Overview of Price, Demand and Supply Pattern of Cadbury Products.

literature review

Go online and find article(s) about the supply or demand of a product and how the S/D situation is influencing price, the overall economy, people’s lives, the environment, government policies, war and peace, just to name a few factors that are connected to the dynamics of supply and demand.

Describe the product in detail – who are the suppliers, who are the customers. What influences the supply decision, what influences the buy decision. What has happened in the past to the product and what is happening to it now and in the near future (short run). What might happen to the product in the future (long run)?

Cadbury is a British company and a leading producer and distributor of confectionary products in the world which controls about 70% share of the market all over the world. According to Wikipedia, Cadbury controls over 30% of dairy milk and chocolate. The demand of dairy milk and chocolate over three decades now has been on the increase especially among the teenagers. For instance, Cadbury dairy milk demand increased by 3.8% between 2011 to 2013.

The company produce and distribute mainly different kinds of confectionery products such as chocolates, snacks, beverages, candy and gums. Although, dairy milk is one of the renowned and best-seller chocolate brands among the other Cadbury products.

Research also found out that an estimated number for chocolate are sold in every year consists of 120 billion and about 60 million of these are manufactured by Cadbury.  Cadbury then becomes the second largest confectionery company in the world. The image below show the pictorial illustration of Cadbury and Nestle confectionary market share.

Factors Affecting Demand of Cadbury Confectionary Products

Basically there are quite number of factors that affect the demand of Cadbury products that is peculiar to dairy milk and chocolate. The factors include:

  1. Brand Image of the company plays a significant role in the demand of Cadbury products between 2011 and 2013 according to Wikipedia.
  2. The products is also affected by the age groups and population growth. Although, the products is not limited to any age group but is mostly common among teenagers.
  3. Cadbury products is a normal product as such is influenced by the income of the consumers. As the income of the consumers is increasing the demand for Cadbury products is increasing. This is evidenced from the slow turn over between 2008 and 2009.
  4. Although, Cadbury is among the leading company of confectionary products but still faces kin completion from Nestle Kit-Kat, Ferrero Roche, Hershey, Mars among others.
  5. Price of Cadbury products, price of complementary products affect the demand of Cadbury. The products has fairly inelastic demand curve which makes the company operate like a monopoly in the market.

Factors Affecting Production and Supply of Cadbury Confectionary Products

The determinants of the supply of Cadbury products is not different from the determinants of conventional products. The specific determinant of Cadbury products include:

  • Cadbury adopt policy of cost minimization in the longrun because of its large scale production.
  • The huge market controlled by Cadbury determined their supply. They decides when to produce more and less based on the prevailing price.
  • Dairy milk and chocolate is a competitive market largely due to its profit potentials. The available competition often determines the number of product Cadbury will supply at each point.
  • The market strategy in terms of potential market demand often influenced the supply of the products. The company might be adopting strategy that grow fast or stay for long.
  • The Cadbury products supply is also influenced by consumer reaction to price changes. Cadbury has elastic supply for the products except for chocolate that has inelastic supply (Budzid, 2009).

Dynamic Analysis of Demand and Supply of Cadbury Products

Cadbury product demand and supply as analysed above has impacted on various sphere of the global economy in relation to their pricing policy, consumer income policy strategy, and social cost in relation to tax policies among others. Cadbury flexible pricing entails producing products that meet all consumer needs regardless of their income. Cadbury operates in a competitive confectionary industry as such adopt low pricing policies.

Cadbury products has provided employment to over 6 million individuals either directly or through sales of the product and has contributed to the global economy at large.

Their product is of high quality and has won the loyalty of many consumers across the globe. The global increase in Cadbury market share increases government revenue in form of tax revenue, import duties to mention but a few. Cadbury sales strategy is designed such that it does not go against trade policies of most government – embarking on some social program especially where the majority of the industry is located.

Cadbury Products Short run and Long run Demand analysis.

In the short run Cadbury products has a very high demand from all its product especially dairy milk and chocolate. However, with high rise in the price of Cocoa, if Cadbury wants to maintain their position in the market, they need to capitalize in economies of scale.

They need to invent better, bigger and faster machinery. It means that they could cheaply produce a large quantity of units and yet lowering their costs. Diseconomies of scale may occur if Cadbury expands their business too quickly. Cadbury need effective monitoring of all their plants and subsidiaries to maintain their economies of scale. So if this is maintained Cadbury product will remain in high demand in both short and long run.

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References

Bized (2009) Cadbury. Available from: http://www.bized.co.uk/dataserv/chron/news/3413.htm

http://economics-on-cadbury.blogspot.com.ng/2013/1/0economics-analysis-of-cadubury.

 

 

 

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