Objectives of Cadbury Schweppes plc
Objectives of Cadbury Schweppes plc
Cadbury Schweppes (CS) objectives:
It is important to understand how CS objectives fit in with their aims and strategies.
* The aim states what you want
* The objectives set out what you need to have achieved to get what you want
* The strategies are courses of action, which enable you to meet your objectives.
In order for smart objectives to be effective, CS must:
* Provide detail about what specifically needs to be achieved e.g. often in a quantitative form
* Have a time limit by when they need to have been achieved e.g. deadline for achieving something on March 2nd
* Need to state the necessary resources that they require in order that objectives can be met.
Cadbury Schweppes main objective is to expand the company:
"Cadbury Schweppes' governing objective is growth of shareowner value."
CS pursues this objective of growth by:
* 'Focussing on the core businesses of beverages and confectionery' -this means that CS are totally committed to expand and provide the world with chocolates, drinks, etc, which the world will enjoy and be delighted with.
* 'Developing robust and sustainable positions in regional markets' - this means that CS make sure that they are in a strong position in the market. An example for 'developing robust' would be that when CS launched 'wispa' a chocolate bar, which was tested in the North East of England to see if the chocolate bar was a 'hit' to people. If 'wispa' was good up in the North East, then it would be suitable for being launched nationally.
* 'Growing organically and by acquisition' - growing organically means is to expand the company e.g. more factories produced, more employees recruited from outside of the company and etc. Acquisition is when a company merges with another company to be stronger and to achieve the company's objectives for growth e.g. Cadburys limited merged with Schweppes to become a more stronger company.
Setting clearly defined and realistic objectives will enable many employees for CS to understand exactly what their job entails and achieving clearly stated objectives might be linked to bonus payments which can easily act as a motivation to employees.
As you can see, CS main objective is strategic objective because a primary objective is an ultimate long-term goal for their business. I personally think that the growth of any business is what CS or other companies use to survive as a business. If CS don't keep expanding their company, they then will find it hard to compete with their competition e.g. Nestle. If CS doesn't keep up with their main rivals, they then can decline in demand, which can ruin the company. If CS do grow and dominate the market, they then can experiment more with different brands and enjoy controlling power. If CS do experiment with more new brands and doesn't do well in the market, CS then can rely on their other brands e.g. if the new brand 'Boost' doesn't do so well with people, CS then can always rely on other brands 'Dairy Milk.' This is known as risk-bearing economy of scale.
CS objective can also be placed into a secondary objective also because without the primary objective, CS primary growth strategy can be minimised without setting a day-to-day objective, which makes a direct contribution to meeting the primary objectives e.g. increase sales by 5% each year, keep labour turnover at less than 4%. If secondary objectives are accomplished within CS, they then can develop their company.
The growth objective is mainly a long term objective but I also think that the growth objective of CS can be a short term because short-term objectives will often differ from long-term objectives, especially if CS is experiencing poor financial performance at present. A short-term objective may be to consolidate, or even simply to survive the difficult trading conditions that it is experiencing. Once this has been achieved and the business has stabilised its performance, then it may well look to achieve its long-term objective of diversification into new products and new markets, or growth through joining up with other firms.
CS objective for expanding is in the private sector because private sector objectives will often differ considerably from objectives set in the public sector. Profit maximisation is often quoted as the over-riding objective for CS in the private sector. This will involve trying to produce at the point where there is the maximum difference between the firm's total revenue and its total cost, which results in large dividend payments for the shareholders. However, it is far more likely that CS will aim to profit satisfy rather than profit maximise (that is, they will aim to earn a satisfactory level of profits to keep shareholders content, and then use the remaining resources to pursue other objectives such as diversification and growth).
CS set objectives to improve their image and to appear more socially responsible and environmentally friendly, which is often achieved through strategies of recycling materials; sponsoring local events and strictly adhering to all employee legislation e.g. pay levels, Health & Safety, discrimination, etc. One of the best-known publicity that CS has is advertising and sponsoring Coronation Street, which is a well-known soap program in the UK.
I personally think that CS is growing and will increase in the future. One of the reasons that CS is increasing very fast in the market is because of the ...
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CS set objectives to improve their image and to appear more socially responsible and environmentally friendly, which is often achieved through strategies of recycling materials; sponsoring local events and strictly adhering to all employee legislation e.g. pay levels, Health & Safety, discrimination, etc. One of the best-known publicity that CS has is advertising and sponsoring Coronation Street, which is a well-known soap program in the UK.
I personally think that CS is growing and will increase in the future. One of the reasons that CS is increasing very fast in the market is because of the impact of Information Communication Technology (ICT). ICT combined computer and telecommunications technologies that made it possible for CS to work almost anywhere. Very few jobs are not directly or indirectly affected by computer technology now. The change of using ICT has happened very quickly and has changed CS. Before the use of ICT, CS had to use paper work to keep information on. This has now developed to be keep information on computers and other sources of ICT. Emailing is a very useful aspect of the Internet. It allows different members of CS to work together although they maybe in different parts of the country or even the world. The Internet also provides CS to have a web site that will attract a wide range of people, which will increase CS growth and income objectives. Web sites can cause CS competition hard to compete with CS because of the attraction of the web site, is making the rivals of CS hard to compete with CS. Mobile phones are also has an impact on CS which means that employees can be contacted at any time either directly or by text messaging. This is not always an advantage and can lead to people feeling stressed as they are never away from work. As you can see above examples, there are many ways that ICT can affect CS, which helps CS to keep growing and compete with their competition.
The two ways that CS can grow are internally and externally, which CS uses both methods to grow. They use internal growth because it increases its size through investing in its existing product range e.g. Dairy Milk, or by developing new products e.g. Boost. This will normally be financed through the use of retained profits (from previous trading years), bank loans or through the issue of shares. Internal growth is a slower and safer method of expansion than external growth. Cs also has used the external method for growth, which happened in 1969, when Cadbury Limited merged with Schweppes to increase the company. This type of merge is called Lateral, which occurs where two firms combine which are similar in some way, but are not in the same industry e.g. Cadbury-Schweppes. Here, both companies produced products which were sold to similar market segments (confectionery and soft drinks). Often, the firms can benefit from the management and marketing techniques employed by the other.
I think Cadbury Schweppes objective to grow as the best beverages and confectionery industry is accomplished in many ways but I also think they are not expanding as fast as their competition. To see how these two of my judgements are analysed and justified are by doing comparison against CS main competition who is Nestle, Mars Inc, Hershey and Phillip Morris. The other way to see whether CS has grown is by statistics. Using these two types of information, I can see if CS is really expanding or decreasing compared to their competition.
The growth of Cadbury Schweppes:
Since 200 years when Cadbury was born, the business has grown one of the best beverages and Confectionery Company's. I personally think that CS is growing at their pace but not at the pace of their competition. However I believe that CS is still growing.
There is also proof that CS objective "Cadbury Schweppes' governing objective is growth of shareowner value," is true.
In 1997, CS introduced Managing for Value (MFV) with the aim of producing superior and sustainable returns for its shareowners ("Cadbury Schweppes' governing objective is growth of shareowner value."). Since 1997, CS has set three term targets against which the progress can be measured. Primarily, these targets are growth in underlying earnings per share, free cash flow generation and superior growth in total shareowner return. The targets have been set over four year periods, the first from 1997 to 2000 and currently 2001 to 2004.
5th year of delivery against targets
997-2000
2001-2004
Target
Actual
Target
2001
Underlying* EPS (CAGR)
0%
+ 11%
+ 10%
+ 14%
Free Cash flow (average)
£150m
+ £252m
+ £300m
+ £397m
"The table above shows that CS met its objectives of growth in underlying earnings per share and free cash flow generation. Our total shareowner return grew 84% over the same period, and by 11% 2001, which shows that CS have accomplished their objective to grow the shareowner value."
The objective given above was only to grow the shareowner value, but the judgement that I have given was that CS was growing as a whole. I believe that CS sales and market is growing very rapidly. This is done because of the many schemes that CS has to produce the growth but there are reasons that I think CS have chosen there objective to expand, which are:
* To achieve economies of scale and see the average cost of production decline.
* To achieve a greater market share.
* To satisfy the ego of the businessman.
* To achieve security through becoming more diversified.
* To survive in an increasingly competitive market.
These five points show the reason that I think CS want their business to grow more advanced but is CS achieving all this? If you look at Fig.1,(Fig 1 is developed by CS who have reviewed there growth for 5 years, 1996 - 2001) you can see that CS has grown immensely in the last five years. In 1996 the marketing and sales was 14.4%, which the sales was at £4575million but there has been an increase in 2001. In 2001, CS marketing and sales grew by 5.2%, which was at 19.6%. the sales of CS also increased by £944 million which was at £5519 million. The reason that I used the sales and marketing criteria's on Fig 1 was to determine that CS is growing because the sales and the market are very largely involved with the growth of CS. If the sale decreases, then CS growth will decrease. There is also other evidence that CS is growing on my judgement:
CADBURY SCHWEPPES REPORTS GOOD FIRST HALF EARNINGS GROWTH
Cadbury Schweppes plc reports on financial performance for the 24 weeks ended 16 June 2002:
2002
2001
Change
£m
£m
%
Sales†
2,354
2,200
+ 7
Underlying Operating Profit*
429
400
+ 7
Underlying Profit Before Tax*
386
351
+10
Underlying EPS* - pence
2.9
1.5
+12
Dividends per share - pence
3.5
3.35
+ 4.5
* Before restructuring costs, goodwill amortisation and disposal gains/losses.
† See note 1a to the accounts
Summary
* Underlying earnings up 13% at constant currency continuing a consistent trend of double digit earnings growth.
* Strong contribution from a more profitable mix and increased efficiencies.
* Overall volumes up 6%:
* Acquisitions contribute the great majority of growth.
* Like-for-like volume only marginally up due to North America Beverages and confectionery in Argentina.
* Developed confectionery markets' volumes up 2%.
* Acquisitions also strengthen existing businesses and extend participation in higher growth categories.
Cadbury Schweppes CEO, John Sunderland, said, "The business performed soundly in the first half and we are on track to meet earnings and cash flow targets for
As you can see on the quote that I received from CS, it shows the earnings of the company's growth. Again this quote clearly shows and backs up my thoughts on CS growth. The earnings CS is receiving have increased by the one-year period of 2001(£2200 million) to 2002 (£2345 million). My judgement that CS is growing their company is backed up with these statistics. The statistics clearly show that CS is growing in sales and marketing, which are the two things that need to, keep expanding so that CS can grow as the biggest and best company in their industry.
Cadbury Schweppes growth compared to their main competition:
My other judgement was that Cadbury Schweppes are growing but not at the rate of their competitors. Their main competition for CS's confectionary section is:
CS's competition for their drinks and beverage section are:
Based on my judgement, I will need to compare CS objective to grow as the leading confectionary and drink company in the world with their opposition expansion. The reason that I made this judgement on CS is because of the first hand observations that you and I can make. For example, I see a lot of people eat a lot of the products that are produced from Mars Inc. However that still is not enough to back up my theory on CS growth compared to their rivals. If you look at Table2, it shows that CS rivals are doing much greater than they are. For example, Coca-Cola is always increasing as the years go on but CS is not keeping in touch with them.
Comparison with Mars Inc:
I think that Mars Inc are more dominant than CS growth because of the strategies that Mars Inc have brought up to increase their Market and Sales, which they have succeeded in. Mars Inc are held the largest share internationally with approximately 13 percent, which can be backed up with Table 3 and 5.
Table 3 - this shows that Mars Inc are much stronger than CS in the US, but that might have changed over the years because Table 3 is bit out of date. However this table shows the domination that Mars Inc has over CS
Table 5 - even in the Europe there is a slight domination over CS by $1billion, which shows that Mars Inc is growing larger and faster than CS in them main countries that are large consumers of confectionary and beverages.
So, as you can see CS is not competing enough to keep up with the rate that mars Inc are going at. There can be a numeral of reasons for the rate that CS growth is going at:
* Rapid and unexpected growth can lead to a host of problems for CS. Probably the most common problem is the effect that the growth has on the company's finances - specifically upon the liquidity and gearing of the company.
* Extra expenses and increased long-term liabilities (such as loans and mortgages) may reduce the liquidity and increase the gearing levels of CS and leave it dangerously close to insolvency.
* It is also possible that CS may become inefficient and it may experience diseconomies of scale (rising average costs). This could lead to a significant fall in profits, which in turn could persuade shareholders to sell their shares - this would result in a falling share price.
* A major problem that a PLC can experience as it grows is the divorce of ownership and control. This refers to the fact that the owners of a PLC (shareholders) are usually interested in maximising the company's profits and, therefore, their own dividend payments. However, the control of the company is in the hands of the management and the Directors. They too want the company to be profitable, but would also like some of the company's resources and money to be invested into new products and new markets.
* This, clearly, reduces the short-term profits of the company and, therefore, also reduces the dividend payments to shareholders.
The judgment that I have suggested on CS is true, that they are behind their main competitors, but however they are still growing at their rate. As you can see above, the problems with growth are not completely true about CS aim for growth, but there still many improvements for CS to make, so that again can be the main rivals at the top. For example, Mars have more variety of products compared to CS, so CS can make improvement in that department.
The two judgments that I have made about CS growth have succeeded and been backed up with proof with statistics. But growth is not the only objective that CS is aiming for. They are also aiming for quality assurance to their customers and suppliers and being efficient. There are also smaller objectives in each department of CS, which all contributes to all of CS main objectives.
CS is successfully meeting the main objective (growth) and others but not as better as their competition.
Objectives helped by quality:
Quality control is the process of checking the quality and the accuracy of raw materials and supplies as they arrive at CS, and also of the finished products as they leave the business to retailers and customers e.g. the product would leave the factory, to retail shops, which is then bought by the customers. Quality control is usually carried out either by quality inspectors or by the employees themselves.
Quality circle is a method that CS uses to improve their production process of quality control.
This is a group of workers that meets at regular intervals during the working week in order to identify any problems with quality within production, to consider the alternative solutions to these problems, and to then recommend to management the solution that they believe will be the most successful.
The members of the quality circle are also involved in the running and monitoring of the solution.
This should help to improve the level of motivation amongst the workers because it makes each person in the group feel valued and that they are making a significant contribution to the improvements on the factory-floor. Meaning that the employees for CS feel that they are part of the team to accomplish CS objectives. The motivation of the employees helps CS objectives e.g. the objective for growth will be helped by the employees because they will feel valued to CS so that they provide excellent quality control of the production. By doing this, the employees are producing good quality products to customer's world wide, which they would be delighted and extremely satisfied with the high quality products, which causes an increase in growth and income e.g. when the employees are motivated to provide excellence in production of quality control, the chocolates would be the perfect in size, taste and etc, which will mean that the customers will be satisfied with the chocolate and buy more and recommend to others of the chocolate. This causes an increase in income because customers are buying lots of the product, which causes the growth to expand because CS can recruit more, develop more products, produce more factories and etc. Also because the motivation of the employees is at high standards, it will decrease labour turnover because the employees are pleased with the conditions, treatments and recognition that CS is providing to them. This can also attract other recruits form outside of CS because of the good quality treatment that CS is providing to their employees, which attracts recruits and helps CS objectives e.g. more recruits, will mean that CS objective for growth will expand.
However, sometimes CS also has to handle with employees who don't take the quality circle method seriously, which could affect CS quality of production. The employees, who are not committed to provide high standard quality control, will ruin CS objectives and performance because of the poor motivation and poor service that the employee is providing towards CS. Because the employee are unmotivated, it will not help CS objectives e.g. the less unmotivated the employee is will mean there can be a high labour turnover that can affect CS objective for growth to decrease. The poor motivation will mean that the employee will produce pitiable quality products which the customers and retailers will be unsatisfied with, which again affects CS growth and income to decrease, causing it harder for CS to compete with their rivals. The poor motivation can also influence others in the business, causing even more poor quality production. This will be noticed by customers who are not satisfied with the products, which will cause the objectives to be minimised e.g. income will be decreased. I also think that poor products also give an appalling image on the company because it shows that the company has a terrible quality control, which again can affect a company's objective. This is all due to employees who don't take quality control and quality circles seriously, causing CS to produce disappointing products to the customers.
The advantages and disadvantages that I have given above shows that alternative ways to quality control affect other functions in CS:
* Human Resources (HR) - quality circles affects HR because if the employees are motivated and satisfied with their work, it shows that the HR department has recruited and selected the right employees for the job. It also shows that the performance management has influenced the employees to be motivated and feel part of the team to provide excellent quality products. The training/development function shows also shows that they have trained and developed their skills towards CS quality control, which helps CS to meet their objectives. The human resource planning has also been affected by quality circles because it shows that they have targeted the right people for the job to provide excellence in the quality of products. This can be the opposite for when the functions in HR have got a wrong, unmotivated employee, which means that the recruitment/ selection and training/development has wasted time and money and the whole process of recruiting the right person has to be done again. This shows to me that quality circles have affected Human Resources in CS because the quality circles makes the employee feel part of the team to success, which motivates them or doesn't.
* Quality circles affects the Research & Development (RD) function because when the employees are suggesting there are improvements to be made in quality control, it can mean that there can also be problems with the product e.g. if the are any improvements on the quality production process to be made, it can mean that there were side affects in the chocolate that the RD didn't consider. Quality circle helps the RD function, so that they can recognise any problems of the products that they didn't consider.
* The Production function is affected by quality circles because knowing what improvements to be overcomed, will mean that there is something wrong in the production process. The quality circles will identify the problems, so that the production process can make the improvements e.g. the raw material might be all unsuitable to be eaten.