Business Strategy & Policies (Cadbury company).pdf PDF

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Table of Contents CHAPTER ONE: CASE PROFILE ....................................................................................................... 3 1.1 History of Cadbury ........................................................................................................................ 3 1.1....

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Table of Contents CHAPTER ONE: CASE PROFILE ....................................................................................................... 3 1.1 History of Cadbury ........................................................................................................................ 3 1.1.1 Mission ................................................................................................................................... 5 1.1.2 Vision...................................................................................................................................... 5 1.1.3 Objectives............................................................................................................................... 5 1.2 Technological Advancement ......................................................................................................... 6 1.3 Cadbury Brothers Ltd .................................................................................................................... 7 CHAPTER TWO: SITUATIONAL ANALYSIS ....................................................................................... 8 2.1 Political .......................................................................................................................................... 8 2.2 Socio-cultural ................................................................................................................................ 8 2.3 Technological ................................................................................................................................ 9 2.4 Demographics ............................................................................................................................... 9 2.5 Economic ....................................................................................................................................... 9 CHAPTER THREE: INDUSTRY ANALYSIS ........................................................................................ 10 3.1 Threat of New Entrants and Barriers to Entry ............................................................................ 10 3.2 Product Substitutes ..................................................................................................................... 11 3.3 Power Suppliers .......................................................................................................................... 12 3.4 Power of Buyer............................................................................................................................ 13 3.5 Intensity of Rivalry Among Competitors ..................................................................................... 14 CHAPTER FOUR: COMPETITIVE ENVIRONTMENT ANALYSIS ......................................................... 15 4.1 Cadbury company strength against Nestle ................................................................................. 15 4.2 Cadbury company weakness against Nestle ............................................................................... 15 4.3 Opportunities of Cadbury and Nestle ......................................................................................... 15 4.4 Threat of Cadbury and Nestle ..................................................................................................... 16 CHAPTER FIVE: ENVIRONTMENTAL TRENDS ................................................................................ 18 5.1 Miniaturisation of Chocolate Bars .............................................................................................. 18 5.2 Premiumisation ........................................................................................................................... 19 5.3 Clean Label .................................................................................................................................. 19 5.4 Healthy ........................................................................................................................................ 19 5.5 Personalisation............................................................................................................................ 20 5.6 New Flavours and Textures ......................................................................................................... 20 5.7 Rare Flavours............................................................................................................................... 20 Page 1 of 40

CHAPTER SIX: ATTRACTIVENESS OF EXTERNAL ENVIRONTMENT .................................................. 21 CHAPTER SEVEN: STRATEGIC ANALYSIS....................................................................................... 21 7.1 Key Success Factors..................................................................................................................... 21 7.1.1 Extensive Distribution Network ........................................................................................... 22 7.1.2 Sustained Key Product ......................................................................................................... 23 7.1.3 Customization of Products ................................................................................................... 24 7.2 Strategies- Business Level; Competitive Strategy; Corporate Level ........................................... 25 7.3 Core Competencies - Resources ................................................................................................. 26 7.3.1 Tangible Resources .............................................................................................................. 26 7.3.2 Intangible Resources ............................................................................................................ 28 7.4 Value Chain ................................................................................................................................. 30 7.4.1 Inbound Logistics & Suppliers .............................................................................................. 30 7.4.2 Operations ........................................................................................................................... 31 7.4.3 Outbound Logistics & Distribution ....................................................................................... 32 7.4.4 Sales & Marketing ................................................................................................................ 32 7.5 Summary: Sustainable Competitive Advantage.......................................................................... 33 CHAPTER EIGHT: SWOT ANALYSIS TABLE .................................................................................... 35 8.1 Definition of SWOT analysis ........................................................................................................ 35 8.2 SWOT Analysis of Cadbury company .......................................................................................... 36 CHAPTER NINE: STRATEGY FORMULATION AND RECOMMENDATION .......................................... 37 REFERENCES .............................................................................................................................. 38 APPENDICES .............................................................................................................................. 40

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CHAPTER ONE: CASE PROFILE

1.1 History of Cadbury John Cadbury was one of ten children of Richard Tapper Cadbury, a prominent Quaker who had moved to Birmingham, England from the West Country in 1794. In 1824, 22-year-old John Cadbury opened his first shop at 93 Bull Street, next to his father's drapery and silk business in the then fashionable part of Birmingham. As a young Quaker, he was against alcohol and so instead sold tea and coffee, he also sold hops, mustard and a new side-line which is cocoa and drinking chocolate that he prepared using a mortar and pestle. Cocoa and drinking chocolate had been introduced into England in the 1650s but remained a luxury enjoyed by the elite of English society. Customers at John Cadbury's shop were amongst the most prosperous Birmingham families, the only ones who could afford the delicacy. Cocoa beans were imported from South and Central America and the West Indies In 1831, John Cadbury became a manufacturer, renting a warehouse in Crooked Lane, close to his shop. Here he began producing cocoa and chocolate. Experimenting with his mortar and pestle, John Cadbury produced a range of cocoa and chocolate drinks, the latter with added sugar. The products were sold in blocks which customers need to scrape a little off into a cup or saucepan and added hot milk or water. These early cocoa and drinking chocolates were balanced with potato starch and sago flour to counter the high cocoa butter content, while other ingredients were added to give healthy properties. According of figure 1.1.1 portrayed of Cadbury Company logo that had establish since 1824.

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Figure 1.1.1: Logo of Cadbury company

In 1840s, his brother Benjamin joined the company to form Cadbury Brothers. The firm began renting a factory in Bridge Street in 1947. Then, the brothers opened an office in London and received a Royal Warrant as manufacturers of chocolate and cocoa to Queen Victoria. John Cadbury retired due to failing health in 1861 and the business was taken over by his sons Richard and George. They were aged 25 and 21. In 1866, the brothers launched a new product, Cadbury Cocoa Essence. John Cadbury devoted the rest of his life to civic and social work in Birmingham until his death in 1889. Although they had worked in their father's business for some years, the prospects for Richard, 25, and George, 21, were daunting. Their first five years were a period of unremitting toil with few customers, long hours and very frugal living. Both seriously considered taking up other vocations where Richard as a surveyor in England and George as a tea planter in India. George was focused on manufacturing, and Richard with sales, but in the early days both brothers went out and promoted their goods. Due to their dedication, sheer hard work and improvements in the quality of Cadbury cocoa products, the business survived and prospered. By the 1870s, Cadbury had outgrown the Birmingham factory and began looking for land outside the city to build its new premises. Keen to move away from the dirty conditions of the city, the brothers set about building their "factory in a garden" to provide a clean and healthy working environment for employees. They chose land four miles outside of Birmingham, which they later named Bournville. The factory opened in 1879. Page 4 of 40

By the late 1880s, the workforce had increased five-fold and 10 years later, the factory was expanded. During 1983, George Cadbury bought more land in Bournville and began building the village which surrounds the factory and launched its first milk chocolate bar in 1897. Eight years later, they come out with new product known as Cadbury Dairy Milk which is chocolate. In 1921, the firm opened its first overseas factory in Tasmania. They had become the 24th largest manufacturing firm in Britain. The original 14-acre site at Bournville had increased to 81 acres. More than 100 acres was devoted to recreation, including dressing areas, rest rooms and a concert hall featured on site. The well-being of the workforce was important to the Cadbury family. The firm merged with Schweppes and became Cadbury Schweppes during 1969. Then, Cadbury and Schweppes demerged, separating its confectionary and drinks business during 2008. 1.1.1 Mission ‘’Cadbury means quality’: This is our promise. Our reputation is built upon quality; our commitment to continuous improvement will ensure that our promise is delivered’ 1.1.2 Vision ‘The Barrow Cadbury Trust’s vision of a peaceful, equitable society, free room discrimination and based on the principle of social justice for all’ 1.1.3 Objectives ‘To develop differentiated product, while exploiting a smart variety, to achieve their profitable growth in confectionery and beverages.’

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1.2 Technological Advancement Dissatisfied with the quality of cocoa products, including their own, the Cadbury brothers took a momentous step in 1866 that not only had a bearing on their business but revolutionised the whole of the British cocoa business. Until that time English cocoa had been heavily adulterated with starch substances like potato flour or sago to mask the excess cocoa butter. The cocoa drink, as described by George Cadbury himself, was a "comforting gruel". Following a visit to the Van Houten factory in Holland to see their new cocoa press, the brothers introduced this new process to their Bridge Street factory. The press removed some of the cocoa butter from the beans, producing a less rich and more palatable cocoa essence - the forerunner of the cocoa we know today. There was no need to add flour and Cadbury's new cocoa essence was advertised as 'Absolutely pure...therefore Best' At that time there was much concern in Parliament about the adulteration of food, including cocoa. The new unadulterated Cadbury's cocoa essence was heralded as a major breakthrough and resulted in the passing of the Adulteration of Food Acts in 1872 and 1875. Cadbury received a remarkable amount of free publicity during this period and sales increased dramatically. The marketing of this cocoa essence helped turn a small business into a vast worldwide company. The introduction of cocoa essence was not the only innovation that improved the Cadbury Brothers' trade. The plentiful supply of cocoa butter remaining after the cocoa was pressed made it possible to produce a wide variety of new kinds of 'eating chocolate,' leading to the development of the smooth creamy chocolate produced today. The quality of the chocolates made by the company following the introduction of the cocoa press was such that in the 1870s, Cadbury broke the monopoly which French producers had previously enjoyed in the British Market.

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1.3 Cadbury Brothers Ltd The business became a private limited company - Cadbury Brothers Limited in 1899 following Richard Cadbury's sudden death at the age of 63. George Cadbury became chairman of the new board and his fellow directors were Barrow and William A. Cadbury, sons of Richard and two of his own sons, Edward and George Cadbury Junior. By 1899, the Bournville factory had trebled in size with more than 2,600 employees. With the formation of the limited company, Bournville entered a new era as the younger members of the Board introduced new ideas - analytical laboratories, advertising and cost offices, a sales department, works committee, medical department, pension funds, education and training for employees. The Bournville factory site became a series of factories within a factory, as everything needed for the business was produced on site, including tin box pressing plants, carton making units, a design studio and printing plant. This policy continued until well after the Second World War when the rationalisation of the business to mainstream activity - production and marketing of chocolate confectionery- led to the use of outside specialised suppliers for ancillary items.

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CHAPTER TWO: SITUATIONAL ANALYSIS

2.1 Political The government change from Labour party to a Liberal Democrat one affected Cadbury’s operations. In the UK, 8 Cadbury factories hired 3000 workers but many restrictions that are imposed could lead to the company having difficulty in skilled employees later. Many taxes imposed are also another factor to study how the company is managing its payments and investments. In 2010, the Value-added Tax that was imposed led to the rise in prices of chocolate which ultimately brought a decline to sales. Also, earlier in 2007, the owner of Cadbury chose to outsource majority of his business to an Indian firm due to expenses. This was a risk to be taken as it could lead to loss of employment worldwide; however, it could also provide more opportunities for job in countries such as India. Cadbury is one of those recognized brands in the world that do not require anything to protect its property and brand. There are a number of products in the market as its substitute but Cadbury is very strong to be ahead in this competition. However, confectionary products have an uncertain future due to risks of obesity and health care as chocolates are not very healthy

2.2 Socio-cultural Cadbury was initially run by the Quaker company hence, they were strictly against alcohol to be added to tea, cocoa, coffee, or liquid chocolate. However, chocolate and similar products that are sold by the company are accepted in the whole world, Cadbury has been facing a lot of arguments especially related to its products not being certified Halal to serve Muslim markets in the world. Moreover, there are problems arising in the west too, such as rising cases of obesity in children and adults. A lot of nutritionists advise people to reduce their intake of chocolates and candies which ultimately will affect the Cadbury industry.

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2.3 Technological Technology has altered Cadbury’s packing and production in the past years. An increase capital investment such as in buying modern technology that use pathogen systems and filing patents for heat-resistant chocolates to keep themselves at par with competitors.

2.4 Demographics Cadbury is equal to consumption of chocolate all over the world. The brand was established in the early 19th century and has offices and factories in the United Kingdom and North America as well as Asia and Africa. Kraft foods in the United States purchased Cadbury in 2010. Thus, Cadbury products are now under the ownership of the American confectionary giant. As the Cadbury's official web site suggests, its journey in India has been an eventful one. In the early 1990s, it tried to cater to the sweet tooth of the children. Those days they steered the market and took control over the company's major market share. However, the strategy changed by letting out the secret that "Everyone has a child inside "and thus everyone craves for the taste of chocolate. Cadbury strategies went through a considerable change. It now catered from children to adults. There is some differentiation targeting as a variety of Cadbury products are available to cater for the individual needs of different groups of customers. But nowadays the people are suffering with diabetes. So the diabetic segment people started use of less chocolate or sugar free thing.

2.5 Economic An interest has an effect on buying behaviour as interest increases, people tend to save more and spend less and as income decreases consumer are likely to pay on their craving for chocolate. The worldwide economic decline affected Cadbury’s extension plans quite greatly; however, it did not affect the sales much. Later, Cadbury was successful in business by gaining a 30% rise in its yearly profits. The products that were most sold are Dairy Milk and Trident. Still, after this, the company’s revenue came to a downfall in 2009. Page 9 of 40

CHAPTER THREE: INDUSTRY ANALYSIS

3.1 Threat of New Entrants and Barriers to Entry

Figure 3.1.1: Position Cadbury company in emerging markets

According figure 3.1.1 in global market share for confectionery industry, Cadbury has been placed their company as the largest and most spreading emerging markets business among its rivals. The entry of new competitors will be difficult because Cadbury are already well established companies within this market place. Moreover, it makes the barrier for entry very hard for another new company to start in this food industry and they may require high initial capital or investment for build their own company. Based on this statistic data, we can see it would be difficult for new competitors to place their company position in market place and influence the customers to buy their products Since the company is widely well-known all over the world in many countries that believe ha...