Understanding Cadburys Market Position against Its Competitors - Case Study Example

CADBURY Student’s name Code & Course Professor’s name University City Cadbury External market factors are essential in understanding Cadbury’s market position against its competitors. In this regard, a number of theories and approach are consolidated in presenting an in-depth analysis of Cadbury’s market position. 1.0 External Environment 1.1 Pestle Analysis 1.1.1Political The alteration in UK’s governing party has a profound effect on Cadbury. Political decision within UK’s political arena could positively or negatively affect Cadbury’s success. An increased tax level would imply a consequent reduction in sales of Cadbury’s products. This has a substantial effect on the number of available units sold to consumers. The increased VAT witnessed in 2010 from 17.6 to 20 % affected its price, which resulted to a decrease in consumer purchasing power. The recent acquisition of Cadbury by Kraft has attracted debates within the government pertaining takeover regulations. A number of principles affect such regulation. For instance, the government stipulates the fundamental importance of reasonability during takeover (Office of Public Sector Information, 2010). A furthered legal notice on employee working hours could reduce the company’s productivity. The UK’s government highly affects the company since it dispels regulations governing Cadbury’s operations. 1.1.2Economic The country’s economic performance affects the company’s market approach. A global economic slowdown affects business operation and international operation. A growing economy creates a stable market poll forces that increase sales and revenue base. Tentatively, unfavourable economic conditions in one of the markets could negatively impact consumer demand. Thepurchase of the discretionary item by consumers may decline during the recession, given a lower disposable income. Consumers may reduce spending on discretionary items by shifting to lower priced items. Moreover, a disruption in the credit market could impact Cadbury normal commercial relationship with consumers (SEC, 2010). 1.1.3Social The social trend among the crisp and snaking industry tends to increase. UK’s population is inclined to snacks and crisp, as opposed to chocolate, gums and candy products. Such changes have affected the sales of Cadbury’s products. The introduction of the Cadbury World is garnered towards increasing consumer experience with Cadbury’s products. An increased health conscious consumers may positively or negatively impact Cadburys’ business. Consumers tend to buy and pay more on healthy and quality products. 1.1.4Technology Changing technological innovations tend to improve production and the development of R & D strategies is aimed towards developing superior products. Contrariwise, the introduction of new machinery in provisioning of blended coffee and cocoa improvesCadbury’s future growth. Kraft takeover has suggest increased technological advancement in its production line. The cost cutting approach through lean manufacturing with thekaizen model will potentially reduce the production cost. Introducing new technology will notably increase investment cost for the purchase and the maintenance of the new equipment. 1.2 Porter’s Five Forces 1.2.1 Buyer’s bargaining Power (Medium) It is proposed that buyers are less sensitive to pricing in the case where a product is a small fraction of the buyer’s cost (Porter, 2008). In this regard, Cadbury is characterized by two types of buyers namely consumers and retailers. The group of retailers have a profound impact on the Cadbury. Some of its large retailers include Asda and Tesco. As such, the products face increased competition for shelf space and a significant threat to backward integration. These competition directly affects its revenue collected from sales against rival confectionary companies. 1.2.3 Suppliers’ Bargaining Power (Medium) Suppliers have a huge impact on Cadbury’s final product, with respect to the price and quality. The suppliers are tasked with the provision of main commodities such as milk, sugar and cocoa in making Cadbury’s product. Any change price change ion these commodities, will impact the price of the final product and the company’s eventual profit. Cadbury and nut prices have increased over the years due to a number of unavoidable production challenges, specifically in West Africa. Its pricing has increased more than 20 % to reach its highest level (Nortje, 2013). This has prompted the creation of a fair trade market with some of its producers in South Africa (Nortje, 2013). On the other hand, given the increased pricing of the product witnessed from 2008, the company derivative contracts are implemented by the company for cocoa and sugar products. A Cadbury-Cocoa partnership has been created to determine the long lasting supply for the cocoa products. Due to the impacts of the products on the company, Cadbury has necessitated the need for a robust position and has created a backwards integration to acquire the products. This would mean an acquisition of one or more of the suppliers in ensuring control over commodity prices. 1.2.4 Rivalry among Competitors (High) Given the dynamics of the confectionary industry, competitors have created a tough market competition in dominating various niche. The United Kingdom forms the second largest consumer of chocolate in Europe accounting for approximately 10 kilograms per capita. The industry comprises of 390 companies, five of which offer great competition to Cadbury. The four strong players with global recognition include Mars & Wrigley, Nestle, Ferrero Rocher and Hershey. All these players have a robust brand name in the global market, typified by a high growth rate in developing and emerging markets. Due to the high competition it is highly likely that the products have competing prices, causing the companies to operate in lower margins. 1.2.5 Threat of Substitute products (High) A potential high threat in substitute for the products is eminent; partly due to the increased awareness of health concerns. UK’s population is become increasingly health conscious subject to the aging population (PR Newswire, 2013). It, therefore, creates an opportunity for healthy product line. A further increased ethical concerns have had a significant influence on UK’s consumer behaviour(PR Newswire, 2013). Tentatively, WHO projected a 1.4 billion adults as overweight and 500 billion adults being obese (WHO, 2008).In this esteem, a number of substitutes have emerged in the market such as fruit bars and cereal bars. 1.2.6 Threat of entry(low) Following the 2008 recession, UK’s confectionary industry registered a dropped value to £4.6 billion. However, the market is dominated by well established brands such as Mars & Wrigley, Hershey and Nestle among other inferior brands. Given the saturated market, economies of scale and dominating brands, it is challengingfor a new company to penetrate such market conditions. Hence, the threat of a new entrance to Cadbury is exceedingly low. 1.3 Recommendations In order to expand in new markets, Cadbury should consider its expansion in developed countries. New market will increase the opportunity to tap unexplored markets in this region, such as UAE. Tentatively, it should shift its factories to less expensive workforce; with the aim of reducing its production cost. For instance, it should move from France and UK to countries in Eastern Europe. Reduction in the production cost will increase cost saving and improve its production capacity. The incorporation of lean manufacturing will sufficiently reduce the workforce and employ an autonomous approach to manufacturing. Innovation will ideally focus on producing products that are attuned to the consumer social trends. This will increase consumer preference in a variety of brands under Cadbury. Health conscious products should be developed to cater for the needs of the healthy consumers across different levels. R & D initiations Investing in R & D is crucial to product success. A threat of substitute is evidenced in the production of healthy products, from the Porter’s five forces. The company should invest in R & D programs that develop new and healthier products. Evidently, the consumers areinclined to healthier products for the market. Additionally, the company should increase its investment in the cocoa production sites. This can further in improving the quality of the cocoa products. Cadbury should initiate scientific research on superior cocoa seeds that will ultimately boost the quality of production in these regions. 2.0 Cadbury’s Internal Capabilities Cadbury’s values respect performance, responsibility and integrity – all well read on paper, yet it is how well the company has brought such values to its workplace. It understands that that its value emanates from its people. No surprise, nonetheless that the company assimilates a rigorous interviewing process, based on the core leadership skills. Tentatively, it places particular importance on its quality of management and believes that managers act as a lens through which the employees view the company. Cadbury has recently launched a Purple award, aimed at recognizing great people managers identified through its intensified Coaching Survey. The company’s ‘Growing Our People’ programme has successfully operated for five years, where managers are equipped with coaching skills and a deeper comprehension of their development and strengths in managing theworkforce. Cadbury draws its values of integrity and respect from Quaker values established in 1824. These values have been continued by subsequent leadership and employees over the years, suggesting its effectiveness. Like all successfully working cultures, the company employs an effective communication strategy that uses a variety of media suited for its business. The company is particularly interested in givingits employees a voice, such that they can contribute issues affecting the company’s productivity. For instance, a ‘Tell Trevor’ systems have been used in the enabling its staff to field idea and inquiries directly to the Cadbury’s president. In the late 90s, John Sunderland successfully communicated his intended change message across Multinational Corporation in a number of countries where environments and working cultures are enormously disparate (McCune, 1999). Because the employees form an interval part of the organization, it takes a responsible approach in addressing the employee’s wellbeing through provisioning a multi-disciplinary Occupational Health department in Bournville. Additionally, it has three NHS/private dentists who treat the employees and their families. Consequently, the company has launched a ‘Fit for Life’ campaign that offers a range of free fitness. Cadbury’s strong leadership position in the confectionary industry is attributed to quality products and acquisition of Adams, one of the world’s leading chewing gum manufacturer. Moreover, it has a strong brand name given popular models like Preety Zinta, Cyrus Brocha among others. The company has gained an increased global market share of 10.2 percent. Its robust and connotative teams offer an underlying support to its manufacturing strength. Cadbury’s total quality management has attained a profound customer satisfaction. 2.1.2 Weakness An increased dependency levels on the confectionary goods and diversified operation of acquired brands have contributed to the high production cost. A high production cost limits the firm’s competitiveness and revenue base from its products. The consumers, however, have shown increased health awareness given negative health impacts of high sugar intake. As such, the consumers are forced to seek alternative health benefits. 2.1.3 Opportunity The company’s strong brand image should enable it to penetrate potential markets. The UAE confectionary market is one of the fastest growing market in the world. The market registers an annual growth of 6.09 % by 2018, where Nestle enjoys a 14 % market share (Nestlé, 2009). Secondly, the company can shift its production units to low cost economies where production cost can be significantly reduced. Thirdly, focusing on healthier products would leverage its viability to healthy consumers. 2.1.4 Threat Possible threat is realized at cut throat competition prices from international choc brands. Negative controversies and publicity. For instance, in 2006 the company faced prosecution in one of its brands from the Salmonella-in-chocolate scare (Harrison& Northedge, 2006). The nmarket has witnessed new entrance and individual players, given the increased sales of home-made chocolate. Tentatively, preference and availability of other substitutes such as sweets and deserts have increased the threat to the products. 2.2 Recommendations Increase Corporate Social Responsibility In boosting its brand image, Cadbury should improve its CSR initiatives. One such consideration would improve its green initiatives. Its involvement in protecting the environment is imperative for the organisation. Increased CSR initiates have been attuned to increased consumer preference to the products; hence it will significantly improve the brand image. Diversify its product range Cadbury should increase the range of product under its brand. Increased product will improve consumer preference from a wide selection of products. Produce Healthy products Given the increased consumer awareness on health, it should implement a healthy approach in producing its products. Hence, it could use natural sweeteners while manufacturing process. An introduction of sugar free and healthy product alternatives will boost its variety of consumer selection. 3.0 Corporate Social Responsibility Cadbury’s CSR review activities use benchmarking to present external perspective on its performance. In improving transparency, the company publishes its CSR report every two years; highlighting its CSR activities. Total participation of top management articulates its seriousness in CSR activities (Mondelez International, 2014). The company launched a CSR website named DearCAdbury.com, with the objective of engaging consumers about responsible consumption, ethical sourcing and the environment (Bowser,2008).Nevertheless, the site is an interactive assetthat reaches out beyond analysis of responsible investors. The site focuses on sharing views and contributing to the public debate on responsible consumption, ethical sourcing and the environment. Certainly, it shows Cadbury’s genuine effort in making the CSR initiatives an integral part ofits operations. Cadbury’s ‘Purple goes Green’ sets to stringent goals for the company to be achieved by 2020 (Bowser, 2008). In furthering its CSR strategies, Cadbury’s employs a stakeholder management technique where it communicates with key stakeholder groups. Hence, there are different committees that function together with the aim of managing the developing the company’s CSR initiates and implementations. The company’s Sustainability Strategy Group is chaired by its CEO who develops the intended CSR strategy. It is then reviewed by the company’s main CSR committee consisting of a number of units with distinct tasks aimed towards a specific stakeholder group. Through such a focused correspondence with its stakeholders, a proficient CSR approach is created. Cadbury’s stakeholder management is attuned to the input-output model of CSR strategy. This model conceptualizes CSR as a form of investment that facilitates the firm’s differentiation of its products and processes (McWilliams and Siegel, 2001). The demand for the company to consolidate the CSR attributes emanates from the customers, investors and the employees. Evidently, CSR can result to products or process innovations. In this reverence, Cadbury has pioneered cocoa cultivation in India, as a form of CSR strategy (Kurian, 2010). The company has worked with Kerala University to initiate the creation of a robust product which improves Cocoa yields(College of Horticulture, Vellanikkara, 2014). The input output model consolidates a technique that focuses on analysing stakeholder engagement and view through a consistent advisory approach. The approach follows that the primary managerial tasks of balancing stakeholders necessitates the determination of the appropriate CSR investment levels and decision making of an optimal consolidation of resources (McWilliams and Siegel, 2001). The impact of this approach streamlinesCadbury’s CSR approach. Through appropriate utilization of the communication channels with divergent personalities in different groups, its social initiatives are well constructed in practicality. Through the collective usage of ideas and approach, it is important to the aggressive, sustainability commitment and corporate governance. In the light of thismanagement approach, it extends its business success in various platforms. Taking into account the stakeholder’s ideas and collaborative approach. Kraft’s takeover presented great difference in the ways the company approaches its corporate cultures. The change process has created a new cultural approach to management. Iren Rosenfeld employs a decentralisation strategy that focuses on performance at the expense of employee perception. These approach is new to Cadbury’s workforce and may affect its productivity. Such an approach may reduce employee motivation in the workplace. 3.1 Sustainability Sourcing Sustainability sourcing consolidates issues relating to the suppliers. Sustainability sourcing is essential for Cadbury development initiates. As an international company, it has a great demand for suppliers. Cadbury articulates that its greatest challenge is maintaining quality standards among its suppliers. Crucially important is the supplier’s sustainability in maintaining a proffered environment suitable for its users. Reduced sustainability has a negative impact to the company’s brand image. In response, Cadbury has created a team that enforces conformance and sustainability. The team is tasked with encouraging audits, training and intervention both in the working environment and suppliers. Additionally, it implements International Human Rights and Ethical trading policies. Cadbury’s aims at leading an ethical approach in business. Its core values affect the decisions throughout its decisions of the value chain. Cadbury’s stance on issues through clear communication bother externally and internally. 3.2 Recommendations There is a need to implement an overall change management process. Designing an appropriate strategy for the change in management will help garner the necessary skills in the long run. Kotter’s 8 step approach to the change process will effectively complement the change to Kraft’s approach to cultural practice (Browning, 2007). Kotter’s approach guarantees least resistance and improves employee relation with managers. 4.0Opportunities Middle East is considered a high potential market and strategic location of choice key players in the confectionary industry. The UAE is a fast growing Middle East trading hub (Sweetmiddleeast.com, 2013). UAE’s chocolate industry is one of the fastest and dynamic chocolate market in the globe given the inclusion of new players. Evidently, the confectionary market is set for a compounded annual growth of about 6.07 percent by 2020 (Confectionary News, 2012). Consequently, the global chocolate market is expected to grow by just 2.3 percent by 2020. As suggested by CA Nielsoin, UAE’s confectionary market stands at AED 546 million,whilstthe growth of 27 percent by and value and 14 percent by volume (Nestlé, 2009). It is evident nevertheless that 98 percent of UAE’s residents have showcased an increased consumption rate for chocolate products (Nestlé, 2009). On the other hand, the packaged food market in the UAE is characterized by a 4.8 % growth rate from 2004 and 2009. GCC package food is estimated at about USD 13.6 Billion in 2007 (Confectionary News, 2009). Moreover, UAE’s confectionary market is worth USD 6.3 billion, with the chocolate market having a 3.2 USD billion worth. UAE qualifies as a proffered country for future business, attributed to a number of key factors. UAE’s strategic location betweenthe Far East and Europe provides a proffered platform for trading key products.Tentatively, UAE is the third largest re-export center in the world and forms strategic part of the future global industry growth (Sweetmiddleeast.com, 2013). PESTEL Analysis Political UAE enjoys a stable political function. As such an effective governing system has been used in maintaining peace among thecitizens. Although UAE’s political environment is relatively stable; its governing structure is fairly dynastic and immature. In the national level, UAE operates as a loose confederation typified by its seven emirates. Because Abu Dhabi is the largest producer of oil, its ruler is typically the country’s president, whereas Dubai occupies the vice presidency. Foreign investors are allowed ownership rights of up to 50 percent for limited liability company ownership and up to 100 percent for professional companies. In supporting business, the country has a robust commitment in developing liberal economic policies that consolidate intellectual property rights. Economic As of 2009, Dubai’s foreign debt has been estimated at USD 100 billion. UAE is expected to see a robust economic performance in the next five years, driven by its ongoing economic diversification especially on travel and tourism. Real GDP growth rates are anticipated to be between 3 and 4 percent during the medium term, hence promoting the increased disposable incomes and security. Tentatively, positive business prospect for the country is likely to increase the influx of expatriates’ workers into the region and an ongoing population growth (Index Mundi, 2014). During the forecast the country’s population is expected to increase at an annual rate of 1 % and 2 % (Index Mundi, 2014). In 2008 the country launched a common market garnered towards the increment in investment and trade between the member countries and strengthen the position of member states. For instance, Dubai’s customer duties are low at 4 % with numerous exemptions; typified by a 100 % repatriation of profits and capital. The lack of foreign exchange control and trade barriers present an attractive market opportunity. Contrariwise, Dubai offers competitive import duties of 4 % with many exemptions (Index Mundi, 2014). Social The country has a large expatriate population consisting of more than 80 percent; with a 70 % male population. On the other hand, UAE’s crime rate is almost zero percent hence fostering a proffered social environment for business. A free social environment does not limit cultural practices, rather promotes unity and proffered environment for foreigners. Technology The country has provided efficient technological improvement garnered towards the improvement of the services offered and improving business functions. Evidently, it has a network of sevenindustries, three highly successful, specialised free international distinctions zones, a major airport, modern highways networks, state of the art telecommunication systems and two class sea ports. Technological improvement are considered the cornerstone for efficient production and economic empowerment throughout different industries. It furthers in improving reliability, flexibility, efficiency and reliability at a reasonable cost and size. CAGE Analysis Cultural Emirati speakers majorly use Arabic language as its national language. They have a strict adherence to religious laws that emphasise on the importance of moral uprightness in regard to Islam. Family is epitomised as an essential aspects of life. Arabians strictly follow the Islamic religion given the laws and guidance between the different genders. Administrative UAE was never colonised. UAE’s, governing framework functions as a constitutional monarchy.It falls under the GCC countries and an active member of the trading block. Although UK and UAE has no shared trading bloc, they enjoy flourishing trade registering a $ 2.2 billion in the first half of 2010 (WAM, 2010).UAE commonly uses the UAE Dirham; however, trading in US Dollars is acceptable in both countries; hence facilitating a uniform trading currency. UAE enjoys a stable political stability, typified by different but similar corruption levels. UAE has a corruption index of 6.8 out of 10 (Tahseen, 2013). The government has appropriate policies, check and balances in its business policies, realised through ADNOC policies. Geographical Distance UAE covers an approximately 82, 880 square kilometres, on the eastern side of the Arabian Penisula. Its longest part, the coastline, borders the Persian Gulf with the short section bordering the Gulf of Oman. As such, it has adequate access to the sea and Strait Hormuz which connects the Gulf of Oman and Persian Gulf (Julia, 2000). Economic Distance UAE enjoys a sizeable annual trade income given its open economy. In 2013, it had a GDP (Purchasing power parity) of $ 269. Large trade free zones, efficient infrastructure and strong business orientation makes it a significant commercial centre in the region. The country derives a sizeable revenue from the re-export business and focuses on extensive improvement on its infrastructure, with the aim of luring fotreign investments. Conceptual Model for Entry Entry into UAE market will necessitates the consideration of the macro-environmental opportunities. These opportunities will be side lined to Cadbury’s objectives, or whether the market entry as a potential success. An analysis of Dubai’s foreign policy presents loopholes and potential opportunities. A detailed analysis on UAE’s foreign policy and FD outflows and inflows gives an idea of the potential investment. Being a foreign firm, the company should identify a registered commercial agent/distributor through the selection of a local partner. Although unregistered supplier agreements are permitted, the present ADNOC policy suggest that a registered agency with a local UAE’s entity is essential to do business in the market. The UAE agency law is significant in protecting the local agents and imperative issues that need to be addressed are commission of sales, statutory rights to exclusivity and compensation if non-renewal or termination. In practicality the agent must be 100 % owned by an Emirati national, must have necessary vendor registrations and essential trade licence. The agents are imperative in the distribution and sales of the products since they are accustomed to the Emirate business structure. Further, it will reduce the cost of installing and developing infrastructure. Reference List Bowser, J., 2008. Cadbury launches CSR website. Available at: .Accessed 1st Jan 2015. College of Horticulture, Vellanikkara, 2014. Available at: . Accessed 1st Jan 2015. David Harrison and Richard Northedge, 2006. Cadbury faces prosecution over tainted chocolate bars. Available at:.Accessed 1st Jan 2015. Index Mundi, 2014. United Arab Emirates Economy Profile 2014. Available at: . Accessed 1st Jan 2015. Julia, J., 2000. United Arab Emirates. Philadelphia: Chelsea House Publishers. Kurian, M., 2010. The current phase of cocoa cultivation in Kerala: A reassertion of dependent development.Beehive Digital Concepts Cochin for Mahatma Dandhi University.Available at: . Accessed 1st Jan 2015. McCune, J. C. (1999). “The Change Makers.” Management Review, vol. 88, iss. 5. 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