Corporate Strategy of Cadbury Plc - Case Study Example

Corporate Strategy of Cadbury Plc Table of Contents Introduction 2 Business Strategy 2 Fundamentals of Business Strategy 3 Cadbury Plc Strategy 5 Strategy Considering the Strengths 6 Strategies Considering the Weaknesses 7 Strategy Considering the Threats 10 Strategy Considering the Opportunities 12 Conclusion 15 References 16 Bibliography 19 Introduction Globalisation has rapidly changed the business operations of organisations. The business strategies have become significant due to globalisation and there is need for skilful and knowledgeable managers in developing the business strategies in order to derive maximum benefit from the competitive environment of the business. This business report is based upon Cadbury Plc, a UK based company operating in confectionery industry. Cadbury Plc is the subsidiary company of Kraft Foods, a US based company operating in the same industry. The report provides an in-depth detail about the strategy of Cadbury Plc in the competitive environment in order to gain more benefit. Business Strategy The strategy of any business observes an organisation from the viewpoint of their internal strengths and weaknesses and its opportunities and threats that are present in the business environment (James, 2004). Strategies are developed by the management by considering the business environment to gain competitive advantage from the current situation and look for the future growth and development that will benefit the organisation in the long run. Fundamentals of Business Strategy There were many schools of thoughts that developed the basics of business strategy that guided the management to develop the strategies based upon these principles. The classical school of thought provided the strategy fundamentals that were based upon the managers’ ability and organisational hierarchy. The processual school of thought provided the fundamentals of business strategy that were based upon continuous development. The philosophy was that the strategy is a continuous process. The evolutionary school of thought provided the fundamentals of strategy that were based upon the concept of business environment (Harfiel, 2011). The business cycle compels the organisations to accept and amend their strategies as the market expands or contracts and any other changes takes place. The management directs the organisations in such business situation through mix business strategies and operational policies to earn revenues and market share along with meeting customers’ needs by means of efficient and effective business operations (Walden University, 2010). There are three significant fundamentals of business strategy or areas that are required to be focused. The operational, product and customer strategies are part of the business strategy formation. Operational strategy is important and organisations need to identify their operations to determine the strategies to gain success. Finding different solutions for operations of the company with different models will allow the management to access the benefit of progression in the business cycle through efficient operations (Walden University, 2010). Cadbury Plc should find out the best possible ways to maximise the use of its assets in its business operations. It should implement business systems that assist in eliminating and controlling the wastes through the concept of lean management or ‘six sigma concept’ that will assist the management to create a culture of organisational success. Product strategy is an essential business strategy as it deals with meeting the expectation of the customers perceived needs. There are different strategies of products that are utilised to gain market share and revenues. Different brands are developed with similar product lines or new products lines that enhances the customer experience (Walden University, 2010). Cadbury Plc should follow the core strategy for the products that are aimed to offer customer satisfaction in meeting their demands. Innovative product strategies should be developed to offer new products that capture the market with its unique features and it is essential for the success of the business. The business strategies related to the customers are long run basis. There are different strategies that are developed for customer relationship even though it increases the operational costs but the goodwill that is generated benefits the organisation for the long run. The customer service needs to be enhanced from the competitors that will gain more customers (Walden University, 2010). Cadbury Plc should adopt different strategic options for the products with customer that will increase the level of satisfaction of the customers. This will facilitate to gain more customers and increase the sales and add benefit to the organisation in terms of return on investment. Cadbury Plc Strategy Cadbury Plc in the confectionery industry is one of the major players in the international market. It operates in more than sixty countries through acquisition and mergers. The strategy of acquisitions and mergers had been successful for Cadbury Plc in order to operate internationally. Even though Cadbury Plc deals with Kraft Foods, it operates its beverage section independently in Australia (Cadbury Plc, 2009). As Cadbury sustained to include new company and product names to its corporate family, it recognises the significance of successfully controlling all technical data internationally in order to manufacture, dispense and trade its products with the objectives of utilising the complete value of its intellectual possessions. In doing so, the company was able to decrease the risk and had ensured conformity with government regulations (Cadbury Plc, 2009). The external and internal forces that are present in the business environment decide the business strategy formation. As it has already been discussed that the strategy of any business observes the organisation from the viewpoint of its strength, weakness, opportunity and threat, the facts will be discussed with respect to Cadbury Plc in the subsequent sections. Strategy Considering the Strengths Cadbury Plc is the largest confectionery supplier in the international market with approximately 9.9% of the international market share. This market share is huge with the products that the organisation has (UK Business, 2011). The strategy of Cadbury Plc should be in acquisition or merger with other companies in different regions of global market. This strategy will assist the organisation to operate in new markets and gain advantage in obtaining more market shares and increase its revenues (Phillip, 2011). Cadbury Plc has been able to show greater potential in its financial performance. This was evident from the year 1997 when there was an increase of 9.4% in the turnovers (UK Business, 2011). The strategy of Cadbury Plc should be in minimising its costs in various categories such as cost of operations, supply chain and other areas. This minimisation of costs will assist in increasing the efficiency of utilisation of its resources and enhance the financial performances (Valveka & Et. Al., 2010). Cadbury Plc has strong manufacturing capability, leader in the innovation of products and has an established brand image in the international market. The organisation has gained strong advantage in understanding the customer segments in the category of chocolate, chewing gum, and candy. This has provided an added advantage for the organisation to gain competitive advantage in the international market (UK Business, 2011). With such brand recognition, Cadbury Plc should be able to develop strategy in order to enhance the image of the brand. They are able to recognise the customers’ expectation according to their product segment. The organisation should be developing the strategy that is towards customers and products. This strategy will be able to assist the organisation in understanding the gaps of customer expectation and meet the gaps with the products that are available in the market. Cadbury Plc has been able to successfully develop and grow with its strategy of acquisition. This strategy had assisted the organisation to enter different markets and also to successfully capture international market share (UK Business, 2011). The strategy in acquisition and merger should be evaluated properly in terms of cost benefit analysis, brand valuation and market potentials. These are necessary to increase the sales of brand of Cadbury and provide a better image of the company. The cost benefit analysis in acquisition and merger will provide the company to gain more advantage from analysis and be able to exploit the market to derive benefits (Phillip, 2011). Strategies Considering the Weaknesses Cadbury Plc is dependent upon two segments namely beverage and confectionery market. Considering its competitors such as Nestle, it has diversified portfolio of products. In such business strategies, the profits generated from the segments can be used for investment purpose in different operational area of business and in research and development (UK Business, 2011). The strategy of Cadbury Plc should be towards diversification in segment or category and the industry as well. The competitors’ strategy can be taken as a model in diversification. This will increase the category segment from beverage and confectionery to other categories that will offer different products to customers from same brand and assist in increasing the revenues. The investment can be utilised in research and development of products that can attract more customers. This will assist the company to minimise its weakness in this segment and gain advantage or provide competition to its competitors (Yokoyam, 2007). The competitors of Cadbury Plc are exposed to greater global experience. Cadbury has its strong presence in European market but not in other markets where competitors are strong. The company being new in different markets has to face lot of problems with the competitors’ presence (UK Business, 2011). Since the competitors of Cadbury Plc had already entered various markets and gained revenues, this had increased the level of competition for Cadbury Plc. They should adopt the strategy to enter new markets solely or through mergers and acquisitions. This will permit them to enter the potential market and enable them to increase their sales. Entrance to the new market will create competitive environment and there will also be tough fight for market share. In entering the new potential markets, Cadbury Plc will acquire competitors’ market share that will provide advantage to the company in developing and sustaining in long run (Kalyanaram & Gurumurthy, 2011). Strategy Considering the Threats In the global market, there is an increasing demand for cost effective environment especially for transportation, packaging and energy. The global supply chains are intended to be in low cost locations (UK Business, 2011). The strategy for Cadbury Plc should be towards minimising the cost in different ways. They should focus upon the transportation. The strategy regarding the transportation should be focused upon reducing the cost of transportation that will minimise the cost and assist in increasing the profit margins (Valveka & Et. Al., 2010). The supply chain strategy should be efficient enough to control the issues of supply chain globally. This strategy will solve the international supply chain problems that will increase the efficiency of the operations and help to achieve the desired outcomes (Jett & Et. Al., 2006). There is competitive pressure from other brands at international and national levels. The promotional and pricing strategy activities by competitors determine the price war competition. This threat is high in deriving the profits (UK Business, 2011). Cadbury Plc should develop strategy for national level and another strategy for international level. The strategy should focus upon promotional activities that should be different for national and international markets. Promotional activities will assist the company to gain benefit in developing the image of brands. It is important to recall the brands so that people do not forget the brands. This assists in increasing sales that ultimately boost the profitability of the company. The social factors are the threat to the core products of Cadbury Plc. People are more calorie- conscious and look for nutrition as well as healthier lifestyles that demand for healthy products (UK Business, 2011). Cadbury Plc should develop strategy in R&D in order to develop innovative products that can offer healthier products for calorie conscious people. The trend is towards healthy food lifestyle. The company should be able to follow the lifestyle trend in developing such products that will assist in sustaining in the future environment. Strategy Considering the Opportunities There are important opportunities with regards to expansion in the new markets such as China and Russia where there are huge population with increase in the economy in the country and demand for confectionery products (UK Business, 2011). Cadbury Plc should develop strategies for expansion. The expansion plan in potential market will not only increase the sales but also increase its market share. The expansion in various markets will develop future markets for different brands and products that the company will develop. This will increase the scope for operations for future and develop the organisation towards achievement of future objectives (Panhans & Kaufmann, n.d.). There are opportunities in increasing the market share through the strategy of target acquisition. Furthermore, there are higher acquisitions and mergers in the confectionery market in the global market environment (UK Business, 2011). The strategy in target acquisition in the confectionery market will increase the company’s operations in different locations and establish its brand in different markets where its competitors are present and in new markets as well. In the FMCG market, the important aspect for survival is through increasing the competence and reducing costs. Cadbury Plc has shown its potential in cost efficiency through the strategy of moving the production units to countries where the labour and raw materials were cheap, there was efficiency in supply chain, procurement and sourcing were done globally and investment opportunities were there in R&D (UK Business, 2011). The strategy should be continuous in nature. The continuous nature of strategy will provide the opportunity for Cadbury Plc to maintain a sustainable development in future. This strategy will assist in continuous reduction of costs and offer benefit till it is effective. The strategy should be flexible according to the changing business situation. This will develop competitive advantage due to continuous reduction in cost and increasing efficiency. This strategy is more future oriented and will provide benefits for long run operations and increase the value of brands. In the FMCG segment, the innovative product development according to the consumers’ preferences and tastes is a key to success. The healthier snacks that posses lower calories are required to be developed. According to the business report of the UK, the “R&D and product launches have led to sugar-free & centre filled chewing gum varieties and Cadbury premium indulgence treat. Low-fat, organic and natural confectionery demand appears strong” (UK Business, 2011). The strategy of Cadbury should be to invest in R&D. This strategy will help the company to develop such products that are unique in nature and can attract the market with its quality and better pricing. The R&D investment leads to certain product development that increases the value of the company when the products are accepted by the consumers at a larger scale. There are three kinds of confectioneries such as chocolate, candy and gum in which Cadbury Plc operates and has been successful in its operations for many years. They need to diversify their products category for sustainable development in the future. This will assist the business in generating more revenues from different product lines and add its contribution towards the future growth (National Packaging Covenant, 2010). Cadbury Plc should diversify their business operations like their competitors. This will offer added benefit to the company in diversification as the risk associated with the product portfolio will be minimised. Due to this strategy the company can not only minimise the risk but also raise the long term expectation benefits. This will reduce the risk in single market operations, which in turn will stimulate the efficiency and profitability. Conclusion Business strategies are significant in sustainability and progression of the organisation. There are many strategies that are developed depending upon the business environment. However, the management of Cadbury Plc should select the best alternative for its affectivity and efficiency in performing towards achievement of the expected goals. The importance of strategies is being more significant due to the variation in the business environments that are caused by different forces. The management is more focused upon the forces that affect the performance of the organisation and develops strategies that minimise the risks developed through the forces and provides benefits to the organisation in different situations. References Cadbury Plc, 2009. Customer Profile. About Us. [Online] Available at: http://www.infor.com/documents/cadbury-plc.pdf?cid=WW-ALL-US-UND-1009-BIG-ERP-MICRSTE-WIMS1 [Accessed April 14, 2011]. Harfiel, T., 2011. Strategic Management and Michael Porter: A Postmodern Reading. University of Waikato. [Online] Available at: http://www.mngt.waikato.ac.nz/ejrot/Vol4_1/harfield.pdf [Accessed April 14, 2011]. James, P., 2004. 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