Cadbury plc: An overview

Cadbury plc An overview1. Introduction Cadbury Plc has constantly been in the spotlight since prideful this year when its sh be price rose by more(prenominal) than cc pence when kraft paper placed its hostile coup bid worth $17 billion. Since then early(a) rivals such(prenominal) as Hershey, Ferrero and hold tight bring in any case cook up interest for acquisition of the union. It is probably happening repay fitted to the facts that Cadbury Plc has been face liquidity problems that prohibited rapid expansion, while at the same epoch having exception tout ensembley affectionate presence in emerging commercializes and having strong labels. Cadbury Plc operates in a in truth competitive candy store foodstuff characterised by fast-changing consumer attitudes and values. wherefore the need for a strategical perspective on merchandise neer lessens. Moreover, (Financial Times, 2009) the confecti atomic number 53ry patience is struggling in the recession as consumers render out cheaper foods limiting discretionary spending on confectionary. These cheaper alternatives, coupled with the pissed takeover bid from Kraft foods, has ca utilize a deep cloud of suspicion to linger on Cadbury Plcs future, further compounding the need for a strategic perspective on pot.2. Business Strategy Business strategy muckle be defined as the nidus and scope of the business enterprise over the long-term,which achieves advantage for the organisation through its arrangement of picks within a suitably ch each(prenominal)enging environment, to satisfy the call for of the market and fulfil stakeh tetradth-year expectations (Brassington et al., 2006). Strategy give the bounce exist at divers(prenominal) take aims in a business entity integrated strategy aids the allocation of resources within the organisation to achieve the business direction and scope specified within bodied objectives. It helps to control and coordinate the dissimilar aras of the or ganisation such as finance, marketing, research and breakment etc. instead often corporate strategy is explicitly envisioned in a mission statement. (Creating Brands People Love, 2009) For example Cadbury Plcs vision is to be the biggest and the richly hat confectionery keep company in the world. Competitive strategy (business unit strategy) determines how a business competes successfully, in a particular market with particular believe to the relative positioning of competitors. merchandising strategy defines target markets, what direction to be taken for a defensible competitive position, compatible with general corporate strategy within those markets. The strategic management process comprises three master(prenominal)(prenominal) components as shown in take in 2 below Strategy writ of exe buffetion is often the hardest part in the strategic management process. How constantly, this report single concentrates on strategy analysis and choice. 3. Strategic analysis Str ategic analysis involves the analysis of the business strength, position and interpreting the preponderant external factors that whitethorn influence that position. The methods below were used to assist in a strategic analysis for Cadbury Plc FiveForces Theory a technique for identifying the forces which affect the level of contest in an industry essential by Michael Porter. Analysis of the Human Resources. incorporate and operating(a) issues. International Export Dimension. Swot Analysis.3.1. The Five Forces Analysis Lindt Sprungli resort hotel Fujiya Co., Ltd. HARIBO GmbH Co KG Hsu Fu Chi International Limited Kraft Foods Inc monkfish Confectionery Co Ltd Nestl SA Perfetti Van Melle SpA The Hershey Company Tootsie Roll Industries Inc spoil IncIn pursuing an advantage over its rivals, Cadbury Plc has in the past adopt such tactics as Changing prices to gain a transitory advantage (docstoc website). For example, a price reduction by three rupees for a mini perk a Ca dbury Plcs brand in India helped Perk distribute the rural market increasing Cadbury Plcs market sh ar in India by 1% with a further 10% rise in overall umber gross taxation. Improving reaping features Cadbury Plcs brand, Dairy Milk, is the worlds most famous brand diagnose and the companys perishing(a) drinking chocolate bar by revenue. The company has used this to its advantage by creating new Dairy Milk varieties such as Wispa and Fruit Nut. Creative use of channels of statistical distribution various outlets such as supermarkets, vending machines and convenient stores consume been effectively utilised by Cadbury Plc and its rivals. Consequently, creative de none has been the key factor in increasing market piece of ground. (Adbrands website) Advertising Age estimated global advertising expenditure by Cadbury Plc to be in the region of $425m in 2007, making it the worlds 83rd largest advertiser in advertising expenditure. Threat of substitutes in Porters, model substitutes refer to any products in other industries with lour prices or better performance parameters for the same purpose. According to confectionery news website, a fathering trend towards healthy products by consumers has resulted in a drop in the value of the overall UK confectionery. Consequently, dark chocolate which is perceived to have great health benefits, has had an attach in touristyity. As a matter of fact, in 2008 Cadbury Plc re-launched its Bourneville brand (dark chocolate) to counter this imminent panic and capitalise on the popularity of dark chocolate.Consumer author this is the impact that buyers pose on a production industry. The magnitude of the impact can be repayable to several factors. A big factor in the confectionery industry is that of a salubrious educated consumer perception of the product. (The Epoch Times)This was so seeming(a) when consumer pressure resulted to Cadbury overbold Zealand backing down from an initiative to substitute coco a butter to vegetable fat and palm oil. The latter would have sort magnitude palm oil production and the associated ontogenesis in plantations could lead to grand destruction of plantations in Indonesia and Malaysia. Moreover, the consumers were not provided unhappy with the products new orientation and texture, but as well the weight of each bar had heartyly diluted. supplier power suppliers refer to the entity that provides the industry with the cutting materials. Powerful suppliers can declare an influence on the production industry by sell raw materials at a higher price to capture some of the industrys profit.Barriers/ brat to instauration as a firm operating in the exempt enterprise world, any firm should be free to enter and put across the market. However, industries exhibit some features that protect high profit firms thus inhibiting the entry of new rivals. Barriers may arise from the Government which can develop and machine policies in relation to sev eral macroeconomic influences, in turn affect markets and organisations such as Cadbury Plc. Cadbury Plc have to operate according to the rules and regulations stated by the governments. Their products have to conform to the safety laws, for example, manufacturing processes in Cadbury Plc be subject to defilement controls. The government involves pecuniary policy, which involves altering government expenditure/taxation. For Cadbury Plc to see an summation in profits in the future, they will want the government to implicate expansionary fiscal policy whereby the government would raise government expenditure, leading to an adjoin in aggregate demand or by cutting taxes, which would dedicate consumers with more funds to spend on products such as those made by Cadbury Plc in turn raising aggregate demand and thusly profits (Advisors in Fiscal Policy). The government could nonetheless introduce Contractionary Fiscal policy which would see aggregate demand be reduced by cutting g overnments expenditure or by raising taxes and hence lessen consumers expenditure. For Cadbury Plc to increase their profits, they will be against the government introducing Contractionary Fiscal policy. The Government in like manner provide Cadbury Plc with incentives to open new factories and other calculate opportunities where there is a high unemployment rate. Patents and propriety k forthwithledge ideas that provide competitive advantage are treated as private property when ostensibleed. Hence others cannot use them, which creates a barrier for entry. Cadbury Plc is strongly positioned due to a large product patent basis and their heavy investment in their research and development sub cleavage. high-ticket(prenominal) capital voltage entrants are reluctant to commit to acquiring passing specialised expensive machinery. As a matter of fact, even though Cadbury Plc being one of the largest confectionery companies in the world, it is facing liquidity problems clogging their expansion into new regions (Data Monitor Cadbury PLC, 2009).3.2. Human ResourceThe biggest human resource issue facing Cadbury Plc today is the loss of job security amongst some of their employers. As demonstrated in Maslows hierarchy of demand, a popular and accredited motivational theory, job security is an important factor in the motivation and eudaemonia of a firms employees (Mottershead et al., 2006).With respectable newspapers and other informative media (The Guardian, Wall pathway Journal, BBC etc.) predicting large job losses in Cadbury Plc should a potential takeover surveil, umpteen employees are currently fearing for their jobs and this may affect their performance (Rohwedder, 2009 No Author, 2009 Clark, 2009). Cadbury Plc union leaders have met with Kraft (a US based business bidding to takeover Cadbury Plc) in order to protect Cadbury Plc employees and ensure that their employees jobs are still secure should Krafts proposed bid be accepted. However, this ac tion in itself demonstrates the measuring rod of scepticism that exists within many Cadbury Plc employees and highlights the lack of job security with many of the workers. This cynicism may be due to the fact that employees are unable to under brave how Kraft can make their potential quoted savings without a significant loss of jobs (No Author, 2009 Griffin, 2009).The loss of job security may not only affect factory workers but may also affect managers and employees in higher positions within Cadbury Plc. During a takeover there is a dispense of restructuring within all companies involved and many jobs tend to be woolly-headed as companies find that bureaus overlap. These job losses occur at all levels of employability and there tends to be a period where the company has a very high employee turnover level. Although Kraft is the strongest bidder for Cadbury Plc, Hershey and Ferrero (an Italian based business) have tardily released free statements revealing their interest in a potential takeover of Cadbury Plc. However as both(prenominal) businesses are significantly smaller than Kraft, sources confining to both firms have revealed that Hershey and Ferrero have been in talks about a potential joint bid for Cadbury Plc. Although, Cadbury Plc union leaders remain tight in their belief that the best option for Cadbury Plcs many employees is for Cadbury Plc to remain an independent company (Clark, 2009).As we enter a more technological era, the ever constant fear for factory workers is the fear that they will be replaced by computers. This is a smaller human resource issue facing Cadbury Plc however it is ever present and therefore is an issue that mustiness be systematically paid attention to and addressed. At a recent visit, to the Bourneville site of Cadbury Plc, students were able to visit both the modern factory and the older one. At the older factory, it was clear to the students that more human fundamental interaction with the product existed. Whi le in the modern factory students saw that a lot of the human interaction had been replaced with faster and more efficient equipment.It is important that the human resource department in Cadbury Plc address the above issues as the motivation and overall well-being of the employees will affect the companys performance in the long term. As Cadbury Plcs is the biggest confectionary company in the world (Cadbury plc, 2009) they stand to drop off a lot. 3.3. Corporate and Operational IssuesWith incompatible businesses attempting to takeover Cadbury Plc, there are a lot of different factors that will affect the way Cadbury Plc is viewed as a corporation and in turn how they operate should a potential takeover succeed.One of the main selling points for Cadbury Plc in Britain and Ireland, who account for 24% (Cadbury plc, 2009) of their revenue, is the fact that Cadbury Plc began and has remained a British business (up until today) and therefore it lends an authenticity to the brand that most competitors do not have. British favourites, such as Cadbury Dairy Milk, may begin to lose out to competitors should Krafts proposed takeover succeed. This is because a lot of the public in the united Kingdom do not support the proposed takeover and some mononuclear phagocyte system have even gone as far as requesting a motion that ensures that Cadbury Plc remains in British hands (No Author, 2009 Rohwedder, 2009). Cadbury Plc have also had negative promotional material towards the takeover with Felicity Loudon who is a descendant of arse Cadbury (the founder), publicly stating that Cadbury Plc is a brand that is synonymous with Britain and should the Kraft takeover succeed it will sire a commercial wasteland. These are strong words and may dissuade wad from buying the once popular Cadbury brand (Rohwedder, 2009 No Author, 2009).As a result of the negative publicity potential takeovers have received, Cadbury Plc will be forced to use a different marketing strategy should a takeover bid be accepted as some of the British authenticity that Cadbury Plc as a brand previously had will be lost in the takeover. Cadbury Plc must be prepared to face losses in the UK market as nodes may choose not to buy Cadbury Plc brands due to the takeover and the potential loss of jobs at Cadbury Plc UK sites. However, if Cadbury Plc is able to launch a successful marketing strategy, then they may be able to limit the loss caused by a takeover.3.4. International Export DimensionAs a leading global confectionary company with an outstanding portfolio of chocolate, gum and candy brands, Cadbury Plc employ well-nigh 45,000 tidy sum and has direct operations in over 60 countries, selling their products everywhere around the worldThe company operates its business through four different business segments disclosely Britain, Ireland, Middle atomic number 99 and Africa (BIMA), Americas, europium and Asia Pacific. Britain and Ireland are the largest business unit in the group. The companys main markets in Middle East and Africa include southerly Africa, Namibia, Kenya, Egypt, Lebanon, Morocco, Nigeria and Ghana. The companys American business comprises of the three largest confectionary markets in the world, US, Canada and Mexico. This also extends through Central America and the Caribbean and it also has operations in southeasterly American countries which include countries like Brazil, Argentina, Peru, etc. With a market grant of almost 20%, the company is the leading player in South America.In Europe, the company operates in majority of Western Europe, Scandinavia, Turkey and Russia. The companys biggest European operating unit is in France. The Companys Asian businesses are concentrated in India, China, Malaysia and Thailand. In the Pacific regions, the companys operations are mainly located in Australia, New Zealand and Japan. Cadbury Plc has a leading position in Australia with an overall 30% market share. (Data Monitor Cadbury PLC, 2009)In each of the four different segments, marketing is very important element in promoting the product and is done different to each other due to the products being sold in those areas. For example, Perk is a Cadburys product which is sold in India. The product is sended at the youth. Marketing for this product is done in a way so it appeals to the Indian community. This includes advertisements which are shown their national language, Hindi and is normally performed by high fecund people of India like actors and actresses of Bollywood (Indian Cinema).3.5. SWOT AnalysisStrengths The main strength of Cadbury Plc is that they have a very good reputation and have a astray recognised brand name which has led them to become the worlds number one confectionary company having bought Adams (the owner of chewing gum brands including Trident and Stride) in 2003. They have unrivalled strength and breadth of participation. It is the market leader in the global confectionery sector with a market share of 10.5%. Cadbury Plc has a alter product base as the company leaves chocolate, gums and candy products the company is well diversified in terms of revenue generation from all its operating regions. Cadbury Plc should aim to balance the share of revenue from its operating regions to gain global ascendency (See Figure 4, Figure 5 and Figure 6). (Cadbury PLC- Our Strengths).This shows the market share of chocolate between Cadbury Plc and their rivals. Cadbury Plc is currently number one, with Mars/Wrigley a very nearly second. (Cadbury PLC- Purple bi, 2009)It is clear that the main source of Cadbury Plcs revenue comes from their chocolate and cocoa beverages. However, it is clearly profitable to the company that they have diversified into other markets. (Cadbury PLC- Creating brands people love, 2009)Weaknesses However, Cadbury Plc has a weak liquidity position. At the year ending celestial latitude 31, 2008, Cadbury Plcs current assets were $2,635 million compared to the current liabilities of $3,388 million. This could negatively impact the operational susceptibility and growth initiatives. Another weakness is the companys employee efficiency, i.e. the total revenue per employee. It is considerably decline than rival companies such as Hershey, and Chocolade Fabriken Lindt Sprungli (Lindt). The low revenues per employee indicate relatively lower employee productivity. This can be solved by offering incentives to employees, i.e. bonuses for high productivity.Opportunities cod to the increasing awareness of dark chocolate and its health benefits, there is a fast-growing market in many parts of the world have with ethical concerns, the demand for organic and fair-trade chocolate have increased. Cadbury Plc has numerous amounts of insurance premium chocolate products across the world so an increase in the customer preference for premium products would increase gross sales. Cadbury Plc can also look to increase sales and their presence in the US confecti onary market it is already well positioned to capture the growing demand for the confectionary in the region. newly, people are worthy more conscious about their health which consequently results in a drop in sales for Cadbury Plc dairy products. This is a growing concern for the company and an issue that must be addressed. Cadbury Plc could possibly invest in a low calorie snack range which could boost sales dramatically. Threats The advance cost of many of Cadbury Plcs raw materials (especially cocoa and peanuts) could cause a serious impact on the companys profitability. Prices are expected to continue rising in the near future for cocoa because the International Cocoa memorial tablet (ICCO) reduced its estimate by 0.1 million tons whilst the demand for cocoa is increasing. At present, Cadbury Plc imports its cocoa products directly from third party suppliers so maybe investing in their own cocoa farm would be secure in the long run.The confectionary market is highly fragme nted with increasing competition. numerous large businesses have merged together to gain more market share intensifying competition. Therefore Cadbury Plc would be under pressure to change prices of products, reducing its margins. Rising labour costs will dramatically cut into Cadbury Plcs profit margin because a majority of their employees are from the US and Europe. token(prenominal) wage has increased significantly in both the US and the UK. Cadbury Plc needs to attract and retain efficient employees in all segments of its business to become even more successful. (Data Monitor Cadbury PLC, 2009)Looking at the data placid from the questionnaires, it is apparent that Cadbury products are easily accessible to the public (shown in Figure 12) so Cadbury Plc should look to keep this up. However, a large number of people do not know that Trident and Halls are part of Cadbury Plc. Figure 11 shows that members of the public would be more willing to buy Trident and Halls product due to the fact that it is part of a well represented company. More than one-half of the general public thought that Cadbury products were well priced, with mainly students thinking that Cadbury Plc price their products. Cadbury Plc should look into the possibility of issuing discount cards to students as this may encourage them to buy more Cadbury products.Figure 4 and 6 shows the share of revenue between Cadbury products and their global sites respectively. It is clear that chocolate and cocoa beverages are their main source of finance. Cadbury Plc need to concentrate on areas such as Asia and the Middle East as the share of revenue is 6% and 7% respectively. Cadbury Plc could sell their sites in those regions and concentrate on Europe, northwestern America, Britain and Ireland, as these areas return a combined total of 66% of Cadbury Plcs share of revenue. Figure 7 (in the appendix) shows that Cadbury Plc has had the biggest share movements over the past year compared to their main rivals.This shows the share of revenue across the world. Britain and Ireland current generate the most revenue followed by North America and then Europe. (Cadbury PLC Creating brands people love, 2009)4. Business philosophyCadburys Schweppes adopted a Managing for Value philosophy in 1997. They are committed to using their assets to work growth opportunities and to drive value creation. The main goal of Cadbury Plc is to consistently rise major shareholder returns. They support this by two other commercial goals to profitably and significantly increase the global confectionary share and to secure and to grow the regional beverages share. Cadbury Plc had a strategic review of Europe Beverages its partner company, the proof being in the best interest of the shareholders to investigate the sale of the Europe Beverages business. The board decided Europe Beverages did not have a high enough potential growth and returns. The board also realised that the money made from the sale could help reduce the companys debts therefore on the foremost September 2005, Cadbury Plc announced they were selling the Europe Beverages group. Cadbury Plc currently possesses nine card Members consisting of two Executive Directors and seven Non-Executive Directors. The Board of Directors are responsible for the overall management and performance of the company, and the approval of the long-term objectives and commercial strategy. They also allot day-to-day management to the Chief Executives Committee (CEC). The CEC reports to the Board and are responsible for the day-to-day management of the operations and implementation of strategy. Driving high level performance of growth, efficiency and capability programmes are The CECs responsibility to the Board. (Cadbury PLC- Our Management)Cadbury Plc also adopts a policy of democratic management. All members of staff are made to work together as a team for the good of the company. Decisions are reached amongst the various groups by first taking into account everyones inputs, ideas and suggestions. This style of management plant life for Cadbury Plc because the workers feel as though they have power in ending making and therefore are more free and able to make suggestions that they feel could just alter the business this motivates workers and makes them feel more busy with the company. 5. BrandingCadbury Plc as an organisation has substantial a strong depict for the Cadbury corporate name to act as a shelter for all its product brands. Branding is the creation of a three-dimensional character for a product, defined in terms of name, packaging, colours, symbols etc. Tthat helps to differentiate it from its competitors and helps the customer to develop a relationship with the product. As a result Cadbury Plc products benefit from both the affection that consumers hold for the corporate name and from the individual character developed for its products such as Cadburys Flake, Cadburys Hot Chocolate and Cadburys Dair y Milk (Principles of Marketing). plan competitors of Cadbury Plc aim to build a strong brand. For example supermarket own-label products are package and branded in similar fashion to Cadburys this has posed a brat to Cadbury Plc as often the supermarket own-label products are cheaper than Cadbury Plc products and, in todays economic instability, this could lead to them fitting more popular and therefore lead to a reduction in sales for Cadbury Plc. There is also a possibility that Cadbury Plc could become complacent with their branding and not seek to improve on it which could therefore lead to consumers becoming bored with the product or maybe even consumers needs could change which could lead to Cadbury Plc falling behind in the market. For Cadbury Plc their brand name is well known, but due to the reasons stated above their name is not enough to ensure that they remain the main brand in the industry. To hold fast on top of the market Cadbury Plc should constantly research into their brand name and look to invest money into improving the brand image to keep up with todays changing times. To compete with the lower priced supermarket own-label brands, Cadbury Plc may have to reduce their prices. However the problem for Cadbury Plc is that if they reduce their prices then that could be associated with deterioration in quality. One way Cadbury Plc could lower their prices to compete with its competitors without damaging the brand is to offer discounts on bulk purchases for example a pack of 5 philanthropy chocolate bars for 1.25 which equates to 25p each whereas the single Bounty bar would be sold at 45p each. The consumer recognises that the lower price is due to bulk buying and does not associate it with the brand quality. 6. Strategic Choice Involves identifying the strategic options, evaluating and selecting strategic options.6.1. Possible strategies to consider and current business issues Recent bid from Kraft Foods Inc and possible new bids from He rshey Co, Nestle SA and Ferrero SpA have made the bureau Cadbury Plc is facing today exceptionally complex and adds multiple choices of possible takeovers and mergers to strategies primarily needed to consider. Kraft taking over CadburyPlc An offer worth $17 billion and placed by Kraft would provide Cadbury Plc with consequent advantages and disadvantages. For instance, deep Kraft stated that the takeover would increase scale in evolution markets and create a company with about $50 billion in revenue it would achieve at least $625 million of cost savings annually by the end of the third year (Bloomberg), whereas conversely professional Mandelson cautioned that Kraft would be facing huge encounter from the local creation and from the British government (Telegraph). Furthermore, this could lead to job cuts in Bourneville, therefore UKis plausibly to seek guarantees from Kraft on decision-making and employment (FT). Recently, Kraft Food Inc has now taken the takeover offer fo r Cadbury Plc straight to shareholders. Kraft offered a diversity of capital and shares for each Cadbury Plc share. This offer included 300 pence in cash and 0.2589 new Kraft shares for each Cadbury Plc share. Alternative take-overs/mergers from Hershey, Nestle and Ferrero Hershey, Nestle and Ferrero have made interest in acquiring Cadbury Plc. Accepting offers from any of the mentioned companies would be more advantageous than to accept Krafts bid, since these are more confectionary marked point and hence are concerned with similar issues Cadbury Plc is facing. For example, Hershey, the largest U.S. chocolate maker, has about 14 percent of its $5.13 billionrevenueoutside its home market in 2008, whereas Cadbury Plc has 22 percent of sales coming from outsideNorth America (Bloomberg). This merge could lead to strongest and biggest global confectionary company. Nestle, the worlds biggest food company, could stand in and buy back the U.S. rights to Kit Kat and Rolo brands from Hers hey, giving Hershey the power to fund a combination with Cadbury another option would be for Nestle to acquire Cadburys gum unit and then sell the chocolate division to Hershey orFerrero SpA (Bloomberg).Expand emerging markets (India, South America, Middle East, and Africa) According to Todd Stitzer, CEO of Cadbury Plc the company has the largest business of any of competitors in emerging markets that already contribute for more than a third of revenues. Cadbury Plc has already created strong foundations such as distribution systems and consumer relationships in these countries. For example, the company has experienced over 20% annual growth for the last three years in India (Creating Brands People Love, 2009). Expand developed markets (Europe, North America, Australia) Although these markets are considerably saturated, according to Cadbury Plc there still is oft untapped potential (Creating Brands People Love, 2009). Expansion here is based on mostly new developed products and innovations in advertising. Concentrate more on luxury and natural products Since consumer awareness, such as healthy lifestyle, fair trade issues etc., is rising, more consumer attention is made on natural and luxury products. Recent takeover of Green and Blacks, The Natural Confectionery Co and Fair-trade certification proves the importance. New relevant takeovers could improve the share of the growing market. Invest more in development and innovationsIn order to expand, especially in the developed markets intelligence and development play great part. Making new products sometimes is the only way to expand in such regions, because of high market saturation. impress factories to countries with less expensive workforce Since factories are mostly based in western countries, high and rising wages play major role for small margin, therefore moving to countries with less expensive workforce could be beneficial (for instance, in Europe, moving from UK and France to Eastern European c ountries and the Baltic States, In Northern America, moving from USA to Mexico), however, there would be strong opposition from western governments and unions that happened during recent factory move from UK to Poland. (Daily Mail)6.2. Future Business fence