Global Brand in International Business: Cadbury Schweppes - Case Study Example

Introduction Global Brand: Cadbury Schweppes Cadbury is one of the world’s most renowned companies with a remarkable assortment of gums, chocolates and candies. There are 50,000 employees directly working in more than 60 countries. http://en.wikipedia.org/wiki/Cadbury_Schweppes  Vision The Vision into Action plan covers all parts of our strategy. The primary objective of Cadbury is to give its shareholders high returns or in other words create value for shareholders. SWOT analysis Strengths Cadbury has a huge potential of it capitalizes foreign market. It has a huge amount of production capacity and making less use of it would mean economic loss. By penetrating in the foreign market Cadbury will produce at its potential thus increase in economies of scale. Since Cadbury has a very well-known brand name therefore even domestic markets won’t pose any big threat for the competition. Also if Cadbury minimizes its dependence on the UK market and penetrates in the markets abroad, it would also diversify its risks. Weaknesses Cadbury is not a very strong brand in US market. However DR pepper has witnessed increase in its sales but it is still low on a comparative basis since it has a low market share. Therefore only UK and US dependence would not be enough and Cadbury need to capitalize a lot in the foreign markets. Opportunities From its confectionary products it can build feasible positions in markets through organic growth and procurement. Besides as mentioned, Cadbury has other opportunities to have market development in foreign countries like Russia, France, China and even some Asian countries. The best opportunity for Cadbury is to cash its brand name among the competitors. Lastly besides the “Low Calorie” line of chocolates they are now offering the “Sugar Free” line. This has opened a completely different Cadbury world in US. Threats Because of the confectionary products that Cadbury offers it is crucial to be aware of any present or upcoming threats. Due to high increase in prices, purchasing power of consumers is varying and thus it is important for the company to take notice of this. It is also being observed that consumers may shift from chocolates to “Healthy” snacks. If this happens, a poor supply might affect Cadbury’s name. Due to consumer trends there may also be a threat of seasonal slump of sales throughout the year which shall also increase the cost of raw materials. Organizational Structure Due to technological advancement Cadbury, over time, has DE layered its employees and replaced them with more efficient machines. It has also been regularly outsourcing areas like maintenance and market research. De-layering has had some benefits on the company. Since most of the work is generated automatically now the quality and taste is not compromised. It remains same wherever the products are being produced. Employees are now skilled at multi-tasking and they can handle more work areas than they did before. This has also increased per labor productivity of the company. Thus profitability has also increased giving more incentive to the company to perform more of restructuring. However each manager will now have more employees to look after while having a broader scope of control. This would induce some amount of confusion and might create communication gap between the two levels. The Cadbury factories in different regions of the world work independently. They use the raw material of the country they are based in. so in a way the company as a whole is decentralized. But the board of directors of the company are involved in decision making processes for each factory and the production processes of each country therefore they give an image of a centralized company. Financial Overview Results FY 2007, • Base business revenue growth at +7% • Decent increase in all categories: Revenue increase of 13% in developing markets • Focus brands increase 9% • Core margins +190bps: Good success on cost minimization techniques. FY 2007 percentage revenue according to regions, America: 27% Asia Pacific: 25% Britain, Ireland, Middle East & Africa 31% Europe: 17% FY 2007 percentage revenue according to category Chocolate & Cocoa beverages 46% Gum 32% Candy 22% Main Competitors Thorntonsplc – UK Lindt&Spruengli AG – SWITZERLAND Ferrero SpA – ITALY Nestlé S.A.  The Hershey Company Mars, Inc. (no longer using the name 'Masterfoods') Strategic Initiative We now look at the strategic initiative that has been planned for the Cadbury Schweppes to undertake in order to be more strategically advanced. Concept Cadbury today seems like a distant brand to a layman customer. The idea for this strategic initiative is to bridge the gap between the Cadbury customers and the brand by relating to the customer’s choice in a natural way. A chocolate boutique plus a small cafe where almost every food item contains chocolate are available. Different varieties and forms of exotic Cadbury brand will be served. There will be in-house manufacturing/baking products. Packages for occasions and celebrations, birthday ceremonies, anniversaries and corporate events are also catered. Mission "To provide high quality products, excellent service and a place where people truly enjoy coming. To build rewarding relationships with all our stakeholders” Vision We look into innovations in the world of chocolate and open up to new taste sensations. At the same time build and maintain a customer-oriented culture and to be a reliable and valued source. Objectives 1. To conduct our business according to the highest level of ethics. 2. To make sure that the customers of Cadbury get value of money and high levels of satisfaction. 3. The management culture is the key to success for Cadbury thus we intend to increase flexibility and also make it more direct. 4. To continue to train ourselves. 5. To be the most efficient in everything that we do. Competitive Advantage There is no chocolate boutique currently present in any famous area therefore we don’t have any direct competition. Chocolate boutique is an entirely new idea and hence. The first mover advantage would be the key for Cadbury. Our competitive advantage for this SBU is variety, taste and quality of service. Business Model Core strategy: To provide high quality products, excellent service and a place where people truly enjoy coming. Basis for differentiation: This strategy will compete in the market using differentiation strategy. The novelty of the idea of a chocolate boutique will be our differentiated advantage, plus our stress on service for café SBU will be our basis of competition with other cafés. Core competency: Cadbury’s core competency is our taste. In addition, we would introduce new flavors very frequently and this news would be flashed on our website and our’s New notice board (it will be placed outside and inside of the outlet). Customer interface: Our customers can interact with us either face to face i.e. when they would enter our boutique, or through our website. The third medium would our Facebook page, information and news about us would be uploaded, plus our products with their prices will also be listed. Target market: Our target market for the boutique includes high-income group who want to enjoy heavenly chocolate for an extra amount, or who want to add touch of elegance in wedding ceremonies or corporate events. For the café, our target market includes middle-income and high-income groups who want to enjoy a good piece of cake in a warm environment. Our target market includes young adults and university students. Fulfillment and support: The only way our product goes to the market is through our outlet, no sales on website will be conducted. Our chocolate products shall be wrapped in our logo, plus customized wrappings for gifts will be offered. Each customer can have unique style of presentation and wrapping. Strategic Planning of Cadbury Strategic Business Units Two SBU’s have been identified, one is the café and the other is the chocolate boutique. Both the SBU’s differentiate on the following basis: CHOCOLATE BOUTIQUE CAFÉ Price Premium pricing Competitive pricing Customers Upper-income group, Corporate sector Middle-income group, young adults esp. university students Competitors Nestle Starbucks , Hershey Quality/style High quality, decorative packaging Medium to high quality, more stress on service than presentation Substitutability Sweets and confectionary at wedding ceremonies Other non-chocolate bakery items Liquidation No effect on café No effect on chocolate boutique Segmentation Three segments have been identified in the market: 1. Middle income group, specifically youth: this segment is defined by the need of good snacks in a good environment, with competitive prices. 2. Office workers: This segment is defined by the need to get eatables very quickly during the brief lunch break. This segment might prefer eating in, or taking away. 3. Special days/Weddings/Events: This segment is defined by high-income earning people who want to add a classy and elegant touch to wedding ceremonies or corporate events or other occasions like mother’s day or wedding anniversaries. Products for this segment shall be custom packaged and premium priced. Assessing Competitive Intensity For our business plan, we will be using Michael Porter’s five forces competitive position model to determine the competitive position of the venture. The five forces are listed as under: 1. Existing competitive rivalry between suppliers: It cannot be established with certainty that the level of rivalry among competitors in this industry is either on the higher or the lower side, so the internal rivalry in this industry is of a medium level. There have been no visuals or measurable signs of the fierce competition in this industry so far. However, there is prevalence of price wars and service quality at certain instances. Therefore, it is deemed that the rivalry among competitors is at a medium level for the venture. The idea is unique hence we can declare it to be ‘seller’s market’. 2. Threat of new market entrants: The threat of new entrants is considerably high for the reason of venture being a new idea altogether and easily imitable business proposition. The ingenuity of a viable business idea needs with the feasibility to be worked out. Once the business is established and its feasibility proven, lots of investors seem interested in the business plan. Currently the food industry is saturated but at the same time it is difficult to copy recipes. Starting a chocolate boutique can also be considered as feasible because we have the first mover’s advantage in a way that no other company is having the same business model and operations. So we can conclude that the threat of new market entrants is at a medium level. 3. Bargaining power of buyers: Bargaining power in this scenario is relatively low because of the product range being an innovation providing a new dimension in the leisure and entertainment industry. Therefore there is less likelihood of any power being exercised on part of the consumers. However, once the business gets into flow and the options get worked out. There is uniqueness of our offerings; our desserts have imported recipes also the chocolates are imported from other places. The customers that we intend to target are not price sensitive because of quality and taste. Hence there is low level of customers’ bargaining power. 4. Power of suppliers: Power of suppliers will be low again considering the existence of a large number of product options using the same ingredients. We intend to Import chocolate slabs from a number of countries. We have decided to buy raw material for bakery products from local suppliers. 5. Threat of substitute products: The threat of substitute products is very high because of the existence of a large demand and supply of confectionary and leisure services hence there is high level of threat of substitutes. The tactic to overcome this weakness we have in mind is by introducing sweets and confectionary in events and corporate segment. Assessing Competitive Position Bases of Competition: M & A tools analyzed which states the following five factors that will determine the bases of competition for our chocolate boutique. 1. Superior cost position: Cost cutting techniques will be used in order to attain a cost position that is better and at the same time quality issues are also taken in consideration. A few cost cutting strategies like targeting our variable costs, cutting those costs which do not add value to our products and along with that we will be monitoring our financials and will always be looking for ways to reduce costs. 2. Customer loyalty: Delivering such products which can obtain customer’s loyalty, thus the strategy will be geared towards keeping a client happy so he or she will provide more business. Some customers do a particular company a great service by offering favorable word of mouth publicity regarding a product, telling friends and family, thus adding them to the number of loyal customers. Hence we will be targeting such customers who can spread positive word of mouth for our outlet. 3. Brand power: There will be a strong emphasis on the brand power. Our brand “Cadbury” is a leading brand altogether, therefore the two keys to achieve a strong brand power will be determined by us beforehand. The brand can get stronger by developing its brand Identity along with its brand personality. 4. Real asset advantage: In financial terms a real asset is an identifiable asset. E.g. buildings, trucks, machines etc. We will be strategically placing our outlet so that we can achieve the real asset advantage for our company. 5. Government protection: This is retail service industry business with very low stake at Government’s level if any however considering the exclusive location intended for this business might require considerable efforts towards acquisition and starting of operations at that location. Government agencies like Capital Development Authority and Small and Medium Enterprise Development Authority would be the possible points of contact at Government protection level. Key Success Factors Below are the key success factors for the industry which are listed in order of importance: Exclusivity and ingenuity: The product being offered by the business has an exclusive element that is difficult to copy. Provision of a leisure environment and brand experience: The brand Experience and leisure environment forms a very important part of the food business. Quality assurance: The Quality policy of the company reflects its commitment to the consumers and stakeholders. The assurance of quality will help remain competitive in the long run. Consistency of high scale of customer service: Customer service remains the most important aspect of service industry business as long as the service quality is consistent. Maintaining price competitiveness: Price competitiveness remains the man challenge as the new business is easily copied by new entrants, thus, introducing price competition in the market. The business will also have to remain competitive in costing. Capitalizing on the strategic location: Strategic location selection for the business will remain the most important competitive edge for the business. Location is one aspect of the business which cannot be copied or taken away from the business and hence the business should be used for capitalization. Brand communication: Brand communication through, ads, annual reports, and employee customer interaction, all areas of brand communication should have coherence in them in order to promote and strengthen the brand image and personality. Advertising tactics: Advertising should adapt creativity in psychographic executions and media usage should promote the brand and create a unique identity. Constant inflow of capital until the breakeven point: Inflow of finances is essential to maintain the competitiveness of the business. Selecting a Strategic Thrust By incorporating industry maturity and competitive position the natural strategic thrusts for boutique will be first mover advantage, differentiation, focus and fast growth. For Café it will incorporate differentiation, focus and growth with the industry. Detail descriptions of five basic areas which are related to accessing strategic thrust are attached in Exhibit 3. Strategic Position Any strategic position has five elements that define it. The Climate: The climate is about “What is changing” that is creating an opportunity for our business and the timing for suitability to all involved, employees and customers. The recent changing lifestyle moving towards a metropolitan culture for the fast moving life propels the consumers towards finding alternatives in entertainment and recreational possibilities which in turn fuels our conviction. The Ground: The Ground is where we choose to compete. The venture chooses to compete in big cities because of the potential in the market. The social and cultural patterns in any geographical area will provide a profitable opportunity for the business in consideration. The Leadership: The principle of leadership compels the people and the customers to follow us in the following ways: Caring: there must be a concern for the people and the customers Intelligence: it is for the reason that we see the opportunity and the changing climate Courage: it is necessary so that we take actions to capitalize on opportunities Discipline: this is tough to exercise but fair to manage the business Trustworthiness: we will have to focus on trustworthiness so that our people and customers can trust and follow us. Supporting /Functional Strategies Market/product strategy: The chosen market/product strategy for our company is Defense of Market Position. This is because initially our strategies will be focusing on retaining the market share. We cannot go for market penetration strategy in the start because we are selling a high end product; hence we do not intend to lower the prices of our product so the best strategy that we see for our company is defending the market position. Exhibit 4 illustrates the supporting action plans for cafes defense of market position. Operational strategy: The strategy on which we will be operating our business will be quality improvement. We are selling our product in the name of quality so this will be ensured in each and every step of the processes we indulge in. our primary purpose will be to verify that the products offered or the service delivered meet the specifications established for them. The secondary purpose of quality control will be to analyze the operations function, seek causes for product deficiencies and answer to any of the customer complaints. Technology strategy: The kind of business that we are operating does not need any high technological equipment. The machines that we will be using in our manufacturing processes will be up to date which will eventually result in efficiency of the processes. At the moment we will not be using the automated billing system because initially we will be starting up with a single outlet; computerized billing system is, however, in our future plans when we would step into expansion. Organizational strategy: Our Company’s organizational strategy is centered on the development and communication of our Organization Chart. This approach will have the effect of setting a path for the development for our company. Once defined, we will be taking the actions required to make it a reality. Retrenchment strategy: At the moment we are just focusing primarily on our chocolate boutique, our café has our secondary focus. We are not venturing out in other products at the moment because we have little capital to start up with. We are also restricting ourselves to one outlet only so that we can expand our operations once we attain financial stability. We also have limited space for customers in our café because our main focus is to minimize costs in whatever way possible so that we achieve our break-even as soon as possible. PESTEL Analysis Every business environment is a set of different factors. These factors play an important part in determining that environment. We would study these different factors to get a better idea of the company. Political forces The political forces that might affect our business can be: Security situation Changes in the Government policies. Strictness in laws related to taxation The above mentioned three factors can affect our business to an extent that it can bring it to an end too. In addition to that, high excise and import duties on the raw material may also cause an effect on our business. Most of our production will be in-house though so that we have the minimum effect of such things on our business. Economic forces The global economic downturn had affected many businesses along with the consumption propensity of people. People tend to have low level of disposable income as compared to earlier times which may affect their decision of buy high end products from our chocolate boutique. The products that we are offering are the luxury products, chocolate being our main focus. The soaring prices of the raw material can also pose a threat on this industry which makes the products less affordable for the consumers ultimately. Social forces Socially, the trends of the region have changed dramatically. The market survey reports show that people now more prefer ready to eat products. It is convenient for the people who are mostly on the go. The emphasis on the quality of confectionary items has increased the competition among the already operating bakeries and cafes. This is also created an opportunity for the new entrants because now the consumer demands more variety and high quality in these kinds of products. Technological forces The use of modern computer software can help our business integrate its supply chain and also integrating its customers to use of modern technology. ERP systems can be applied to our business and thus make it as much technologically advance as possible. Any other changes in technology might also create a threat for our firm as long as we do not implement it in our own business. Ecological forces Our business will have concern for the environment. We intend to use paper bags that are more environment-friendly. Our products are also made up of those ingredients which will not cause any harm to the environment. Besides the processes that we will be indulging in will all be environment friendly. Any effects on environment will not affect our business to a larger extent. Legal factors Our hiring procedures will be highly legal. The corporate law policy will be implemented in our business. Everything is intended to be done ethically and lawfully. Any changes in any kind of laws would be quickly implemented in our business too. Promotion Promotion for Cadbury will include banner ads on Facebook, flex will be placed in proximities with target market and leaflets will be distributed in campuses and advertisement in newspaper. A half page advertisement about the inauguration will be given in NEWS and then every a quarter page advertisement on the First Sunday of every alternate month. Promotion through word of mouth and personal selling will be our first priority. For the chocolate boutique direct selling and print ads will be used while for the café banners will n promotional campaigns will be launched in universities. However broachers and leaflets will be placed at the front counter and on the tables for small scale promotion. Revenue Model Cadbury will be following both Businesses to Customer and Business to Business revenue model. In the case of b2c the customers will be individuals who will purchased both our café and boutique products. In b2b model the customers will be corporations which will be severed with our unique boutique items for their corporate events. Sales Our sales are seasonal for some items example sales for shakes and chocolates demand are higher in summers and coffee is preferred more in winters obviously. Mostly boutique items sell in quarter 1. Ice cream and brownies will be the highest selling items in café. For boutique items demand is high in first quarter because of Valentine’s Day. 20 grams Chocolate Bites sales will be highest. References http://www.cadbury.com/Pages/Home.aspx  www.cadbury.com www.cadbury.co.uk Miner, J. B. (2005). Organizational Behavior: Behavior 1: Essential Theories of Motivation and Leadership. Armonk: M.E. Sharpe. Weisbord, M. (2004). 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