Cabury- assigment 2 - PESTLE SWOT PDF

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Abdikarin Hassan BMC151634345

Introduction I am proceeding with my work in the Economic Development Unit (EDU) at my nearby council; I am working with the officers who are responsible for publication, brochures and guides. I have been requested to choose and examine a huge business that exchanges the European Union (EU) and use this research to write a report that evaluates the effects of the environment on that business. Cadbury is a British multinational sweet company owned by Mondelez International since 2010. It is the second-biggest chocolate company in the world after Mars. Cadbury is universally headquartered in Uxbridge, West London, and works in 50 different countries worldwide. Cadbury was established in Birmingham, England in 1824, by John Cadbury who sold tea, coffee and drinking chocolate. Cadbury developed the business with his brother Benjamin, followed by his sons Richard and George. Cadbury chocolate generated more than $3 billion in global net revenues in 2016. P4- Discuss the internal, external and competitive environment on a given organisation. A PESTLE analysis is a structure to analyse the key factors influencing an organisation from the outside. It stands for Political, Economical, Social, Technological, Legal, and Environmental. Political- With the change in the government regulations, Cadbury need to change their policies accordingly. The government regulations have their impact on all the processes from recruitment, training to employer rights. If we consider UK government, it has changed from Labour Party to Liberal Democrat that has its impact on the operations of Cadbury. According to estimates, 3000 workers have been employed by UK factories but the entry of skilled workers can be limited and it may affect the hiring in future. Another example could be the rising in tax rates. In 2010, the value added tax rates rose by 2.5%. This led to increase in chocolate prices and reduction of sales. That time, Cadbury Schweppes thought to cut back the operation price by outsourcing hour and accounts practices. This leads to saving the organisation and losses of jobs within the country. https://www.locusassignments.com/solution/unit-1-external-internalenvironment-assignment-cadbury Economical- Due to the weak pound in 2010, Kraft were able to buy Cadbury at a lower price than its actual value. The low interest rates in the UK also enabled Kraft to borrow £7 million from a British bank to secure the sale. Further economic costs of this sale included the relocation of manufacturing to Poland, which was cheaper and Kraft were seen as being focused on the amount of profit it could make from Cadbury, rather than protecting the brand itself.

Abdikarin Hassan BMC151634345

For example, if the unemployment rate is too high, many people will not be able to afford luxury things or even pay rent. If interest rates are high, then it will be much more expensive for Cadbury to finance the purchases of their investments. An increase in taxes could mean they have to charge more on their products so they can pay off all their expenses and try to make profit. If they charge more on their products customers might not be willing to pay the demanding price for the products. Social- Cadbury was initially run by the Quaker company therefore, 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 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 eating chocolates and candies which are likely to affect Cadbury sales in the future. Consumers are becoming more ethically aware and are questioning the practices of those associated with the production of cocoa. There was report that some chocolate companies use children to plant and pick out cocoa. The industry was heavily criticised over the use of “child slave labour”. Cadbury could lose a lot of customers if they use children furthermore it will damage the company’s reputation. Technological- Finally, technology has changed Cadbury’s production and packing process over the years, starting with the introduction of new brew machines to blend coffee and cocoa gains. Recent moves in this regard include the use of pathogen testing systems and filing patents for heat-resistant chocolate. They use technology to promote their products, launch new products and they also have different social media sites to keep their consumers up to date. First and foremost, technology affects a Cadbury’s ability to communicate with customers. In today’s busy business environment, it is necessary for employees to interact with clients quickly and clearly. Websites allow customers to find answers to their questions after hours. Fast shipment options allow businesses to move products over a large geographic area. When customers use technology to interact with a Cadbury, the business benefits because better communication creates a stronger public image. Most businesses of the modern era are subject to security threats and damage. Technology can be used to protect financial data, confidential executive decisions and other proprietary information that leads to competitive advantages. Simply put, technology helps businesses keep their ideas away from their competition. By having computers with passwords, a business can ensure none of its forthcoming projects will be copied by the competition. A business that has the technological capacity to research new opportunities will stay a step ahead of its competition. For a business to survive, it must grow and acquire

Abdikarin Hassan BMC151634345

new opportunities. The Internet allows a business to virtually travel into new markets without the cost of an executive jet or the risks of creating a factory abroad. Legal- Legal issues which impact on Cadbury is the requirement to provide details of ingredients and calorie details to help consumers with making choices based on fat content. Other legal issues which Cadburys have arguably make easy for future business activities have potentially arisen as a result of the hostile takeover by Kraft and the possibility of a review of the regulatory framework surrounding this. The concerns on obesity may also lead to a strengthening of the regulatory structure such as the proposed sugar tax. Legal requirements in the UK have increased for food manufacturers due to EU membership and these may reduce after the Brexit process is complete. However, due to past food scandals in the UK, it is unlikely that consumers would want to see food regulations regarding health and safety and ingredients to be greatly relaxed. Another legal issue is concerning with the healthcare of customers and peoples using chocolate products in common. The obesity problems and subsequent fewer are mostly reported to National Health Service (NHS). Most heart problems are caused due to usage of cocoa products therefore they are discussed in legal scenario as well. If there are any legal regulation for usage of contents in chocolate is imposed, it may affect Cadbury very badly in a lot of ways Environmental- The main factor that affects all companies is the environment. Fossil fuels are used in huge amounts and therefore it’s increasing in costs. There may be alternatives needed in the future. Furthermore, every brand needs a welldeveloped environmental image in the market. Therefore, Cadbury must try to start investing in green technologies that is environment friendly processes. Environmental issues for Cadbury include the amount of packaging which they use and the organisation has reduced the amount used for Easter eggs and the production of its organic Green and Black chocolate. Other environmental concerns will relate to the carbon footprint created by their supply chain including manufacturing and distribution. Further plans include supporting farmers who grow cocoa beans to ensure that this is carried out sustainable. Ethics The supply chain and distribution process- This describes the way in which raw materials are sourced and transformed into final products and delivered to customers. Cadbury has direct control over what happens in the transformation stage of its own process and can also influence the behaviour of suppliers and distributors. This enables Cadbury Schweppes to monitor a supplier and check they stick to standards in particular criteria. One criteria, for example, may be the environment and the questionnaire allows the supplier to express whether they carry out review or

Abdikarin Hassan BMC151634345

have an environmental policy. As a major international company Cadbury recognises its environmental responsibilities and the need to care for its workforce, local communities and all those who may be affected by its activities. For example, its environmental responsibilities include:   

Treating waste water prior to clearance Looking to improve its energy efficiency Controlling the release of gases into the atmosphere.

Competitive advantage Definition – this is any condition or circumstance that puts the business in a more favourable/ superior business positions as they are offering customers greater value, which could be from lower prices or by offering their customers a greater product or service that justifies a higher price. Cost leadership-By using this strategy the objective is to become the lowest-cost producer in the industry, the way to they can achieve this is to produce on a large scale so that the business can exploit economies of scale. If the selling price can be at least equal, or close, to the average of the market then the lowest-cost producer should enjoy all of the benefits. The strategy usually is associated with a large-scale business who offers "standard" products with relatively little differentiation which is accepted by the majority of customers. Most of the time, a low-cost leader will set discounts on their products so they can maximise sales, particularly if by doing that they have a cost advantage over their competitors and this can lead to them increasing their market share. This strategy requires Cadbury to closely co-operate between all functional areas of a business. To be the lowest-cost producer, the firm is likely to achieve or use the most effective distribution channels, Use of bargaining power to negotiate the lowest prices for production inputs and High levels of productivity How PESTLE helps business succeed? PESTLE analysis is a simple and widely used tool that helps a business analyse the political, economical, social, technology, legal and environmental changes in a business. This helps the organisation understand or see the big picture forces of change that you are exposed to, and from this, the business can take advantage of opportunities that they present. Importance of PESTLE analysis PESTLE is useful for four main reasons: It helps the organisation spot business or personal opportunities, and it gives them advanced warning of significant threats.

Abdikarin Hassan BMC151634345

It reveals the direction of change within their business environment. This helps the business shape what they are doing, so they can work with change, instead of against it. It also helps the company avoid starting a project or launching a new product that is likely to fail for reasons outside your ability to control. Lastly, it helps a business to break free of unaware doubts when you enter another country, region, or market; because it helps them to develop and set a target view of this new environment. Competitors Cadbury’s main competitors are Mars and Nestle. Mars-Mars is a privately owned business. In 2014, Mars had a piece of the pie of 29.5% in the United States for the chocolate industry. Some of its best-known brands are M&M's, Snickers, Starburst, Twix and Skittles. Mars was the seventh-biggest privately owned business in America in 2014, with offers of $33 billion. Nestle- Nestle is the biggest food organization on the planet, covering various subsectors of the market. Chocolate isn’t one of the main products they make, however it has 5.8% piece of the pie in the U.S. they own companies like Kit Kits, smarties, Lion, Crunch etc. P5- selects a variety of techniques to undertake a situational analysis of a given organisation. SWOT refers to strengths, weaknesses, opportunities and threats. SWOT analysis is a process where the business identifies the internal and external factors that will affect the company’s future performance. The company’s strengths and weaknesses are the internal factors. Opportunities and threats are the external factors. Why is it important for a business to conduct SWOT and how it helps the business succeed? If a business is looking to expand and grow they need to look for new opportunities, including new potential customer groups or gap in the market for demanding products, developing new categories of products and services and geographic expansion. In SWOT analysis the management team identifies emerging opportunities to take advantage of right now and tries to predict longer term opportunities so they can plan ahead and when the time is right they can launch the products. Cadbury use SWOT to compare their performances to competitors, they also use it to detect future threats that could affect the performance of the business; once they do this they try to find solution to avoid this threat. Strengths- Cadburys has a strong manufacturing process which can adapt to changing consumer tastes and meet these changing demands. Despite being

Abdikarin Hassan BMC151634345

associated with chocolate, they have a lot of different products to provide for their consumers so they can compete in this changing market. Cadburys is associated with a strong ethical approach and this has reinforced its brand as being caring and socially responsible to stakeholders and environmental issues. Cadburys has a strong brand and its adverts, such as the gorilla playing the drums, have created talking points for their consumers and reinforced the brand. Another strength is that they are well know and easily identifiable brand therefore they customers all around the world trust their products and buy them. One of their main strengths was the introduction of Dairy milk which is the most sold chocolate in India. Weaknesses- The competitors of Cadbury such as Nestle have a very diverse product portfolio which means they sell other products other than chocolates and other sweets where as Cadbury, it only depend on the confectionery and drink market, where as its competitors can use this as an advantage to make more profit. They also attract other customers by providing more products. Cadbury doesn't have great international experience like its other competitors; it has traditionally been strong in United Kingdom Europe only. Now they operate in America and Asia, it possibly lacks the understanding of the new emerging markets and consumers behaviour compared to competitors. It will take a long time to settle in a new market in another country so their competitors would be a step ahead of them. Another weakness is that it has been relatively high priced brand, which is turning the pricing customer away. There are a lot of other companies customers can turn to therefore they need to reduce some of their prices to keep their customers. Without customers there won’t be any sales and without sales they won’t make a profit. Another weakness is that there is a lot of competition in the market therefore it will be hard for Cadbury to dominate the market. Opportunities- The opportunities lie in new markets, such as developing countries and emerging markets like China, Russia, India and other Asian countries where populations are growing, the wealth of consumer is increasing and there is a high demand for confectionery products. They also need to launch other products other than chocolates and other sweets. Their competitors sell all different types of food products therefore they should do the same if they want to compete and expand their business. Production can also be moved to lower cost countries where labour costs are cheaper which would help with cost savings and Cadbury may also benefit from the economies of scale. The company should take steps to make effective their distribution channel to provide their products in rural areas. Threats- the demand for Cadburys' products may also be impacted by increased concerns regarding obesity and consumers becoming more health aware. This may require Cadburys to increase its research and development to reduce the calorie

Abdikarin Hassan BMC151634345

content of its products but this should also include consumer testing. People have become much aware about health due to increasing side effects of chocolate. They are therefore consuming fewer chocolates so it becomes threat for them. Worldwide there has been an increase in demand for cost environment, particularly for energy, packaging, sugar and transport. Global supply chain in low cost locations. The porter’s five force Porter’s five forces is a simple but powerful tool to understand the competiveness of a business environment, and strategy to make profit. Supplier Power - The Cadbury Company has got many contracted suppliers that are able to support their on-going production operations. There is a lot of competition in the market, for the raw materials such as nuts or special ingredients but still it is enough to satisfy their production requirements. Cadbury has kept a very good relationship with their supplier which is considered as a very good an advantage. Barriers to Entry - Cadbury is already very popularly and widely known, it can easily earn the trust of the countries. The only and the main thing that might affect the production of the Cadbury is to find a good positioning and get together the necessary requirements for the smooth entry and running of the factory and the foreign policy and laws that might affect the operation. Power of Buyer - The demands for chocolates have gone down because of the existence of health aware. The price of the product is no longer subjected on the demand of the people but is now subjected to the increasing number of competitors in the market that offers the similar type of products at a much lower cost might be the cause of the customer turning their back on Cadbury. Rivalries - There are many competitors in the business who are planning to take over the supremacy of the company that has been kept for years. The difference in the choice of the customers depends on their taste and what they prefer. And in the recent past, companies like Nestle in this market are continuously developing their new products or new ideas making it harder to compete. Threat of substitute- supermarket or small businesses tends to copy popular chocolates (e.g. Nestle Kit Kat) and put on their own brand on the package and sell it for cheaper prices. Confectionary is normally brought for snacks or gifts, in this way large number of substitutes exist, like chips, fruits, drinks etc. But chocolate are sold higher than these other substitutes. 5Cs 5C Analysis is a technique used to conduct situation analysis. Conducting a situation analysis is one of the important steps in identifying the research problem. A situation analysis involves testing the external environmental factors and internal organizational capabilities that impact how a company operates.

Abdikarin Hassan BMC151634345

Customers- One of Cadbury’s main principles is to provide its products at a reasonable price to its customers, it follows that customers find its prices quite affordable. However, we have to know that we are referring to the cream customers who would compare Cadbury with Nestle or others. Some Cadbury stores might be very premium whereas others will be very much affordable. But mostly Cadbury has a premium pricing strategy. The pricing is made possible by optimizing development and training costs. Competitors- S...