Cadbury’s
In 1768 Richard Tapper Cadbury came to Birmingham having trained as a draper with his friend and fellow Quaker Joseph Rutte (Joseph left the business after 4 years). Richard became a respected citizen in Birmingham; involved in public affairs on the town council; serving on the Boards of the General Hospital, Eye Hospital and the Institutions; and becoming an active promoter of the railways.
John Cadbury was born in Birmingham, leaving for Leeds 16 years later to apprentice as a tea dealer.
In 1824 John Cadbury returned to Birmingham and started a business next to his father's drapers shop in Bull Street, selling tea, coffee and drinking chocolate. The emphasis was on quality.
The manufacture of drinking chocolate and cocoa began in a small rented factory in Crooked Lane, Birmingham by this time John Cadbury sold 16 types of drinking chocolate and 11 cocoas. A larger factory in Bridge Street, Birmingham, was rented and John's brother Benjamin became a partner.
John and his brother Benjamin pulled out of retail, passing this side of the business to a nephew, Richard Cadbury Barrow.
In 1845 Cadbury Brothers opened an office in London and received the Royal Appointment as Cocoa Manufacturers to Queen Victoria. The mid 50s were hard and the brothers nearly wound up the business.
The Cadbury Brothers dissolved their partnership. After the death of his wife and a long illness, John stepped down and Richard and George took over in 1861.
In 1869 Cadbury became the first business to put pictures instead of printed labels onto chocolate boxes. With the success of the chocolate business, the Cadbury brothers stopped selling tea and coffee and concentrated purely on chocolate.
In 1993 Cadbury opened the world’s largest and most advanced chilled warehouse in Minworth, Birmingham.
Ownership
Cadbury is a public limited company. It has the opportunity to become larger than the other forms of private business organisation. It is allowed to raise capital through the medium of the Stock Exchange, which quotes their share prices, and this creates a fullness of financial possibilities. The initials “PLC” (or plc) appear after the name of the public limited company. Only two people are needed to form a public limited company and there is no stated maximum of shareholders. In Cadbury’s case it is owned by many shareowners, some of whom are members of staff.
Cadburys business advantage is:
- Shareholders have limited liability, so it means that the shareowners lose what they put in the business and they receive annual dividends.
- It is easier to raise finance from banks, because Cadbury has many assets, which means banks are insured their money back or Cadbury’s assets instead of the money.
- Since it has many assets, it is possible to operate on large scale, which means more production and promotion for the product. This leads to Cadbury’s objective to grow the business and also to operate in a wide range of markets. This leads Cadbury to have a high income, which is a success to Cadburys objective, which is to maximise profits.
- Suppliers feel more confident about trading with legally established bodies
- There are tax advantages associated with giving shares to employees
The disadvantages are:
- Since Cadbury is a plc, its affairs are public; e.g., accounts and annual returns must be audited. This gives opportunities to competitors to get information about Cadbury. For example if Cadbury makes a loss, investors (competitors) will know about it and use it to their advantage.
- It’s a complicated business. Cadbury is a large business it has many different departments for different jobs, all these departments have to work together. Information passes between departments can be confusing.
- Cadbury has many assets, which contain many capitals, which are very costly to use.
- Since Cadbury is a large business, formatting and running, its costs can be expensive
- Since Cadbury is a plc, Heavy penalties are imposed if “rules” are broken.
Cadbury plc reports on financial performance for the 52 weeks ended 30 December 2001.
Aims and objectives:
- Increase market share
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attract to the firm's products, thereby boosting sales and profits
- Grow the niche market in Eastern Europe
- Increase market budget for any new lines
- Attempt the launch of at least two new brands at the next financial year.
Cadbury strategy uses value based management technique:
‘value based Management is a systematic way of analysing and understanding a business, the market in which it operates, its strength and weakness as well as of those of there competitors. We then seek to develop better strategies which will produce step changes in the competitive performance…’
(Annual report 1998)
Cadbury has undertaken a SWOT analysis to find out where improvements are needed and to achieve it main objectives.
Research into: Strength
Weaknesses
Opportunities
Threats
Will assist the company to the best strategy.
Strength; well established brand names including its most famous Cadbury’s Dairy milk; major brands in several chocolate market segment; a sound financial base.
Weaknesses: may be viewed as an old brand.
Opportunities: many confectionery businesses that could be acquired. New markets available, especially in eastern Europe. Other markets niches to exploit following the huge success of the introduction of favourites into the ‘assortments’ market.
Threats: major competitors such as Nestle continue to expand and ‘attack’ Cadbury’s brands; the legal and economic climate in which Cadbury’s operates; health reports that highlight the danger of eating too much chocolate; a down turn in the economy reducing the amount spent on sweet.
Before production takes place, a brief is done, to find out what to produce? Then it is backed up by primary and secondary research. Then Marketing department basically takes place, "what product should be produced, for what price, where to locate it, "place" and how to promote it. This will help Cadbury to achieve their objective to give satisfaction to customers through selling them a certain product for certain price, will also help them operate in a wide range of markets and Help Cadbury to be noticed through Promotion.
Contribution to customers in order to achieve business purposes.
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Cadbury’s was recognised when it was voted one of the "most admired companies for community and environmental responsibility" by Management Today magazine in 2003. It was also ranked second in the Food and Drink sector in the "Per Cent Club" Index of corporate giving for 2003, with an in the community of around 3of its UK pre tax profits
Cadbury’s contribution takes place in many forms, from cash grants and sponsorship and gifts in all kinds. For example:
- Donating money in response to specific appeals
- Investing funds in project relating to their key areas
- Financially supporting schools or communities organisations
- Sponsoring community focused events or activities
- Directly employing people and resources to manage community programmes
In 2002 in the UK alone Cadbury spend 1.8 million on non profit making causes. That is around 2% of UK pre-tax profit.
Functional areas
Every public limited company has organisational functions these are the main activities of the following areas at Cadbury, which allow it to exist and become a successful business. This diagram shows the system of the business.
The factors of production
Land: buildings (site where the business is located)
Labour: Mangers, workers (any jobs roles that need to be filled)
Capital: equipment, machinery needed
Enterprise: the willingness to take risks to earn a profit
The factors of production at Cadbury are (as shown below in table):
Finance
The finance department is in charge of and deals with money. The Finance department keeps records of all financial documents this involves reporting and recording expenses spent and profit made, asset value and cash flow
(Money that goes in and out of the business). Since Cadbury is a limited company the finance department must, each year, file with Register of Companies a set of audited accounts. These will include a director’s report, auditor’s report, profit and loss account, balance sheet, source and application of funds and an explanation of these accounts. It is also necessary to file an annual return giving details of the directors, shareholders and other information required by law. All this information will be kept on file at Companies House and is opened to inspection by members public. This is a diagram of how financial information can be fed to those who require it, such as information for record keeping and decision making purposes.
This department is in charge of giving budgets to other departments (by doing this it makes sure that the business reaches break even and no less in really bad circumstances). This is also, so that the other departments keep to their main objective and responsibilities and do not waste money. Managers see these targets and compare them with other past targets to find how successful the business is. The targets help the finance department to make plans for the future that will help the business to achieve its objectives. For an example the finance department gives research and development, a budget of £50,000. The research and development department will use this money within one financial year and not over drawing (not taking more money). But under circumstances if research and development department required more money to develop a new chocolate, the finance department will analyse research and development’s plans for producing a new chocolate and if they think it will be successful finance will give the money needed. Through this the departments would have achieved their objectives (e.g. making a profit, good reputation, achieve best possible financial return on capital). They way that Cadbury deals with exchanging of money is by SAP, which is an electronic payment system. For example if Tesco purchases a quantity of chocolate from Cadbury. Cadbury can bill Tesco straight away. This process is time efficient and is a straightforward process.
Production
The production department produces the products; any activities linked with production are wealth creation. An example of wealth creation would be the production of a chocolate bar. The difference between all of the costs of the production and the price of the finished chocolate represents the wealth that has been created. The contribution of all those involved in its development have added value to this process and helped to create that wealth.
In production there has to be an input, which is transformed to an output. The transformation is taken through by processes, these add value to the output such as materials and Labour so that the finished product can meet customer needs. The output could either be a service or a product (in Cadbury’s case). The business will need to have a system to ensure that the production process and the product itself are of constant high quality production. For example Cadbury reduces the amount of food wasted:
Primary, secondary and tertiary production,
- help to add a bit more value to something the customers benefits from
- improves the welfare of our society
- Provides us with the standard of living to which we have become accustomed.
For example:
- Primary production, is the earliest stage in the production and is concerned with extracting raw materials e.g. Cocoa
- Secondary production is the second part of production process. It involves process that transforms raw materials from the primary stage into finished product.
- Tertiary production is the productivity activity of the service sector of the economy.
The production department in Cadbury is concerned with the following issues:
- Costs of production
- The condition of the means of production (machinery, etc.)
- Keeping production going
- Health and safety
- Keeping employees motivated
- Keeping up to date with technology
- Satisfying the requirements of customers
- Maximising the use of plant
- Minimising the waste of materials
When Cadbury produces a chocolate it produces it in a Flow Production, which is a continues process of parts passing on from one stage to another until completion. Units of production are worked on in each operation and then passed straight on to the next work stage. In order to make the production line work smoothly, Cadbury insures each operation must be of equal length and there should no movements or leakages from the line. E.g. hold ups to work in process. Because there is a continual demand for chocolate this process (flow production) is successful.
Before production takes place, a brief is done, to find out what to produce? Then it is backed up by primary and secondary research. Then Marketing department basically takes place, “what product should be produced, for what price, where to locate it, “place” and how to promote it”, (Read Marketing). This will help Cadbury to achieve their objective to give satisfaction to customers through selling them a certain product for certain price, will also help them operate in a wide range of markets and Help Cadbury to be noticed through Promotion.
The system that Cadbury produces its products is
Human resources
Human resource is concerned with the whole range of activities to do with looking after the people that work within an organisation and those with whom the organisation comes into contact. In Cadbury, staff members are one of a business’s most expensive and valuable assets. Human resource department plans the manpower needs of the business, recruits not just the people who work but for their qualifications, talent and well motivated; it is also responsible for Health and safety, training of staff and making staff record. Cadbury would use human resources because it is a very big organisation. Human resources would help them meet their objective of developing staff skills. By giving staff subsidised training, staff for Cadbury will be able to improve their skill like gain a degree (mature student) Cadbury does this all and employees the right people for a smooth running of the organisation.
Administration
Cadbury does not really have a main administration department. Each department has its own administration. Each department is responsible for its inputs of information, processing information and out put of information; does its own filing, photocopying, correspondence, mail and telephone calls.
Research and development
The research and development department is the department that researches new products and develops the old products. To remain successful, business must constantly work to create new and better products and processes.
Research-this involves carrying out investigation to come up with new idea, e.g. by carrying out brainstorming, examining competitors products or carrying out research in laboratory.
Development- this involves turning the findings of the research into useful products or processes.
If Cadbury had a mishap with a chocolate, the research and development department would try to correct the mishap. The research and development department must work closely with the marketing and production departments in particular this is because marketing and production are the beginning and end of producing a product.
As you can see from the table above this is the life cycle of the product while being produced.
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The input would be from the Marketing department.
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The process would be from the production department
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The output would be the product or waste
Therefore because there is a mishap from the output, this has to be due to a fault in the input (The marketing department) or the process (the production department)