Use of profits
In Cadbury, shareholders may receive a benefit from owning shares in two ways.
- They may be paid a dividend upon the shareholding, which is expresses as a return on the face value of the shares
- They may receive income by selling their shareholding at a value above that which they originally paid for it.
Legal Liabilities
Cadbury ltd must present a memorandum of association and articles of association in order to receive a certificate of incorporation.
The memorandum spells out the nature of Cadbury Ltd when viewed from the outside.
Whoever reading the memorandum would be able to obtain a general idea of what Cadburys is and the sort of business it’s concerned in.
The memorandum sets out the companies:
- Name
- Registered Address
- Objectives
- Capital
Cadburys produce a fairly vague list of objectives in their memorandum. Therefore this gives them the opportunity to alter their activities if market opportunities arise.
The articles of association set out the rules that govern the inside working of Cadburys.
- The rights of shares offered by the company
- Rules and procedures for issuing and transferring shares
- Procedures and timing of Cadburys meetings
- Details of how accounts will be kept and recorded
- Powers and responsibilities of directors
- Details of how company officers will be appointed
After these documents were accepted, Cadbury were granted a certificate of incorporation and were able to start to trade.
This certificate sets up the company as a legal body in its own right. This means that the company (not the individual; shareholders) enters into contracts and can sue or be sued in the court of law.
Multinational enterprise (MNE)
Cadbury ltd is an MNE and has its Headquarters in Birmingham, UK and sells and produces their products worldwide.
There are a number of advantages for Cadbury be to an MNE.
- It spreads the risks, so that Cadbury is able to protect itself from a downturn of sales in its own home market, therefore it can cushion the fall of its successes abroad.
- Cadbury benefit from the growing world market. This is part of the process of globalisation. (The rapid growth of similar goods produced and distributed by MNE’s on a world scale)
- It reduces Cadburys costs by setting up operating units close to foreign customers. Its cuts down the transports costs and in many Eastern countries labour costs are dramatically cheaper.
- To overcome tariff wall by serving Cadbury factories from within different countries. This enables them to get inside the European union.
Mission statement
Cadburys mission statement is:
To me this means that Cadbury ltd want increase the profits for the people who have invested (shareholders) and to produce chocolate that people enjoy. Cadbury also want to stand out from all of the other competition as being clearly better than the rest of the other companies producing confectionary products. As well as wanting everyone to know about it (consumers, customers, competitors and shareholders)
Objectives
Businesses exist to provide goods and services. All businesses, whether they aim to make a profit or not, have to make products and/or provide services that satisfy customers ‘wants and needs’.
To do this they need to set themselves objectives that govern the way they operate.
Different businesses set themselves different objectives depending on what they want to achieve.
Having a focused objective gives you a clear idea in the direction you are heading in and to help you judge how successful you have been in meeting your objectives.
Profit
The most frequent objective businesses have it to make a profit. This is the total revenue of a business and its total costs. Failure to make a profit leads to loss of confidence in the business, particularly among the shareholders. Although it’s not the shareholder who’s lively hood is threatened; there is a ripple affect, employees start to worry about their jobs ECT.
The ripple effect
Increasing sales or market share
Many firms seek to be market leaders. They are all to aware of the importance of market share and will fight to get there, and when the succeed in gaining the largest share they will broadcast there success world wide. You can immediately identify major market leaders and once they have acquired an edge they can normally hang onto it by ploughing money into investment, product improvement and advertising and promotion.
Surviving
The businesses world is faced with rapid changes, as borders between nations disappear and competition increases, and so on. To survive to intelligent organisation adapts to the changing world. For example Cadbury have twice the Varity of chocolate bars than they did 30 years ago, as they popularity of chocolate has grown. Some of the companies that have not done so have lost favour with consumers and governments and have disappeared or been swallowed up by other companies.
Providing services to the community
If the business of business was just simply business we wouldn’t find many organisations in this country who’s key objective is to provide a service to the community. Such services are an important part of the function of organisations such as the BBC. While these organisations run many of their activities in a profit orientated way, this is not their sole concern. In addition, they seek to meet a responsibility to provide a service to the community.
Charitable of non-profit services
There are many organisations in this country that can be seen as comprising the charitable or ‘not-for-profit’ sector of the economy. Here the organisation’s objectives are widely different from those with ‘for-profit’ organisations.
Long and short-term objectives
A long-term objective is an objective that will take months or even years to achieve. In order to achieve a long-term objective an organisation must identify and set specific practical short-term objectives, these help the organisation to meet their long-term objectives. Cadbury’s long-term objective is to deliver consistently superior shareowner return.
Organisations long-term objectives are closely related to its short-term objectives. This helps them to judge how successful you have been in meeting your objectives. The sooner you meet your objectives the nearer you are to achieving your mission statement.
An example of one of Cadburys short term objectives would be to produce a new chocolate bar, which meets the needs of the customers better than existing chocolate.
Smart objectives
A smart objective it a objective which is Specific
Measurable
Attainable/Achievable
Reasonable/ Realistic
Timed
An example of a Smart objective would be to ‘Increase sales by 10% in the next 6 months’
This is a smart objective because: It’s specific because it states what it wants to achieve. It’s measurable because it wants to increase sales by 10%. It’s achievable because it’s a small percentage of sales of a long period of time. It’s realistic because it could happen. And it’s timed because they want it to be achieved over a period of 6 months.
Cadburys objectives
Cadbury’s objectives are to:
- Deliver consistently superior SHAREOWNER RETURNS
- Generate substantial free CASH FLOW every year
- GROW EARNINGS per share at least 10% every year.
- Profitability GROW SALES at rates greater than the categories in which we compete.
Objective number 1 means that Cadbury aim to always time after time deliver higher dividends each year. I think Cadbury set this a one of their main objectives because Shareowners are very important to their business and would like to show their appreciation. Also because the higher the dividend the shareowners receive each year depend on how well financially Cadbury done that year therefore its another way of Cadbury showing how well they preformed.
Cadbury is meeting that objective by making a bigger profit year. This is reflected in the table later on in the report showing dividend rates per ordinary share.
Objective two means that Cadbury want to make a sensible amount of money after meeting all its obligations for interest, tax and dividends and after all capital investment excluding shared sales or purchase by the employee trust.
Cadbury would want more free cash flow because they always want to generate a bigger profit.
Although free cash flow was lower this year (2002) than previous years, the group remains strongly cash generative, reflecting the high margin and cash generative nature of the business.
Objective three is a smart objective. It is a smart objective its specific it states clearly what they want to achieve. Measurable because it wants to grow earnings by 10%. It’s attainable and Reasonable as it will happen and it’s timed because they want to achieve it over a year. It means they want to increase dividends per share by 10% or more each year. This objective is longed to the first one as they both refer to creating higher dividend for the shareowners. Cadbury has this object because they want to keep their sales up and increase dividends to keep their shareholders happy.
Objective Four means they want to increase their profit higher than their competition. This is an important objective. This means that they are selling more products than their competition. Cadbury has this as one of the objectives because if they achieve this they are very close to achieving their mission statement. It also means that if they sell more products they will receive a high profit and higher dividends.
How Cadbury are meeting their objectives
Cadbury are meeting their objectives by increasing their sales. In Europe their sales rose by £95 million or 7%. Cadbury in the UK’s seasonal sales were strong both Easter and Christmas and performance strengthened throughout 2001 they were up 2% in the final quarter of 2001. This is along with volumes up 6% in Australia, growing sales by 10% in India and 18% in Egypt.
For the overall region, operating profit at £34 million was 21% better than 2000. Excluding the impact pf exchange rate movements and the contribution from acquisitions, like-for-like operating profit was up 25%
This graph shows Cadburys free cash flow
This table shows that the total pence per ordinary share have gone up a steady 0.5 per year over the last 5 years.
I think this shows that Cadbury is meeting its objectives well although the ‘free cash flow’ hasn’t been as successfully as the past years. This could be for a number of reasons, for example a lot of expenditure in new factories or a lot of production from new products.
Departments/Functions
Human Resources
Recruitment Manager – It involves managing recruiting employees for their firm.
Industrial Relations Manager – Managing dismissing employees from their job.
Training Manager – Managing training employees for their new job.
Health and Safety consultant – Go round and make sure the safety regulations are up to scratch.
In human resources they’re in charge of the hiring and firing of employees. When hiring people they have to look are several aspects because they want to higher the right sort of people. For example hey would look at their qualifications, to see whether they are qualified for that specific job, if there not they might offer them another job in a different area.
Marketing
Market research manager – Finding out what people like and want.
Promotion manager – In charge of promoting a new or re-promoting an old product.
Advertising manger – In charge of T.V, magazine, radio and poster advertising
Public relations manager - Getting the firm noticed
In Marketing they research the customer’s want and need and investigate what their competition is up to. They then advertise and promote their products using various means. If the Marketing team makes a mistake a lot can go very wrong and affect the rest of the functional areas. An example of this would be if there research shown that everyone wanted a new vanilla favoured chocolate bar and then Cadburys mass-produced this product and it didn’t sell the finance department would be in trouble because they would have a profit loss, Cadburys reputation might also go down due to making a non selling product.
Finance
Finance Director – In charge of the businesses accounts
Cash flow manager – Manager In charge of where the cash goes and comes from.
Budgeting manager – Managing the money so the firm makes a profit and doesn’t lose money.
Trading manager - records the profit or loss made by the firm.
There are two sides to finance, the management of accounts and accounts. In the management of accounts they take all the information from accounts, sort if out and make sense of it and then write the reports for the senior managers to act on. In accounts they gather all the information and data together. For example credit control, invoices, double entry, tax, N.I and wages. After this has been sorted out they then set budgets. This is one of the most important function to Cadbury because it is here where they find out if the have made a profit or loss that year. If someone was to make a mistake on this department the could over/under budget for the next year which would cause a lot of problems especially if the over budgeted.
Production
Location manager – finding the right place to produce a product.
In means of getting ingredients in and shipping goods out.
Distribution manger – how you distribute the goods.
Organisation manger – Organising everything so it goes to plan
Mass production manager - Organising products so they get produced in mass quantities.
In production it’s all about producing the product/s, transporting it around the world, looking after the buildings and centralising and decentralising thing. For example each department can only be found at the HQ or head office. Cadburys could lose out on a lot of money if something would go wrong in the production or transportation of their products. In the worst circumstances they might have to through the whole batch away.
Research and Development (P & D)
T his is slightly like marketing. Where you find out information about the latest trends and develop the idea and information into products.
If you have a bad P & D you could find yourself getting into lot of mess, by not being able to keep up with the rest of the market, therefore you lose trade and by losing trade you lose profit and in the end you become bankrupt.
Administration
In Administration is where all the letter, emails faxes are made and sent off. They also take all the calls set up meetings and collect all the paperwork from other departments.
If you have bad admin staff and the phone calls and letters weren’t sent out properly and the meeting not set up you would be in trouble because you would have very bad communication with suppliers, and all other departments.