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Level 3 Business Unit 1 - Learning Aim C (P4, P5, M3, D2)
- Module
- Unit 1 - Exploring Business
- Institution
- PEARSON (PEARSON)
This document includes P4, P5, M3 and D2 for learning aim C of Level 3 Business.
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Coursework – Unit 1, Learning Aim C: P4, P5, M3 and D2P4 and P5:
For P4 & P5, I have decided to choose Mars Inc as my business to analyse and
overall examine the environment in which Mars operates within. Firstly, I will
conduct a SWOT analysis which includes Strengths, Weaknesses, Opportunities
and Threats. This type of analysis is usually used to determine and evaluate a
company’s competitive position as well as produce a strategic plan for a
business to follow. SWOT analyses are crucial as they help to assess the
internal factors (strengths and weaknesses) and external factors (opportunities
and threats) and in what ways they affect the business. This can be utilised to
acknowledge room for improvement or appreciate what Mars, or any business,
does well.
SWOT Analysis: Mars, Incorporated
1. Strengths
One of the biggest strengths of Mars Inc is their financial position and their
overall ability to make profit as the total revenue of Mars increases yearly. For
example, in 2012 their revenue was said to be $33 billion and eleven years
later, in 2023, the revenue had increased to $47 billion which is nearly a 50%
increase. The financial success of Mars results in them being considered the
fourth largest privately held company in the United States according to Forbes.
To put this into perspective, the revenue of Mars is ahead of Coca Cola who
are the biggest beverage company in the world, ahead of Pepsi. Additionally,
Mars has a revenue growth far ahead of other global companies such as Nestle
or Unilever which evidently shows that Mars is extraordinarily strong
financially.
Secondly, Mars Inc is an international brand and is well acknowledged globally.
It can be argued that most of the world population is aware of Mars’ products
in at least some capacity. In fact, Mars has a significant international presence
in 74 countries with some of its biggest successes in major countries such as
the USA, UK, and France. In 2022, M&Ms was consumed by 4.1 million people
and Twix was consumed by approximately 3.3 million people within France
which evidently presents the successful operation of Mars Inc in France.
Additionally, in 2019, Mars Inc was recorded as having 26.7% market share in
,the UK chocolate confectionery market, only coming behind Mondelez who
had a 34.4% market share.
Moreover, another big strength of Mars Inc is their ability to consistently
manufacture high quality products that satisfy the consumers. As an example,
Mars came 2nd in the NPS ranking among its competitors, only behind Hershey
Company. The NPS metric is used to record the satisfaction of the customers
when they consume the company’s products and is usually based on how likely
the customers are to recommend their products. This shows that the quality of
Mars Inc is one of the best in the confectionery market. In the product quality
score, Mars Inc has scored 4.1/5 which puts it 2nd among its competitors, yet
again only behind Hershey.
2. Weaknesses
A major weakness of the Mars Inc company is their involvement in various
controversies throughout the years of their operations, which can heavily
impact on the relationship between Mars and the public. For example, Mars
Inc has been accused of relying on child labour in the harvest of cocoa beans
used for its famous products such as M&Ms and Snickers. The investigation has
been carried out by CBS News and their findings concluded that children were
working at every farm in Ghana that they have visited. Mars has responded
saying they condemn every form of child labour; however, it does not change
that such findings and publications can seriously harm Mars as a company and
influence their successes. After the controversy has reached the public, a
petition has been made against the company which crossed 20,000 signatures,
showing how one controversy can change the public’s opinion on Mars.
3. Opportunities
Mars, Inc would greatly benefit from the growth of the confectionery market
which they are a part of, as it could expand their operations to more places
and more people. Mars is the biggest confectionery brand in the world, and, in
fact, they have generated sales of around $22 billion in 2023. The ever-growing
confectionery market lures more customers in and, since Mars is the biggest
brand of such kind, it is more likely that they will purchase products of Mars
rather than other companies, which in result would increase their profits.
According to Statista, the confectionery market is expected to grow by 5.78%
annually between 2024 and 2028 and the total revenue in the confectionery
market amounts to $1.19 trillion in 2024. These are exceptional numbers and
,an opportunity for Mars to take the incentive and make use of this growth, as
it will surely create positive results for Mars.
Similarly, to the confectionery market, the pet care industry has also seen
significant growth over the previous few years. Since 2019, the number of pets
in US households has increased by a staggering 5 million according to Morgan
Stanley Research and, in addition, 4% more households in the USA now include
pets. Furthermore, Morgan Stanley predicts that the pet care market will
experience an 8% compound annual growth by 2030, which is one of the
largest growths in any retail segment. In 2022, Mars has generated a
substantial revenue of $19.5 billion for its pet care products, whilst also sharing
17% of the total pet care market share, according to Nielsen. The increased
growth of the market is likely due to the surge of pets around the world, as
more people are required to purchase products for their pets. Mars itself has
over 50 brands dedicated to providing the best pet products in the world,
simultaneously ensuring that their products appeal to as many pets as
possible. This strategy can prove to be remarkably effective, and it is no
surprise that Mars is known as the best pet care company to many outlets.
4. Threats
Naturally, an immense threat to Mars is the competition coming from other
similar businesses, whether those specialising in confectionery or pet care.
Either way, the presence of rivalry is inevitable, and, in any form, it has the
potential to negatively affect Mars. In 2021, the confectionery market share in
the United States has mainly been dominated by Hershey (23.6%) and Mars
(22.9%). For comparison, Ferrero, which came 3rd, only had 9% of the
confectionery market share which presents us with a big gap between the 2
companies and the rest. In the UK, Mars also appears to be dominating the
confectionery market share alongside with Mondelez (or Cadbury) sharing
26.7% and 34.4% of the market, respectively. It is evident, therefore, that Mars
is likely not to face any substantial threats, having a relatively equal market
share with two of its main competitors in the USA and UK. On the contrary,
Cadbury, a chocolate brand owned by Mondelez, is immensely popular within
the UK as, in fact, 79% of chocolate eaters in the UK consume Cadbury.
According to Statista, Mars Inc products have been consumed by an estimated
10.7 million people in Great Britain (2020) and, when compared to the 95% of
the UK population that consumes chocolate, the result is that 17% of chocolate
eaters in the United Kingdom eat the products of Mars. Visibly, Cadbury
,products are much more popular than that of Mars which can pose as a
challenge to Mars if they intend to increase their operation within the UK.
There exist factors, such as competition, that are completely in the hands of
Mars and its rivals and can therefore be utilised by Mars to become the largest
brand in the world for both the confectionery and the pet care parts of the
retail industry. Despite that, certain things are inevitably out of control, such as
inflation, which can be a catastrophic threat for Mars. Inflation occurs when
the prices of goods and services increase over a certain period, causing the
purchasing power of customers to decrease. In short, this consequently results
in money not being able to buy as much as it could in the past. Inflation affects
the world as a whole so if prices of products increase, employees may demand
higher wages which means that the total expenditure of Mars will increase
heavily, as suppliers would also increase their prices. A relatively recent
instance of inflation occurring within Mars happened in September 2023 when
Mars decreased the size of the Galaxy bar from 110g to 100g, whilst
simultaneously increasing the price to £1.25. According to Mars, this change
was necessary due to higher costs of raw materials. This evidently shows how
inflation can impact the business as well as the customers. Inflation showed its
heavy effects during the COVID-19 ‘pandemic’, as the demand for products
drastically outweighed the supply, causing shortages and the increase in price
of many products.
A PESTLE analysis focuses on the external environment and how it may affect a
company, emphasising on six factors which are crucial to acknowledge the
position of businesses. PESTLE stands for Political, Economic, Social,
Technology, Legal and Environmental and below, the influence of these factors
is evaluated for Mars Inc.
PESTLE Analysis: Mars, Incorporated
1. Political
Political stability is critical to ensure that Mars can be successful across the
globe in the 80 countries that they function in, as any instability may result in
decreased profits or performance overtime. Over recent times, continuous
political instability had resulted in the re-birth of large-scale conflicts, such as
those between Russia & Ukraine and Israel & Palestine. Today, it has become a
struggle for businesses to stay politically neutral and any action (or inaction)
,may deliver an outcome of heavy consequences for Mars. In the beginning of
the current conflict between Russia and Ukraine (albeit tensions have been
high since 2014) in February 2022, Mars have refused to withdraw their
products from Russia stating that ‘Mars has operated in Russia for over 30
years’ and they will support their ‘almost 6000 employees’ in Russia, as their
role is essential to the Russian people. In 2023, Mars Inc has been named an
international sponsor of the war by Ukraine’s National Agency for the
Prevention for Corruption (NAZK) highlighting that ‘Mars helps the Russian
economy and their ability to wage the war against Ukraine’. Such reports can
influence the public to stop purchasing the products of Mars, potentially
resulting in a worsened performance. Nevertheless, it appears that these
effects have not been felt by Mars in any form and their financial results have
improved. For instance, their overall revenue had increased from $40B in 2021
to $45B in 2022, the year in which the current conflict broke out. Even though
Mars aimed to minimise its activities within Russia, they recorded a 14%
increase in sales in the Russian market and, additionally, their profit increased
by almost 60%, evidently displaying that the political instability had no drastic
effects on Mars and seemingly they have benefitted from it.
Contrastingly, difficulties may arise amid the challenges on food and drink
manufacturers to reduce sugar levels, put forward by the Public Health, which
may include taxing sugary products. In April 2018, the Soft Drinks Industry Levy
(commonly recognised as a sugar tax) was applied to UK produced and
imported drinks containing added sugar, with 18p for 5-8g of sugar and 24p for
8g+ of sugar per 100ml. On one hand, said tax is only relevant for drinks – an
area in which Mars does not specialise the most and in which they do not hold
a significant market share, so the tax may have little or no effect on them. On
the other hand, however, future taxes may affect sugary foods which will
directly impact Mars as they are the biggest confectionery manufacturer in the
world. Such tax will force Mars to increase prices of their products to recover
the losses that will come from paying the tax, in turn decreasing the number of
customers as they look for alternatives. Moreover, it will be crucial for Mars to
comply with any government acts and thoroughly follow them, as any non-
compliance will result in legal or reputational risks such as penalties, fines, or
legal action.
2. Economic
,The success of Mars Inc is highly dependent on a healthy economy and any
troubled times will directly impact the performance of their company. In
February 2024, it was announced that the UK has entered a recession which, in
short, means that the growth of the economy has significantly slowed down.
Often, this will cause people to reduce their spending and become more
careful with their money which will result in a decreased demand for products.
This can prove to have drastic effects on Mars as they will be required to
pursue initiatives with the goal of convincing people to continue buying their
products whilst the country is in recession. This will likely force Mars to
decrease prices to an affordable amount for the customers to be able to
purchase their products whilst not being heavily affected by the recession.
Also, importantly, decreasing prices may help to establish a competitive
advantage as people will purchase goods from the cheapest businesses which
means that Mars can possibly gain additional customers and when the
economy starts growing again, they could increase the prices knowing that
their customer base is loyal.
As people across the world become more health conscious and begin looking
towards healthier alternatives, the demand for ‘unhealthy’ products will
significantly reduce, which can directly impact Mars as they specialise in
manufacturing chocolate-based goods. This decreased demand may affect
Mars in many ways, most crucially through the loss of profits as less people will
be willing to purchase their products overtime. Additionally, Mars will be
required to negotiate new deals with their suppliers to address and tackle the
ever-changing demand for chocolate products, as acquiring too many materials
when the demand is lowered will also degrade their profits as well as create
excess stock, which Mars may be unable to sell if not enough people are keen
to buy their products. This shows how people’s views influence the economic
situation that Mars can find themselves in, displaying the importance of
meeting the wants of the customers for the business to flourish.
3. Social
Many products that Mars offers are aimed at people and animals, both of
whom make up a substantial part of society. Therefore, it is understood that
Mars will be impacted through a plethora of social factors, whether positively
or negatively. For example, in recent years there has been a shift in the way
people view sugary products, with much more of humanity now aiming to
avoid consuming as much sugar as they would do previously. According to
,Statista, there has been a decline in sugar consumption in the UK from 1.92KG
in 2018 to 1.76KG in 2024 (per capita) and, as far as one can tell, this number
will steadily decrease over the years to come. It is well acknowledged across
the world that chocolate foods contain incredibly excessive amounts of sugar
alongside with various additives, all of which can contribute to the
deterioration of a person’s health overtime. Mars is the largest confectionery
brand in the world and a vast percentage of their portfolio consists of
chocolate-based products with plenty of sugar. Consequently, it is within the
realm of possibilities that several challenges will arise for Mars, given that the
‘movement’ against sugar consumption expands to a remarkable level within
society, causing the population to purchase sugar-free substitutes or products
with reduced amounts of sugar. As a result, the presence of Mars in the
confectionery market may be weakened as other companies (including their
competitors) thrive due to meeting the expectations of customers through
reduced sugar levels. On the contrary, Mars could utilise such a problem and
transform it into a competitive advantage through exploring options to cut the
levels of sugar in their products to appeal to the people. In fact, Mars have
announced in 2018 that their classic Mars bar will be presented in a ‘More
Protein’ version, offering sugar reduction of 40%, showing that Mars strives to
achieve a smaller sugar consumption over the world whilst simultaneously
supporting healthy eating. It is crucial for Mars to recognise how the needs and
wants of its customers alter over short and long periods of time for the
purpose of adjusting their offers to appeal to the majority of customers, which
they have done perfectly with the More Protein bars as that change could have
possibly retained those who intent on leaving sugary foods behind.
Individuals who purchase chocolate products often do it impulsively with no
rational thinking, meaning that such purchases are completed without any
prior planning. This is mainly because consuming chocolate leads to increased
levels of enkephalin which convince the brain for the need to eat more
chocolate. Moreover, chocolate contains a stimulating chemical known as
theobromine that combines itself with caffeine, resulting in an improved mood
and an aphrodisiac boost. Evidently, chocolate is more or less consumed
largely thanks to the brain rather than the person and companies, like Mars,
can use this to their advantage to ‘force’ people to purchase their chocolate
products. For example, impulse purchases can be solidified through diverging
people’s attention to certain products, particularly through placing them at the
front or continuously offering discounts to increase the attraction people
,possess towards those products. When done effectively, the sales Mars makes
(and therefore the profits) will be immensely increased, highly contributing to
the long-term success. Before the COVID pandemic, 70% of all Mars products
were purchased on impulse which means that the majority of customers did
not anticipate that they will purchase them. Mars can benefit further from
impulse purchases through placing their products between necessities such as
bread, eggs, or milk in various stores, as customers will be required to roam
through Mars’s chocolate products before buying their desired products. Quite
likely, the customers will be tricked into buying more products along the way
which may include Mars products, and this will result in more profits and more
products sold.
4. Technological
As technology expands faster and further, Mars will inevitably utilise it to their
advantage and attempt to pursue an expanded growth for all their operations
across the world. For example, Mars could increase and improve their
Research & Development unit to establish a competitive advantage as well as
expand the company. Through effectively upgrading R&D, Mars can position
themselves as the pioneers of the confectionery market given, they develop
more innovative products. This will help Mars to gain a competitive advantage
and become the ‘go to’ brand for many new people, adding to their current
position of being the largest company of their kind. In fact, in early 2024 Mars
has opened its new $42 million global R&D hub in Chicago spanning over
44,000 square feet, making it the largest of its global snacking R&D sites.
Additionally, the whole facility will be powered by renewable electricity, which
may help to avoid any social or environmental issues that may have otherwise
risen. New oven technology and sustainability methods will be carefully tested
inside the facility with the aim of replacing non-sustainable processes in Mars
facilities. This clearly shows that Mars utilises modern technology and methods
in order to pursue success, which will result in an eventual increase in the
growth of Mars.
5. Legal
Governments across the world regularly introduce and update laws and other
various legal factors which are extremely important for businesses to comply
with. Failure to obey with regulations could negatively impact a business
through fines, imprisonment, or a loss of customers. This said, it is crucial that
Mars stays on top of all legal requirements and ensures that it does not fall
,behind, to avoid legal action. As important as complying with regulations is,
meeting certain legal requirements may damage Mars in one way or another.
Mars heavily relies on cocoa imports from African countries such as Côte
d’Ivoire for most of its products. Cocoa production has been in a continuous
decline and, as a result, prices have significantly risen which has already
impacted Mars. To add on to this, new EU measures will start from December
2024 aimed to stop deforestation which will undoubtedly threaten chocolate
companies such as Mars, as their cocoa supply will further decrease. Mars will
be required to prove that every cocoa bean they import to the EU did not
contribute to deforestation elsewhere which will be a costly mandate to an
industry already suffering through the declining production and record prices.
This is a clear example of how meeting legal requirements can be harmful for a
company and put forward negative effects.
6. Environmental
It has become more important than ever for society to show an increased care
for the environment around us with the goal of preserving the world and
preventing detrimental outcomes. Companies, such as Mars, are heavily
expected to lead the ‘movement’ to contribute good for the world, mainly
since they have massive influence. As such, there has been a growing trend
towards the use of eco-friendly products that do not damage the environment
and Mars could utilise it as an opportunity to acquire the trust of stakeholders,
including day-to-day customers who likely care about the world the most. This
can be seen as a competitive advantage that Mars may attain, given they listen
and give in to the needs and wants of their customers. Through realising this,
Mars can advance and appeal to its customer base which will, in result, lead to
the growth of the company. This clearly shows how environmental changes
around the world can positively benefit Mars. On the other hand, the
environment is enduring increasingly more damage day by day which creates a
possibility that Mars will experience troubles within their company. As an
example, concerns have risen within society surrounding climate change and
its dangers and, whether valid or not, such worries will still form a dangerous
situation for Mars. If they fail to address any environmental issues and act
upon them, Mars may begin to lose the support of its customers. Additionally,
changes in climatic patterns might directly impact the quantity of cocoa
production, for which Mars severely relies upon for a lot of their products. This
evidently presents how environmental factors have the potential to
destructively impact Mars.
, Porter’s Five Forces is a model used to analyse the competitive environment of
a business, aiming to determine the shape of the industry that a given business
is located within. The model comprises of five factors which are:
- Threat of existing rivals (competition)
- Threat of new entrants
- Threat of substitutes
- Bargaining power of suppliers
- Bargaining power of customers
All factors are analysed to provide information on various aspects of the
industry, and below I have written a Porter’s Five Forces analysis for Mars and
the confectionery industry.
Porter’s Five Forces Analysis: Mars, Incorporated
1. Threat of existing rivals (competition between established businesses) -
HIGH
The rivalry in the confectionery industry between existing businesses is
exceedingly high and it is difficult to maintain, or achieve, the spot at the top of
the industry. In the UK, Mars and Mondelez hold 26.7% and 34.4% of the
confectionery market share respectively, which demonstrates that competition
is very intense making it difficult to stand out as the true and lone leader. As a
result, Mars must continuously explore possibilities that can contribute to
pushing itself away from Mondelez and become the market leader. For
example, Mars may be required to invest towards innovative products and
effective advertising so that they outline themselves as different from its
competitors which may win brand loyalty – this is crucial if Mars wants to
retain customers that only use them for confectionery goods, and achieving
this will result in a major competitive advantage. In a survey carried out by
Confectionery News, it was concluded that 87% of 16-24-year-olds have or
might switch their chocolate consumption from brand to brand, making it even
more important to consider a unique selling point for the purpose of ensuring
individual growth through retaining a loyal customer base.
2. Threat of new entrants – LOW
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