South Africa’s great chocolate rivalries
The South African chocolate market is valued at more than R3-billion, and growing at an estimated 3% per annum.
All of Cadbury’s moulded brands (slabs) are manufactured at the Port Elizabeth plant, namely, Dairy Milk, Top Deck, Wholenut, Mint Crisp and Fruit & Nut. Some of the biggest brands in South Africa have also been created here, including top market performers Lunch Bar and PS, as well as Tempo, Question and Astros.
Due to the aggressive growth in the market and demand for Cadbury products, the chocolate manufacturer continues to invest significantly in its Nelson Mandela Bay manufacturing plant.
Nestlé, the world’s largest food and beverage firm, was registered as a company in South Africa in 1916 – with its first factory being established in East London 44 years after its first products arrived in the country in 1872.
Nestlé has, invested heavily in increasing its chocolate-producing lines. This has streamlined the business and enabled Nestlé to become more competitive in its market niche without compromising on the nutritional aspects of its chocolate products, he adds.
Henri Nestlé, a Swiss pharmacist, established the Nestlé brand in 1866 with the hope of benefiting society. He produced the first milk-cereal food for children, and while Nestlé’s original business was based on milk and dietetic foods for children, numerous other food products have been added to the range over the years.
These include chocolate, instant beverages, culinary, refrigerated and frozen products, ice-cream, mineral water and pet food.
1.1 Chocolate companies in South Africa are characterised as monopolistic competitors. Explain the key features of a monopolistic competitor showing how this differs from a monopolist and the impact that this type of competition has on the chocolate industry in South Africa. (25)
1.2 Monopolistic competitors are also known as ?non price competitors.?
Compare and contrast the ways in which Nestle and Cadbury compete through non price competition. (10)
1.3 Explain the definitions of substitutes and complements and how these affect the chocolate companies such as Nestle and Cadbury‘s.
Question 2 (50)
Read the extract below and answer the questions that follow:
In July 2008, former President Thabo Mbeki addressed a media briefing relating to his administration‘s economic policies. At the meeting he encouraged inflation targeting and said that there was a need to revisit South Africa‘s macroeconomic stance on inflation targeting or the budget surplus.
?Indeed that has helped us in this situation of turbulence in terms of the financial markets globally… that has enabled us to cushion the country using that particular system of budgeting.?
Uncertainty over the future direction of SA‘s economic policy was seen as one of the main challenges that faced SA‘s economy at that stage.
His comments on the economy immediately raised the hackle of the ruling party‘s left allies- COSATU and SACP. At that stage, they accused him of trying to ?narrow the scope of policy changes? that were much anticipated would happen when current president Jacob Zuma arrived.
Former president Thabo Mbeki had defended the inflation targeting approach to monetary policy, arguing that it help to ?cushion? the South African economy from supply shocks such as substantial increases in the international oil price. One interpretation of this statement is that inflation targeting ?alters the course of inflation? and so may help to keep inflation low even when supply shocks are experienced.
2.1 The above claim highlights the structuralist model of the inflation process. Critically analyse this model. (30)
2.2 Define the inflation targeting approach and explain how it helps keep inflation low ?even when supply shocks are experienced?.
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