Marketing Theories: Case of Cadbury Inc - Term Paper Example

Marketing Theories: Cadbury Inc. Case Study SWOT ANALYSIS Strengths Unique customer base: Cadbury has an extensive market and enjoys a unique kind of market that is rarely affected by seasonal and economic factors. Chocolate continues to be demanded as a gift for children and lovers. It is a favourite among both children and adults and it is often possible to find chocolate being used as a relaxing snack or reward snack especially among women (case study). Established brand name: Cadbury is a household name across the world and enjoys a significant level of recognition. As one of the oldest brands in Britain, Cadbury has managed to single out itself as one of the most preferred brand as far as chocolate, candy and chewing gums are concerned. Strong manufacturing competence: Cadbury has been in the business since 1905 and has established itself as a leader in innovation through coming up with unique and quality products. Focus on confectionery: Cadbury mostly focuses on chocolate, candy and chewing gum which have ensured unique understanding of customers in the confectioneries market. Accordingly, the company is able to produce what customers are likely to appreciate thus increasing profitability. The company can also conduct research more easily and focus advertisement resources thus creating more impact. High financial strength: Cadbury is well established and this has maintained its financial strength. Furthermore, Cadbury’s sales are considerably high and hence the increasing financial strength. Accessibility: Cadbury chocolate and other products are easily accessible as compared to competitors’ products. Cadbury chocolate will be found in basically every shop, supermarket, café, train station, universities, colleges and vending machines across the world; which makes the product easily accessible to the customers thus increasing the company’s sales. Innovative advertising tactics: The Company attempts to attract as much attention as possible through their advertisements. The gorilla advertisement of Dairy milk in for example attracted a great deal of interest and drove up the company’s revenues by 6% in Britain (Alarcon, 2008). The company now plans to use brand ambassadors to promote the company in what is considered more of brand engagement as compared to straight advertising. This will be done during the 2012 Olympic Games which the company is sponsoring. Weaknesses Product diversity: Unlike other companies such as Nestle which have diversified product portfolio, Cadbury concentrates on the beverage and confectionery market. This limits their profit potential and risk, given that diversification reduces risk through having backup businesses in different areas in the market. International experience: Cadbury’s market concentration has mostly been on Europe. This places it at a disadvantage over its competitors who have established firm market presence in the world. Impact of the take-over bid: The recent take-over by Kraft foods threatens the continuity of Cadbury’s brand name and culture. Since the takeover, Kraft foods has made significant changes within Cadbury and thus impacted on the operations of the company. According to Ribbeck (2011) for example, Somerdale Factory in Keynsham was closed in December 2010, leaving 400 employees jobless. This is an indication that many changes brought by Kraft could affect the company significantly. Management hurdles: There have been significant changes in Cadbury management following the Kraft merger which may impact on the operations of the company. A number of people in the management resigned following the Kraft takeover including Roger Carr, the Chairman; Todd Stitzer, Chief Executive Officer; Andrew Bonfield, the Chief Financial Officer; and Phill Rumboll, the Marketing Director. This must have affected the company’s operations in a significant way. Opportunities New markets: There are significant market opportunities for expansion around the world including India, China, Russia and Africa where there is a significant growth in consumer wealth. Combined with the growing population levels, the demand for confectionery products in these countries could boost Cadbury’s profitability. Diversification: Cadbury could benefit more from product diversification through investing in other beverages such as coffee, tea and milk production. The company could also come up with new products aimed at capturing the luxury market. Notably, Cadbury has not ventured into the production of luxury chocolate yet it is a growing market (case study). Threats Competition: The chocolate confectionery product category is highly competitive and Cadbury faces fierce competition from nestle, Mars and Kraft, as well as emerging and luxury chocolate makers Cacao Sampaka and Hotel Chocolat among others (case study). Competitors are constantly seeking to overpower the Cadbury brand through extensive marketing and through mergers and acquisitions such that its market share is threatened. Popularity of dark chocolate: In the UK, dark chocolate is becoming increasingly popular among the adult population thus threatening the market for milk chocolate. Dark chocolate which was only popular in mainland Europe where milk chocolate is associated with children is now being consumed more in the UK. Dark chocolate has been perceived to be healthier hence the change in preferences. The increase in the launch of dark chocolate products has increased the demand for the same and this threatens the marketability of Cadbury’s milk chocolate. Customer preferences: Customer preferences are highly volatile and they are likely to change their tastes depending on the products in the market which may decrease demand. In 2007 for example, Cadbury lost a significant amount of profits when their sales started plummeting due to reduced demands such that the company had to incur a significant amount on advertisements (Ganesh, 2008). The shift of demand from milk chocolate to dark chocolate could also affect the company significantly. MARKETING MIX Product Cadbury has managed to retain their customers through producing the same quality products which always leave the customers yearning for more. Cadbury dairy milk is prepared using real chocolate and milk. Cadbury maintains a trademark quantity of ‘a glass and a half full cream milk for every 200g of dairy milk chocolate’ (Cadbury website). Cadbury maintains huge milk supply aimed at maintaining the ingredients of milk chocolate. Generally, Cadbury products are popular around the world and this can be attributed to their manufacturing expertise which allows them to produce desirable snacks and beverages. Price Price is one of the most important aspects in the marketing mix and may highly affect the demand for chocolate and other products sold by Cadbury. While price may be affected by different factors including competition and market changes, Cadbury ensures that the prices charged for its products are affordable. This is especially so for dairy milk and other confectionery products such as éclairs and other candy. The price however is highly affected by the market forces, competitors’ price and the product life cycle. Overall, Cadbury maintains a significant market share due to the favourable prices offered. Placement The supply chain maintained by a company determines the availability of products to its customers and hence influences profitability levels. Cadbury strives to ensure that the customers are in a position to access their products at the nearest shop. This is done through a supply chain that targets all outlets where customers are likely to frequent including supermarkets, shops, petrol stations, railway stations and other areas that customers are likely to frequent (Ganesh, 2008). There are also vending machines in most towns, which allow customers to purchase chocolates and candy without having to go to shops. This way, Cadbury is able to reach a high percentage of customers and hence increase profitability. Furthermore, Cadbury operates in over 200 countries which make their products easily accessible to customers thus enhancing profitability (Cadbury website). Cadbury also attempts to customize products to fit the culture and religion of countries it operates in. Promotion Cadbury is highly aggressive when it comes to advertising the company’s products with a view of encouraging demand for its products. The company has managed to maintain a great brand image around the globe especially in the chocolates market. The company mostly uses straight advertisement that targets the customers in different segments of the market using print media, online advertisement and television. These are aimed at enticing the customers to purchase its products through indicating their perceived deliciousness. Among the most intriguing advertisements is 2004’s advertisement in which a person and an animal were debating on whether to eat one among the range of bars including Dairy Milk; 2007’s gorilla advertisement which featured a gorilla playing drums along Phill Collin’s “In the Air Tonight”; and 2008’s advertisement featuring trucks on a runway, racing to Queen’s tune “Don’t stop me now” (Alarcon, 2008; Ganesh, 2008). The gorilla advert was later re-launched in 2008 with Bonnie Tyler’s track “Total Eclipse of the Heart”. The company also advertises its products through sponsoring events. The latest campaign that Cadbury is preparing for is the 2012 Olympics in London where it is a major sponsor (Reynolds, 2010). 2000 brand ambassadors are being recruited to help in staging mini Olympic Games which would be used in support of the company’s sponsorship. Different games are being staged including 5-a-side football matches, ‘spots vs. Stripes’ events and short races by workers; all aimed at keeping the spirit of the Olympics while advertising Cadbury (Reynolds, 2010). PRESTCOM Political factors These include changes in the political setting and government structures such that the running of the company may be affected. A new form of government in a country for example may impact on the company through introducing new rules in the country which may affect production, supply and demand among others. An example is government campaign against obesity which has led to downsizing of the amount of junk food advertisement on television. Regulation Changes in regulations witnessed in different countries could have a significant effect on the functioning of the company thus impacting on the profitability. In the UK for example, companies have no right to enforce a minimum price and retailers can therefore set their own prices without recognizing the company’s recommendations. This could easily affect the company’s profitability as products would have to be sold cheaply to the retailers. Economic factors These include changes in the customers’ disposable income and the general condition of the economy. Factors that may affect the economy include fluctuations in currency values which may affect the price of inputs such as cocoa which has to be imported, economic fluctuations such as inflation and deflation and increase in employment which leads to increased disposable income. Factors affecting demand and supply also impact on the company significantly. Reduced demand for chocolate due to the rising preference for substitutes for example could lead to reduced demand for the company’s products. Social These include changes in the social set-up and culture which could impact on the company’s well-being. Changes in trends among consumers due to changes in social factors could lead to changes in demand. The rise in ethical consumerism for example has led to the rise in demand for dark chocolate due to the fact that organic and Fairtrade brands are mostly dark. Technology With continuous advancement in technology, it has become imperative for all companies to be on the lookout for new developments so as not to be outdone by competitors. Technological changes have led to the introduction of new and more efficient machines used in the confectionery industry with a view of cutting down costs and producing better products. Cadbury must therefore keep up with the improvement in technology so as to ensure that they adopt the new technologies and hence keep up with competition. While advancing technology levels are often considered useful for companies that desire to stay ahead of competition, it is usually costly for companies to keep investing in new technology. Cadbury is therefore faced by the challenge of keeping up with technology as this may be very costly for the company. Competition The market is highly competitive, with other confectionery and beverage companies striving to capture increased market share, such that Cadbury must strive to remain competitive through providing innovative products. Due to its strategic position in the market, Cadbury has been a target for competition, especially for its dairy milk brand (Ganesh, 2008). Competitors particularly Nestle are increasingly exerting efforts towards beating Cadbury in the market through intensive marketing and the introduction of new products into the market. Organisation These include factors within the organisation and these may include the company culture, management and processes. The ways in which these are governed determine the success of the firm. The company’s core purpose is “Working together to create brands people love” for example is likely to promote innovativeness and motivation towards developing products that are appealing to the customers. On management, the recent acquisition of Cadbury has led to a significant level of turbulence in the management after a number of high level managers resigned following closure of the deal. This could significantly impact on the company’s process structure as new managers replace the existing managers who had accumulated enough experience at the company. Market The market for confectionery and beverages is likely to be affected by different factors including the presence of substitute goods, changing trends in the market and population size among other factors. These to a large extent determine the demand for the company’s products such that the management must be on the lookout to ensure that the customers are satisfied.   PRODUCT LIFE CYCLE  The product life cycle goes through four stages as follows:   Most products at Cadbury are at the maturity stage. This is because the company tends to focus on products that it developed a number of years back, which have become the company’s identity. Dairy milk chocolate has remained in the maturity stage for a significant period of time having gained popularity among customers around the globe. While sales may have fluctuated in certain times, dairy milk chocolate always manages to maintain sales and therefore it may not hit the decline stage in the near future. The same applies to Bournvita, Drinking Chocolate, Cadbury Crunch, Snickers, Cadbury’s Buttons, Cadbury Box and Éclairs among other products. Bournville which was previously neglected was re-launched around the world in 2008 in the dark chocolates category. This follows the growing demand for dark chocolate across the globe. Bournville can be considered to be in the growth stage, given the appreciating market growth for the product. It has already passed the introductory stage, a factor triggered by its existence in the market before. The new cranberry and granola variant that gives users an alternative to dairy milk chocolate is also in the growth stage having been launched in 2008.   NEW PRODUCT DEVELOPMENT  Cadbury’s strives to come up with new products from time to time with a view of satisfying customer demand and hence improving profitability. Notably however, Cadbury has mostly maintained its traditional brands, with dairy milk being the most popular product in the market. Others include beverages such as Drinking Chocolate, Cocoa and Bournvita which have been in existence for a long period of time. Cadbury has however managed to maintain these brands as an all time favourite in families across the world such that the introduction of new products by other companies rarely has an effect on the demand for its products. In essence, new product development has not taken a significant level of priority. Among the newest products in the company include Crunchie Rocks which was launched in 2008 (Atkins, 2008) and the cranberry and granola variant in the same year (Partos, 2008). Changes in the customer preferences triggered by the need to maintain health and wellness have driven Cadbury towards the intentions of manufacturing healthy snacks. In 2008, the company sought to launch a new dairy milk alternative through a cranberry and granola variant. This is a cereal bar with fruit pieces and oat doses such that it creates a healthy appeal (Partos, 2008). The company is continuously seeking ways of developing new products to deal with the wellness twist and this has seen the re-launching of Bournville which is a dark chocolate brand. PRODUCT PORTFOLIO MANAGEMENT  Product portfolio management ensures that new product developments in the company are well managed in order to ensure that they are appealing to the customers. Cadbury has a dedicated research team and product designers who are responsible for collecting information from the market and then designing the products so that they can effectively satisfy the customer’s needs. Further, the existing products must undergo thorough quality control checks so as to ensure that the standards are maintained and that buyers receive the required quality. Product portfolio management at Cadbury also involves examining the products in order to establish redundant products or those whose value in the market has depreciated in order to withdraw them from the market or rejuvenate them through extensive marketing. It also involves studying competitors’ products and consumers’ response to these products before designing new products that will attract customers to buy the company’s new products.   BRANDING- BRAND IMAGE  A brand by definition is a combination of name, symbol, design or a combination of all these meant to identify a company’s product from that of competitors by creating a mental picture of the product in the customer. By creating a brand, a company promises to deliver certain benefits, features and services through its products. Cadbury’s is often associated with the best chocolate in the market and it has always strived to ensure that the brand is maintained that way. The objective is to ensure that the brand that people are used to from their chocolates, candies and beverages are maintained in high standards and through innovative developments. This is ingrained in the company’s culture whose core purpose is “Working together to create brands people love” (Cadbury website). Cadbury has maintained a strong brand image that is highly popular across the world. The purple coloured logo with the word Cadbury written in calligraphy has remained a constant brand image for the company’s products and is easily recognizable to its users. The company seeks to identify the brand with a range of touch points through images as seen on advertisements. The slogan ‘a glass and a half of full cream milk in every 200 grams’ is not only enticing to the consumers but also triggers desire from the image of milk pouring into a block of Dairy Milk Chocolate. This is an advertisement success which has served the brand for over fifty years and is indeed an integral part of packaging. The image which can be found in literally all areas including on buses, trains, television, billboards, shops and supermarkets has created an unshakable image that is ingrained in the customers’ thoughts when making buying decisions. This has earned Cadbury many loyal customers.   CONSUMER BEHAVIOUR The nature of customer behaviour is a significant factor in influencing the development of Cadbury and its eventual profitability. As noted by Butler (2006), customers are highly unpredictable and their behaviour is likely to be influenced by an insignificant number of factors including new products in the market, prices, class of customers, changes in tastes and preferences, season factors, desire for luxuries and general view of products. Cadbury seems to have recognized this and therefore attempts to ensure that customers are served according to their needs. A number of factors influence customer behaviour in the confectionery market as follows: Occasions Customers have a tendency to change their buying behaviour whenever there is an occasion or special event and thus look for gifts to complement these occasions. Fortunately, Cadbury has unique products for occasions including gift packages meant for loved ones which can be accessed at any time of the year. Cadbury has mostly ensured this through Cadbury Celebrations, consisting of assorted chocolate products such as Gems, Dairy milk, Perk, Nutties dry fruits covered in dairy milk chocolate including raisins, Almonds, cashew nuts and caramels among others. Examples of gift packages include the dairy box, temptations, gems and Koko. These are used as gifts for special occasions such as birthdays, appreciation/thank you visits, baby showers and bridal showers among other occasional times such as anniversary celebration and gifts given to lovers as a special treat. These also come in different varieties including fruit and nut, whole nut among others. The company also has limited editions for special seasons which include valentine, Easter and Christmas. During valentine different forms of beautiful and romantic packages are made consisting of Cadbury’s favourite products. Easter eggs and Christmas tree decorations are also in the list of special editions for various seasons. Attitude towards products Generally, Cadbury products are widely accepted among the young and older generation. Cadbury chocolate is especially famous and is often been considered most people’s favourite when it comes to chocolate. Not only is it available at pocket-friendly prices but it is also tasty and readily available. This also applies to most other products from Cadbury and is therefore strong point for Cadbury. Benefits Customers often compare the benefits they are getting as opposed to what they are paying for. This to a large extent influences their purchasing decision. Cadbury through its manufacturing expertise has managed to maintain quality in its products thus maintaining demand and reducing the effect of competition. Market trends Trends in the market are often triggered by the emergence of new products, financial stability and changes in social trends. Cadbury is threatened by changes in the market such that it could impact on demand. The most current market trend is the popularity of dark chocolate which may reduce the demand for milk chocolate as well as the increasing well-being tendencies which have tended to discourage the consumption of junk food such as chocolate and sweets. SEGMENTATION – TARGETING - POSITIONING Segmentation Segmentation involves the division of a potential market into distinct sub-markets of customers who have common needs and whose characteristics are similar, thus making it easier to manage their needs. Cadbury has segmented its market into three different markets which include cocoa powder and drinking chocolates; chocolates, wafer biscuits, candy and sugar confectionary; and malted foods. The first segment seeks to serve beverage customers and includes items such as Cocoa and Drinking Chocolate among others. The malted foods category includes Bournvita and malt extract. The Chocolates, wafer biscuits, candy and sugar confectionary is the biggest market; with a percentage of 76 percent. This segment further divides the market into age groups thus producing products that are appealing to adults and others which are appealing to children. It is however notable that Cadbury does not place an age barrier in most of its products and most chocolates and biscuits can be consumed by adults and children alike. Targeting Targeting involves the selection of customers that the company desires to serve more from the identified segments. Cadbury has realized the strength of its chocolate products, mostly the Dairy Milk Chocolate and hence targets the consumers of these products. The company has done this through extensive advertising that aims at popularizing its chocolate around the world, thus significantly improving sales. Cadbury mostly targets customers who love to enjoy life and would generally consider a chocolate bar to put them in a jovial mood. It targets parents and their children and tries to make Cadbury milk chocolate look like a necessity or something that is worth having. It is advertised in such a way that it seems to be a thing of the family and not for children alone. The same applies for party lovers such that chocolate bars are often presented as good options to have a wonderful evening with friends and loved ones. Cadbury also targets people seeking presents for their loved ones and Cadbury chocolates are presented as a gift of choice thus attracting many buyers. Positioning Positioning denotes the process of implementing the company’s targeting tactics through coming up with a chosen image and appeal to the chosen market. Cadbury has chosen to position itself as a manufacturer of the best chocolate and a favorite choice for everyone. The company thus aims to promote its products in the most appealing way and in a unique manner that identifies the products from others. The aim is to remain the brand of choice among consumers. The chocolates are presented as the best by implying that they are made with the best ingredients and with the most milk than any other milk chocolate. The appealing rectangular blocks of chocolate with two glasses of milk pouring over them is Cadbury’s way of creating a lasting image in the customer’s minds such that they are not likely to choose any other chocolate. The Dairy Milk Chocolate and other products have therefore positioned themselves in the market and are likely to appeal to customers when making buying decisions. Reference List Alarcon, C 2008, Cadbury ‘gorilla’ ad drives UK sales, Marketing Week, Feb 19, 2008. Atkins, P 2010, Confectionery giant Cadbury’s set to launch Crunchie Rocks’ available online < http://www.ingredientsnetwork.com/story/full/confectionery-giant-cadbury-set-to-launch-crunchie-rocks> Butler, A M 2006, Essentials of Marketing in the 21st century, McGrawHill, New York. Cadbury website (UK) Cadbury's (nd) Our Products, Available fromhttp://www.cadburv.co.uk/ourproducts/todav/Pages/JS boxes.aspx?category =boxes#koko. Accessed 12/11/2010. Ganesh A U 2008, Analysis of Cadbury Inc, Dhruva College of Management, Pakistan. Partos, L 2008, Oat and fruit focus for new Cadbury granola launch, available online < http://www.confectionerynews.com/Markets/Oat-and-fruit-focus-for-new-Cadbury-granola-launch Reynolds, J (2010) 'Cadbury to stage series of mini-Olympic events', Marketing, 28th April, p4. Ribbeck, M 2011, Cadbury wraps up chocolate production at Somerdale site, available online < http://www.thisisbristol.co.uk/news/Cadbury-wraps-chocolate-production-Somerdale-site/article-3055478-detail/article.html> Read More