Intensifying product experience with neutral aesthetic context." Marketing Letters 23.1 (2012): 223-235. Retrieved from: http://link.springer.com/article/10.1007/s11002-011-9149-y#page-1
Kannan, Vijay R., and Keah Choon Tan. "Just in time, total quality management, and supply chain management: understanding their linkages and impact on business performance." Omega 33.2 (2005): 153-162. Retrieved from: http://www.sciencedirect.com/science/article/pii/S030504830400060X
Laughter, Julie, B. Douglas Brown, and Ramaswamy C. Anantheswaran. "Manufacturing Chocolate for Entrepreneurial Endeavors." Specialty Foods: Processing Technology, Quality, and Safety (2012): 157. Retrieved from: http://books.google.com/books?hl=en&lr=&id=ImXyBhurm60C&oi=fnd&pg=PA157&dq=Guidelines+for+Chocolate+Companies&ots=VMpeQy6ApO&sig=P-S2SxALgBe75AAE68fQV4Gyq4Q#v=onepage&q=Guidelines%20for%20Chocolate%20Companies&f=false
Mortimore, Sara, and Carol Wallace. HACCP: A practical approach. Springer, 2013. Retrieved from: http://books.google.com/books?hl=en&lr=&id=mWpDAAAAQBAJ&oi=fnd&pg=PR3&dq=GMP+and+HACCP+by+Cadbury+Company&ots=iLQq-164O8&sig=Qmq5HJuY8EjB9F9Uyqs6LD83vyY#v=onepage&q&f=false
Órla, R., and Ó. Ryan. Chocolate nations: Living and dying for cocoa in West Africa. Zed books, 2011. Retrieved from: http://www.cabdirect.org/abstracts/20113255341.html;jsessionid=718C7F6BF4C34DE2D1172C7523BBF39C
Sekumade, A. B. "The Place of Total Quality Management (Tqm) in Agribusiness: A Case Study of Cadbury Nigeria Plc." Food Science and Quality Management 19 (2013): 55-62. Retrieved from: http://iiste.org/Journals/index.php/FSQM/article/view/7495
