Environmental Changes of Cadbury Company in Last Five Years - Assignment Example

? Introduction to The Cadbury Company and its glowing History: Cadbury was initially established in 1824 by John Cadbury as a small shop in Birmingham. He believed that the sole cause of poverty was alcohol. So, instead of that, he sold coffee and tea at his shop. Also, he added drinking chocolate and cocoa to his list; all the time believing that they may serve as a substitute. He was very particular about maintaining high quality standards for all of his products. His hard work and effort proved to be very successful, as by the year 1842, he was selling 11 kinds of cocoa and 16 kinds of drinking chocolate. (English Tea Store 2009) John experimented with his mortar and pestle, and was proud to present a range of cocoa and chocolate drinks. His chocolate drinks had sugar in them to enhance the flavor and his precious chocolate products were sold in blocks. When customers purchased these blocks they cut a tiny piece, placed it in a saucepan, added milk or water as they desired and the delicious concoction was ready in a flash. (Cadbury Ltd 2011) The business was prospering very well and both brothers, John and Benjamin, joined together to form the company Cadbury Brothers of Birmingham. They set up an office in London and in 1854 received a Royal Warrant, the first of many, as manufacturers of chocolate and cocoa to Queen Victoria. After running the business successfully for six years, the brothers ended their partnership because John`s health was deteriorating and hence, the responsibility of running the company landed on the shoulders of John`s sons, George and Richard. Both the brothers ran the company very well and expanded the product line. They introduced Cadbury’s Cocoa Essence which marked the beginning of chocolate as it exists in today’s time. Soon, they were able to shift their operations to a larger facility. As the company continued to progress, the brothers appointed Master confectioner, Frederic Kinchelman to share his recipe and production secrets with the Cadbury workers. This resulted in the expansion of the product line as more chocolate delicacies were made available and in 1897 they introduced the first milk chocolate and from then on, after two years they were incorporated as a limited company. Cadbury merged with Schweppes in 1969 to form Cadbury Schweppe and from there on they went on to acquire Sunkist, Canada Dry, Typhoo Tea and more. The manufacture of Cadbury brands was licensed to Hershey. Also, Schweppes Beverages was created. (English Tea Store 2009) In February, Kraft Foods acquired the Cadbury Company, making it the largest confectionery company in the world again. From the year 1969 onwards Cadbury`s was known as "Cadbury Schweppes plc" but that was until a demerger took place in May 2008, which resulted in the separation of its global confectionery business from its U.S. beverage unit and was renamed Dr Pepper Snapple Group. Microenvironment: The microenvironment of an organization means the factors or fundaments present in its direct area of operations that has an impact upon its performance and as well as the important decisions made by the organization. These factors are comprised of the company`s: competitors, customers, suppliers, distribution channels and also the general public. (Business Dictionary 2011) Microenvironment of Cadbury: Customers: Every company treasures its customers; similarly, Cadbury`s ensures that its customers are getting delicious and premium quality products which are worth their price. People have faith in the brand name of the company and the company exerts it utmost effort in maintaining the faith of its customers. Cadbury`s believes that Good business and Good values are directly proportional to one another. Therefore, they are committed to the implementation of their commitments and promises, so that they can value and guard the long history of trust that their consumers have in them. They listen to their consumers and respond to their needs. (Cadbury plc 2011) Roald Dahl, in his book The boy, writes that when he was in school, little card board boxes containing Cadbury`s chocolates would arrive for each boy in the house. All the boy had to do was sample each of the twelve bars in the box and give his comments about what he liked or disliked about the chocolate. By doing so, the company was having some of the best chocolate experts test out their innovations. (The Boy 1986) Listening to consumers: Knowing what the customers and consumers want and desire is the first step on the ladder of success. So, what they do is they talk to the people who sell their products, and they also have resources to correspond with the consumers; people who consume their products. This way, they are able to stay in touch with the latest consumer trends. (Cadbury plc 2011) Responding to consumer needs: Nowadays consumers are becoming more and more health conscious; they also prefer safe, healthy and quality products. Therefore, the company uses its insight bonded with the consumers` perspective to understand their wants, wishes and issues, and then, by taking appropriate action, they ensure that not only are they in line with them but also that they create tomorrow's business today. (Cadbury plc 2011) Employees: As the company expands, its number of employees also increases. Consequently, they need to be well aware of their responsibility towards their employees. Cadbury`s recognizes the efforts of its employees, and treasures and cherishes them. They have various awards for giving recognition to the employees, some of which are mentioned below: Chairman's Award for employee community involvement Big Heart Awards (Cadbury plc 2011) Shareholders: The company keeps its shareholders updated on its progress, as they have invested in the company with the belief that it will prove to be beneficial for them in terms of capital and hence, they have a right to know about the progress the company is making and how it’s developing and shaping. Media: The company has the most mouth watering television advertisements and has a very strong media campaign. As they are a global company, so they adjust their media campaign to the various cultures and traditions of different countries. Like in India they have positioned their chocolates as something that doubles the happiness of the occasion. They have different packaging for Holi, Rakhi...etc and they have beautiful and emotional ads. Also for Pakistan and India, they have beautiful and catchy jingles in their Cadbury`s Dairy Milk ad. Their bill boards are also very creative and just by looking at them you feel like purchasing their chocolates. Their chocolate drinks are also very popular and Bourn vita is in a very strong competition with Complan, especially in India. Competitors: Cadbury`s gives strong competition to its competitors and they vary on a country basis. Like in India, their chocolate drink Bourn vita is in a strong completion with Complan. While in Pakistan, they have to face Nestle`s Milo and also Ovaltine. Cadbury`s Roses are proving to be tough competition for Mackintosh`s Quality Street. So, we can gather that their competitors for their various products are on a country wise basis. Macro environment: This includes all factors that can influence the organization, but are not usually under their direct control. For instance, even though laws and regulations of the operating environment do have an influence on the company, but the company cannot have much influence on them. The macro environment is a dynamic force and the company needs to be highly flexible to adapt to it. Along with that, there could also be intense rivalry and competition in the market. With the advent of globalization, the threat of substitute products and new entrants in the market has increased all the more. Other than that, the wider environment is also ever challenging, and hence, the marketer should also always keep the factors of changes in culture, politics, economics and technology in view while designing strategies. (Marketing Teacher 2011) Macro environment of Cadbury: Political: Cadbury`s has its business spread out globally and each country has its own set of rules and regulations with which the company must comply with. If a change is made by any country in their rules, regulations or policies, or even the food labeling/packaging, then it would greatly affect the business of the company. Like in Pakistan, they have to ensure that their products contain Halal ingredients only (Halal are those products that Islam has allowed its followers to consume). Besides this, the company needs to make sure that none of its factories are breaking rules of the country in which it is operating. Like, they should not be polluting the environment, paying the employees below the minimum wage rate or employing under age children etc., since these could result in law suits or scandals and ruin the reputation of the company. Economic: Chocolate is one commodity that is always in demand. People of all age groups like and enjoy it and as far as the confectionary market is concerned, the economy would support it well as its demand exists very well. Chocolate is a luxury for consumers, so if they develop the taste for a particular brand then they would be willing to spend on it even if the cost is comparatively high. Also, the confectionary and beverage market is expanding on a global scale, new products are being introduced and also new companies are entering this business, which means there is still room for development and there are many uncovered segments. Social: The company has a strong brand name and the consumers trust it. Its products are also very popular; hence, its popularity combined with consumers` trust brews a formula for success. But with the spreading awareness about health and the opinion of the slimmer the better, consumers are reducing their cocoa intake so as not to gain too much weight. But since it’s a luxury treat, so its demand cannot possibly cease to exist. Besides this, different drinks, specially carbonated drinks, are said to increase weight so the health conscious people also tend to avoid them. Technological: Production is high due to high technology machines and factories enabling high quality mass production Medias such as the internet, television and the radio enable large amount of cheap advertisement. Internet is a good place to sell goods, even confectionary ones, as it provides a new consumer group with access to Cadbury and allows even larger sales due to a larger overall consumer group Environmental: The company takes full responsibility that it will not pollute the environment and that its production process will be environment friendly. They have set targets for themselves that they will reduce their energy consumption and use the natural resources carefully. Legal: The legal environment of a country is very important and the companies need to be well aware of it, as it affects their products as well as the production process. Britain will revise its rules for a takeover in order to protect its companies from corporate raiders. This was decided one year after Kraft made an aggressive takeover bid for Cadbury`s. (Power 2011) The food labelling laws in UK are very particular regarding which products may be labelled as chocolate as they are required to live up to specifications. Chocolate can be defined as any product which is comprised of cocoa nibs, cocoa mass, cocoa, fat-reduced cocoa or any combination of two or more of these ingredients; they can be with or without extracted cocoa butter and sucrose. The labels on the packaging must have: name of the product, name of the manufacturer, ingredients used expiry date and storage instructions. Companies must ensure that they are aware of the laws and also that they abide by them. (Cadbury 2011) Micro environmental analysis of virgin Cadbury with regard to last 5 years: In the last five years Cadbury`s has further improved as well as strengthened its position in the global market. It has expanded its consumer base. After being acquired by Kraft foods, it has moved on to gain popularity in the US market alongside maintaining its position in the European market. Also, it has expanded globally and also it has increased its product line. With the Cadbury Cocoa Partnership in place it has taken the initiative to help its suppliers of cocoa that is the farmers in its cocoa producing countries. With the company`s efforts, those farmers will be able to yield more cocoa out of the same land and also earn more with which they can improve their socio-economic conditions. The customer base in Asian markets has considerably expanded, as it attracts more and more consumers owing to the company’s marketing campaigns. Neither its suppliers nor its customers have changed over the years. What has happened is that its consumers have increased and alongside that, the conditions of its cocoa suppliers have also improved. Its competitors have certainly increased on a country wise basis and it is now facing hard on competition from giants like Nestle. SWOT analysis: Strengths: Cadbury`s is one of the largest and most important global confectionary companies with a very strong brand name which consumers trust hands down. It owns many important and successful brands like Dairy Milk, Bournvita, Trident, Snapple and Bubbilicious. It has operations all over the world and brings together multicultural employees who work in harmony to produce exceptional quality products. Its competitive and an innovation leader which refines its products and incorporates innovation in them to make them turn out better, more attractive and tasty. Its brand name is very well established and well known around the world. The company has a good know how of its market segments and consumers. The marketing techniques of Cadbury`s are exceptional and they spend a lot on their media campaign. Cadbury`s has tapped into untapped market segments and it targets its products towards people of all age groups and not just children. The company also adjusts its marketing activities according to the cultures and customs to the country it is doing its promotion in, so as to create a more effective and long lasting impact. Its acquisition by Kraft has made it even stronger than before. Weaknesses: The prices of various products of Cadbury`s are comparatively higher than those of its competitors. Also its main production facility is located in the UK, which results in higher production as well as transportation costs. There is simply no room for error due to the exceptional trust that the consumers have in the company, therefore their slightest mistake or flaw could deliver a heavy blow to the reputation of the company. In comparison to its competitors, it doesn’t have a lot of experience in the international market. It maintains a strong position in the European markets and since it has been recently acquired by Kraft Foods, a USA brand; hence, it is relatively new to the US consumers and may not understand the emerging markets as well as its competitors do. Also, its product quality varies country wise e.g. its UK manufactured products are way better than the products produced by Cadbury`s Pakistan or Cadbury`s India. Opportunities: The demand for confectionary and beverages exists worldwide; hence the company could expand its business internationally. Since the company it strong, powerful and well developed so it could aim towards acquisition of well known brands. The product range may be expanded in order to increase the number of consumers and also the target market can be expanded further. The population is increasing globally but the Asian countries are the most populated ones with a relatively high birthrate, so the company could try its luck in these emerging Asian markets.The company should focus on outsourcing in order to reduce its production and transportation costs, which may also lower the prices of its products, making it easier for consumers to purchase the products and also the company will have more money to spend on marketing and research and development. Besides this, they may offer low calorie products for the health conscious consumers. Although, it is currently doing so e.g. it has sugar free gum. Threats: The international tax on beverage and confectionary has increased along with other goods. This has, in turn, further increased the prices of the products making it difficult for consumers to afford and enjoy them. Also, the prices of fuel have skyrocketed and this increased the transportation as well as production costs of the company, which also impact the prices of the products offered by the company. Cadbury`s has to face major competition from existing companies like Nestle, which are very well developed, and also from other emerging companies. Since Cadbury`s has a global business, hence the change in regulations or laws of the country it does business in can directly impact its sales and production. With the increase in consumers becoming health conscious, the sales as well as demand of Cadbury`s products are being negatively affected. Macro environmental analysis of virgin Cadbury with regard to last 5 years: The Macro environment of Cadbury has developed for the better over the past five years. The company has expanded and with its acquisition by Kraft foods, it is now one of the largest companies in this industry. It has expanded its product line and has also entered into various untapped markets. Also, it has bettered its media campaign and especially in India, it is now presenting its chocolates as a treat for all happy occasions. Todd Stitzer, Cadbury`s chief executive, stated that its scary to deal with the Macro environment since the prices of cocoa have seen a 30 to 40% rise closely followed by a 50% increase in fuel prices as compared to what they were a year ago. (Thompson 2008) According to analysts, in spite of the meagre economic standpoint and elevated commodity costs, Cadbury is indomitable on the matter of keeping control on costs and uphold its existing focus on recuperating fundamental sales growth and operating profit margins. (Jones 2008) It can be better understood through the examples provided in the following PESTEL model. Political: Cadbury’s was acquired by Kraft Foods in the year 2010 and the company needs to keep in mind the welfare of the British consumers and maintain the image of the company. After the acquisition of this British company, the government has revised its policies on acquisition so that it can better protect its companies in the future. The key to success for Kraft Foods after its acquisition of Cadbury`s lies in how it keeps up with the brand values of Cadbury's and its basic British identity. Kraft should continue the currently existing Cadbury brand portfolio till it is able to fully understand and analyse the consumers of Cadbury`s, its brand power in the minds of its consumers and its unique selling point which gives it an edge over its competitors. (Hasenoehrl 2010) Economic: There has been a decline in the world economy and peoples` purchasing power has been badly affected. The prices of raw materials have increased due to which the price of the finished product has also increased. The fuel prices have also increased due to which the companies have been forced to increase the selling prices of their finished products. Also, the governments of various countries have increased taxes which impact the prices of products. Due to a decrease in the purchasing power of the consumers, the company`s sales are being negatively affected. Shortage of raw material in different countries doesn’t help either e.g. Pakistan is currently facing a major sugar crisis. Social: Cadbury`s understands its social responsibilities and it has set an example through the Cadbury Cocoa Partnership through which it aims to protect the cocoa farmers and their communities of cocoa producing countries namely: Ghana, India, Indonesia and the Caribbean . It will provide them economic, social and environmental sustainability. (Cadbury plc 2011) Cadbury partnered with UNDP in January 2008 and the Cadbury Cocoa Partnership was formed. This partnership aims to shelter the cocoa farmers and their communities by providing them economic, social and environmental sustainability. In Ghana, they have committed to addressing the following issues: They will try to increase the earning of the farmers by helping them improve the quality of production and also increasing farmers’ incomes by providing them education about cultivation and management techniques, so that they may increase the output of their crop. (Cadbury Cocoa Partnership n.d) Technological: The Cadbury`s production process is mechanized and it uses specialised machinery that has been made to order, from both Britain and other countries to produce top class products. (Cadbury 2011) With improved technology, its production process has become more efficient and its product line has also expanded. It set targets for a more efficient use of energy sources: A 50% reduction in the ‘absolute’ carbon emissions, aim for 60% biodegradable packaging, all sites with water scarcity will have water reduction programmes being implemented. (Cadbury plc 2011) Environmental: Cadbury`s has launched the purple goes green campaign. It was launched in July 2007 with a goal to overcome the climate change taking place. The company aims to overcome it by reducing the amount of energy it uses, being more vigilant when using the natural resources and also by dipping excess packaging. Also, they are focusing on the targets, promises and commitments which they have previously made in their 2006 CSR report. (Cadbury plc 2011) With the aid of regional and local partnerships with Business in the Community Cares employee volunteering program, the National Trust and the Wildlife Trust, the Cadbury UK employees participate in Team Challenges through which they help restore grounds and gardens. (Business in the community 2011) Legal: The company has had to improve its production facilities and double check that there are no contaminants present in its chocolate bars, specifically any traces of salmonella montevideo. The company faced a serious lawsuit after a rare strain of salmonella montevideo was discovered in some of its chocolates and the Health Protection Agency pronounced as the major cause of sickness in 37 individuals who had consumed Cadbury`s chocolates. The Cadbury’s spokeswoman said: “We regret that people have been unwell. We have already changed our testing protocol and implemented new procedures to reassure consumers that any product showing any trace of salmonella will be destroyed, regardless of how low the level.” For this, Cadbury’s held a leaky pipe at its Marlbrook factory responsible and the company was ordered to decontaminate and take apart equipment at the plant within six months. (Elliot 2006) The US based Kraft Foods, which acquired Cadburys early in the year 2010, is thinking of switching control of the company to Switzerland which may deny Britain of a yearly tax of over ?60 million. (Atkinson & Petre 2010) Conclusion: Cadbury`s is a well known and well trusted brand worldwide. Its products are of premium quality and temptingly delicious. It should focus on its advertisement and promotion alongside research and development, for its unique and tasty products are what convince the consumer to pay a higher price for them. Also, innovation is the key to success in the beverage and confectionary industry. It should not let any segment of the market go untouched. It should also pay close attention to its packaging and modify it as required to adjust to the environment of the country its being sold in. If the company continues to keep its focus on delivering premium quality products to its consumers and incorporates innovation, new designs, and refines and enhances the flavors even further, then it will go very far on the road to success. Recommendations: The company should incorporate outsourcing and by doing so, reduce its transportation and production costs which are directly proportional to the product prices. They should introduce products for the health conscious people with lesser sugar and calories. Cadbury`s should target the Asian markets, since they have a high birth rate and therefore a larger consumer base, specifically China, India and Pakistan. They should ensure quality of their products, because considering its popularity, even a small mistake could cost it heavily e.g. it must ensure that no contaminants like salmonella montevideo are present in its chocolate bars. It should further improve its packaging and make it more attractive or maybe change it for it has been the same for quite some time now. Also it ought to offer customer discounts like discounts or little presents for bulk buying...etc It should ensure that its products are of the same quality in all countries e.g. its UK products are better than Indian or Pakistani products and hence, efforts should be made to make the quality consistent all around. References 1. Atkinson, D Petre J 2010, Mail Online, Cadbury goes Swiss to avoid British tax: Move by U.S. bosses will cost Treasury ?60 million a year [online], Available from: http://www.dailymail.co.uk/news/article-1335774/Cadburys-Swiss-avoid-British-tax-cost-Treasury-60-million-year.html, [Accessed on 28th Mar 2011] 2. Business Dictionary.com, 2011, Microenvironment [online], Available from: http://www.businessdictionary.com/definition/microenvironment.html, [Accessed on 28th Mar 2011] 3. 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Marketing Teacher.com, 2011, The Marketing Environment [online], Available from: http://www.marketingteacher.com/lesson-store/lesson-marketing-environment.html, [Accessed on 28th Mar 2011] 14. Power, H 2011, Student Research Center powered by EBSCOhost, The Times (UK) [online], Available from: http://web.ebscohost.com/src/detail?vid=3&hid=11&sid=495493e8-defc-435e-afcf-687cf012e393%40sessionmgr12&bdata=JnNpdGU9c3JjLWxpdmU%3d#db=nfh&AN=7EH45787876, [Accessed on 28th Mar 2011] 15. Thompson, J 2008, The Independent, Dairy Milk sales keep Cadbury feeling sweet [online], Available from: http://www.independent.co.uk/news/business/news/dairy-milk-sales-keep-cadbury-feeling-sweet-881412.html, [Accessed on 28th Mar 2011] Read More