COURSE OF ACTION

The group had formulated three possible ways to resolve the issue through the
viewpoint of the company. The assumption across the three alternatives is that (1) the
company values corporate social responsibility, (2) the company aims to help in resolving
the issue, and (3) the company plans to promote awareness regarding the issue, and (4) the
company intends to implement programs and campaigns to resolve the issue if resources
are available.
Alternative 1 – The company will buy inputs from FLO-certified cocoa
producers and compete in the niche market (organic Fair Trade chocolates) by
charging high prices.
Advantages:
1. Profits will be significantly high.
Based on the fact laid down in the case study, companies in this niche market will
attract “consumers who are socially but not particularly price conscious” as suggested by
some critics.
2. The company will be in support of Fair Trade.
Buying inputs from non-FLO-certified producers is like turning a blind eye to the
main issue in the chocolate industry (unfair compensation for the farmers which leads to
child labor). Hence, it is better to be in support of Fair Trade because it promotes the
lives of the chocolate farmers especially the child laborers.
3. There will be little competition.
Based on the economic landscape nowadays, Fair Trade chocolates are
positioned close to the price range of luxury chocolates due to its “Fair Trade-certified”
labelling. This is why many believe that Fair Trade chocolates occupy a niche market.
Disadvantages:
1. The company may be antagonized in the market.
Some critics already label companies in this niche market as “taking advantage”
or capitalizing on the gullibility of “consumers who are socially but not particularly price
conscious.” It would be expected that the company will also be viewed the same way if it
chooses this alternative.
2. The future of a niche market is not predictable.
Mourdoukoutas (2011) explained that there are instances that a niche market
just cannot simply turn into a mass market or even completely fail in the long run. It all
depends on how merchandisers decide to commercialize the goods.
 Alternative 2 – The company will buy inputs from FLO-certified cocoa
producers and introduce a more “practically and socially responsible” alternative by
charging lower prices for the same product as Alternative 1.
Advantages:
1. The company will be in greater support of Fair Trade.
The price comparison used in the case study was 3.49$ and 2.49$ which
similarly entitles farmers 0.03$. If a given consumer intends to buy Fair Trade chocolates
worth 35.00$, the consumer would be able to buy four extra pieces if he chose to buy
from the latter (i.e., 2.49$), thus, it entitles farmers an extra 40% revenue from FLO.
2. Profits will be higher than Alternative 1.
Although the selling price is lower compared to Alternative 1, the total sales figure
is expected to grow since consumers are naturally drawn to lower prices especially since
the products are identical.
3. Attract players in the industry to sustainably support the Fair Trade movement
Fair Trade competitors would intuitively lower their prices as well since the
performance of the company threatens their sales. General chocolate competitors would
also eventually join the Fair Trade movement when consumers start to prefer Fair Trade
chocolates (owing to its practical and social component) than chocolates which are not.
Disadvantages:
1. Competition becomes more significant.
Bearing the words Fair Trade in itself makes the company a compete in the
foregoing niche market, but the lowered prices may become helpful in establishing a
competitive advantage against Fair Trade competitors. On the other hand, the lowered
selling price also positions the company a price range closer to the non-FLO-certified
chocolate products.
2. There are several uncertain events that may arise.
This alternative technically makes the company a trailblazer where uncertainties
may ruin even the grandest designs.
 Alternative 3 – The company will produce its own cocoa and compete in the
general market or the entire chocolate industry.
Advantages:
1. The company will be seen as a socially-responsible entity.
The company will establish good labor standards in its own production of cocoa.
It can publicize this labor standards to promote awareness on the ongoing issue in the
chocolate industry and advertise its own to be against unfair compensation and child
labor.
2. The company may be patronized more than chocolate companies who bluntly
disregard the issue.
This may help the company survive in the market by balancing out the positive
effect from such patronization and the negative effect of having a higher price for
virtually the same product.
Disadvantages:
1. Competition would be tough.
Since the company positioned itself inside the general market, it is likely that it
would compete with popular brands for some market share. The problem is that these
popular brands already established a strong foothold in the market.
2. Cost of production would become higher.
As discussed in earlier sections, the production of cocoa is a labor-intensive
process from cultivation until finishing. Since the company will uphold high labor
standards (fair compensation and strictly no child labor), the labor component of the
product’s cost will considerably increase.
3. The price of the product will likewise become higher.
The only way to compensate for a higher cost without affecting profit or income is
to increase the selling price as well.
RECOMMENDATION
Upon reviewing the pros and cons of the three alternatives, the group members have
unanimously selected the second alternative as the most optimal. This is based on the
following reasons:
 Price – The second alternative offers the lowest price. As explained in the second
alternative’s advantages, consumers would be able to purchase additional goods
which equates to additional revenue or assistance for chocolate farms covered by
FLO.
 Profits – The second alternative proves to be the most profitable if consumers
prefer lower prices for an identical product. Profits can either be declared as
dividends or reinvested to the company. Under the assumptions enumerated in
the preceding section, the company will reinvest such higher profits as resources
to fund more programs and campaigns to help resolve the issue (such as
donations, health care programs, educational campaigns, and others for the
victims of unfair compensation and child laborers).
 Resolving the Issue – The second alternative directly resolves the issue because
it strongly supports FLO without tarnishing any ethical values. The first alternative
is a greedier approach since it capitalizes on the gullibility of some consumers.
On the other hand, the third alternative only helps resolving the issue through its
programs and campaigns which is also already present in the other two.
 Sustainable and Socially-Responsible Operation – Although this is primarily
based on speculations, the cumulative risk of pursuing the second alternative is
worth the cost if the final reward or benefit is eliminating or significantly reducing
unfair compensation and child labor in the industry. The two major assumptions
are (1) consumers are drawn towards lower prices for an identical product
especially when the product is Fair Trade and (2) competitors will follow the lead
of the company in buying Fair Trade-certified inputs and selling them in
reasonable prices. Based on a study regarding consumer evaluations, the first
assumption holds true as long as the quality of the product does not diminish
along the price of the product (Shirai, 2015). In the case of the second
assumption, Boyd (2017) suggested that when a company conducts a
competitive analysis and benchmarking, it would probably replicate the best
practices of a competitor. If this alternative proves to be successful, then it would
not be impossible if all chocolate manufacturers shift entirely or a major part of
their operations toward the organic Fair Trade chocolate market.
 References
Boyd, J. (2017). Competitive benchmarking: What it is and how to do it.
https://www.brandwatch.com/blog/competitive-benchmarking-defined-how-to-do-it/
#:~:text=Competitive%20benchmarking%20is%20the%20process,a%20set
%20collection%20of%20metrics.&text=Benchmarking%20means%20you%20can
%20easily,to%20evaluate%20your%20own%20strategy.
Mourdoukoutas, P. (2011). Why pioneers fail to turn a market niche into a mass market.
Forbes. https://www.forbes.com/sites/panosmourdoukoutas/2011/12/20/why-
pioneers-fail-to-turn-a-market-niche-into-a-mass-market/?sh=3816bf236733
Shirai, M. (2015). Impact of “high quality, low price” appeal on consumer evaluations.
https://www.tandfonline.com/doi/full/10.1080/10496491.2015.1088922