Interest rates will need to be considered as well. As Student Media (2004) noted, it can affect Cadbury's because if the interest rates were high then Cadbury's would not want to borrow as much money for expansion. Also if consumers had loans they would again have less disposable income to but luxury items. If the minimum wage was brought down, this would mean more money for Cadbury's but would also result in low sales from the consumers.
- Social Factors
Changing social customs may be an important factor influencing the nature and size of the market for particular products. (Smith, 1990, p.37) According to Jauch and Glueck (1988), social customs focus on the values and attitudes of people. They explained that these values translate into lifestyle changes which affect the demand for products and services.
According to Tsai (2004), there have been significant changes in consumer lifestyles in recent years. Increased levels of both male and female employment have created time poverty. She concluded that less time is now spent on food preparation and, as a result, people eat out more frequently or even take short cuts to meal preparation by purchasing ready-made dishes. It suggests that Cadbury’s chocolate can meet the emerging market as chocolate itself does not take time to prepare only buy it and can be eaten directly. As Tsai (2004) pointed out that the readily available and conveniently located at the proper point of purchase food is always bought. She concluded that chocolate confectionery is qualified for the demands, therefore, this changing lifestyle will fuel chocolate market. I believe that Cadbury’s will get benefit in the aspect.
Demographic changes also need to be considered in terms of social factors. (Tsai, 2004) According to Mintel (2002), it is estimated that around 35% of confectionery is consumed by children and as such the number of children in the population is an important driver of sales. The average British child eats 17.6kg of chocolate each year. These suggest that the number of children in the population in UK will influence the volume of Cadbury’s chocolate consumers. However, according to Mintel (2002), the number of children in the population is beginning to decline. It suggests that Cadbury’s sales might decrease by this reason. As Tsai (2004) warned that the demographic changes imply that this trend will threaten the volume of confectionery consumers significantly. She suggests (2004) that it is urgent for manufacturers to devise new ways, such as investing more money on advertisement or developing new brands, to encourage more consumers to purchase. In responding to the facet, I believe Cadbury will need to carry on devising new products and launch new products from time to time.
Changing household composition also needs to be considered in chocolate confectionery market in terms of demographic changes. (Tsai, 2004) According to Mintel (2002) the smaller household size will increase in the future. Tsai (2004) pointed out that smaller household size is driving the trend towards more singleserve products. She suggested that it will drive a trend towards food and drink products in smaller packages and will have a positive impact on the value of the packaging market. In my opinion, Cadbury’s will need to develop smaller packages to seize the market.
Health issue is also an important one we need to consider (Tsai, 2004). As Mintel (2002) pointed out that the issues have surrounded chocolate confectionery for many years. Mintel explained that the prime concern is that products are high in fat and sugar, over-consumption of which may lead to obesity and tooth decay, especially among children. As Tsai (2004) warned that it is really a big issue exists in chocolate market. She warned further that it may be the fatal factor to decrease chocolate sales. In my opinion, Cadbury’s will need to do something to respond to the issue. Cadbury will need to product more reduce-fat product, for instance. As Tsai (2004) also suggested that it is really urgent to launch low-fat products since more and more consumers do concern the issue. In addition, I believe Cadbury will need to use marketing strategies to reshape consumers’ perception of chocolate. As Mintel (2002) pointed out that manufacturers have strongly refuted these claims with the assertion that, as part of a balanced diet, chocolate and chocolate confectionery can be beneficial in providing energy and nutrients apart from the pleasure they offer to eaters.
Moreover, as Tsai (2004) noted, increasingly consumers wish to know more about the foods they buy: how the ingredients were grown and processed (organic), and whether the farmers who grew the original crops received a reasonable price for their efforts (fairtrade).
Therefore, Cadbury’s will need to not only launch reduced fat or reduced calorie chocolate confectionery, in common with other food categories, but also to launch with organic ingredients. I believe that Cadbury chocolate with organic chocolate and other ingredients may appeal to those who wish to balance their indulgence with the perception of a higher degree of purity than other chocolate products on the market. Besides, looking at human rights in emerging markets, the issue of child labor in cocoa plantations has affected the reputation of Cadbury’s Schweppes. Therefore, producing fair-trade chocolate will be inevitable in the future for Cadbury.
Also, according to Student Media (2004), if Cadbury's factories do not control their pollution levels or have big buildings destroying the landscape with noise and traffic congestion, then the local residents would complain to their local council resulting to possible incentives for bringing in jobs for the community being stopped.
- Technological Factors
As Dicken (1998) noted, technological change drove the first industrial revolution in the nineteenth century, and seems set to drive a second one some two centuries later. In fact the link between technology and global economic growth is demonstrated in the work of the economist Kondatriev. (pp.146-151) Technological change is the most visible and pervasive form of change in society, as it brings in its wake new products, processes, and materials (Finlay, 2000). Finlay (2000) explained that the developments in IT, and particularly the internet, are megatrends that impinge directly on the operating environment.
As Clarke (2002) noted, scientists at the Institute of Food Research (IFR) on the Norwich Research Park are taking this technology in a new direction, and are using ultrasound to help improve quality control during chocolate manufacture. Clarke (2002) mentioned that the technology is being tested in big pilot plants on all sides UK at the present. As a result, chocolate companies Cadbury’s, Nestle and Northern Foods are working together in a grouping with IFR and the University of Nottingham to try and develop the technology so it is useful on an industrial scale. In my opinion, in terms of technological environment, the technology will bring the benefit for Cadbury’s since it will enhance the quality of chocolate. In addition, Cadbury’s will need the commitment to the research.
Moreover, as Cadbury’s noted, they now use Computer-integrated manufacturing (CIM) which is where computers are used all the time, from the design of the product and the components, through all the different stages of production, including quality control, to delivery of the finished goods. They also use computers to control the temperature of the chocolate and to pour the chocolate into the moulds. In addition, it further pointed out that computers are also used to make the wrappers and to pack them.
- Competitive nature of the industry
3.2.1. Intensity of Rivalry among Existing Competitors
Rivalry among existing competitors takes the familiar form of jockeying for position – using tactics like price competition, advertising battles, product introductions, and increased customer service or warranties. (Porter, 2004, p.17) Porter (2004) explained that rivalry occurs because some competitors feel the pressure or perceive the opportunity to improve position.
According to ICCO (2000), the chocolate market in the UK is an oligopolistic market. The chocolate market in the UK is dominated by three large international companies: Cadbury’s, Masterfoods and Nestle, who together account for approximately 75%-80% of the retail market in chocolate confectionery. (ICCO, 2000) As ICCO (2000) noted, in oligopolistic market, the competition among the existing firms will decrease. However, it also explained that there is continuing intense market competition in the UK, among the three companies. It suggests that Cadbury does really feel competitive pressure and Cadbury need to compete with each other 2 companies keenly. In addition, as Mintel (2002) noted, sales of chocolate confectionery are highly dependent upon consumers being aware of the brand and gaining a favourable impression of the brand. Mitel (2002) pointed out that an important part of the appeal of chocolate confectionery is the image that the brand portrays.
As a result, I believe that Cadbury’s will always need to assure their products staying innovative, strongly promoted and keenly priced. Also, Cadbury’s will need to increase its advertising expenditure to increase the customer’s awareness of Cadbury’s chocolate. Moreover, as Tsai (2004) suggested that the developments in IT, the internet in particular, do benefit the companies as we could see that it has reduced the advertising spends. It also implies that Cadbury’s will be able to save advertising money partly to spend on other areas, such as doing research and launch new products.
In addition to advertising, as ICCO (2000) pointed out that chocolate manufacturers can attract and keep customers through promotion. Therefore, Cadbury can try to meet consumers’ needs by expanding product range, meeting the recent trend in demand for low fat, reduced calorie or sugarless products, for example. In my opinion, it is an urgent and
good strategy to develop since more and more people aware of obesity. I believe it is a potential growing and profitable market for Cadbury to seize. Further, the rivalry in which Cadbury is in among them is intense but it is a positive competition since it enables Cadbury to carry on devising new product and offer customers better quality chocolate and meet the customers’ satisfaction.
3.2.2. Threat of Entry
As Porter (2004) noted, new entrants to an industry bring new capacity, the desire to gain market share, and often substantial resources. He (2004) explained that the threat of entry into an industry depends on the barriers to entry that are present, coupled with the reaction from existing competitors that the entrant can expect.
As Mintel (2002) pointed out that the most important factors that influence brand purchase are trusted brand name. Cadbury which is a established firms have brand identification and customer loyalties because of Cadbury’s past advertising, product difference. Also, in terms of capital employed, it is good news to Cadbury. The reason is as Clarke (2002) noted, chocolate is much more complicated than we might initially imagine. It suggests that the new manufacturing chocolate needs to invest large financial resources on research and development but new entrants normally lack of huge capital. Moreover, in terms of distribution channel, Cadbury have ties with channels based on long relationships, or even exclusive relationship. As Tyler (2001) noted, the powerful position of Britain's supermarket chains has created an oligopoly, with a very few players controlling virtually all outlets for food and fresh produce, and able to dictate terms to the primary producers. This barrier to entry can be created by the new entrant’s need to secure distribution for its product. (Porter,
2004, p.10)
However, in terms of switching cost, Cadbury will need to worry about it. As Mintel (2002) pointed out that chocolate confectionery is a highly indulgent product that offers a combination of creamy chocolate taste, interesting textures and sweetness.
3.2.3. Pressure from Substitute Products
All firms in an industry are competing, in a broad sense, with industries producing substitute products. (Porter, 2004, p.23) In terms of the pressure from substitute products, Cadbury face greater challenges. As Mintel (2002) noted, confectionery has to compete for consumers' spend with a variety of other goods. Mintel explains that as the chocolate product itself cannot be considered to be a staple purchase and is a luxury item, other similarly indulgent items can become more enticing and be purchased instead. Therefore, Cadbury is facing increased competition for a share of consumer expenditure and is under high pressure to keep consumers interested in their products. It is also proved by Mintel (2002) that the chocolate confectionery market has declined in recent years as alternative purchases have captured the spending power of shoppers.
I believe that Cadbury’s will need to distinguish themselves from other alternative since there are many alternative to compete with. As Mintel (2002) also noted, recent years have shown the changeable nature of the consumer and revealed that, if manufacturers show any failure to innovate or to market their products in novel and appealing ways, other purchases can take the place of confectionery.
3.2.4. Bargaining Power of Suppliers
According to Porter (2004), suppliers can exert bargaining power over participants in an
industry by threatening to raise prices or reduce the quality of purchased goods and services. (p.27) In terms of suppliers in chocolate industry, according to Tsai (2004) we can look into two different groups which are cocoa farmers and cocoa buying companies. A cocoa farmer alone is powerless obviously, however, big cocoa buying companies do have huge bargaining power because they buy a big quantity of cocoa from cocoa farmers directly with cheaper price.
3.2.5. Bargaining Power of Buyers
As Porter (2004) noted, the bargaining power of buyers is one of the key competitive forces determining the potential profitability of an industry. He also pointed out that most industries sell their products not to a single buyer but to a range of different buyers. (pp. 108-109) To Cadbury, retailers and individual buyers are two main buyers.
With regards to the bargaining power of retailers, retailers have strong bargaining power to Cadbury’s. As Tyler (2001) noted, Britain's food retailing is the most concentrated in Europe, with the top five supermarket chains—Asda, Morrison, Safeway, Sainsbury and Tesco—controlling 70 percent of all food purchased. He explained that the purchasing power of these supermarket chains is such that it has forced margins down at many food suppliers. He also concluded that the powerful position of Britain's supermarket chains has created an oligopoly, with a very few players controlling virtually all outlets for food and able to dictate terms to the primary producers. It is not only their large volumes of purchase power but also they could influence their customers. As Porter (2004) also noted, retailers can gain significant bargaining power over manufacturers when they can influence consumers’ purchasing decisions. (p.26) Moreover, as Kumar (2004) highlighted that with advances in
information technology and the precipitous drop in the price of storage media, it has now become relatively inexpensive for firms to track and store the behaviour of their customers. It suggests that retailers may be well informed about the state of demand. As a result, as Porter (2004) noted, they can be ruthless price bargainers. It will lower down Cadbury’s profit.
Conversely, as far as individual buyers are concerned, they have a lesser amount of bargaining power than retailer. As Mintel (2002) noted, the market is heavily branded and relies upon the creation of imagery and promotion to generate sales. It implies that buying decisions are highly dependent upon consumers being aware of the brand and gaining a favourable impression of the brand. As a result, Cadbury could manipulate consumers’ buying decisions through advertising. Also, as Porter (2004) noted, buyers who are in a poor position to backward integrate lose an important bargaining lever.
Nevertheless, individual buyers do have some bargaining power since they could refuse to buy chocolate or individual buyers face switching cost. As Mintel (2002) suggested, other similarly indulgent items can become more enticing and be purchased instead. But it occurs hardly. I have to conclude that retailers are powerful buying bargainers to Cadbury, individual buyers are not instead.
- Opportunities
After viewing the external environment, I would conclude that there are some opportunities to Cadbury’s. With the growing PDI, customers will have more money to buy chocolate and it will be beneficial to Cadbury. In addition, with the changing lifestyle, it is good opportunity for Cadbury to increase its sales. With regards to the obesity issue, Cadbury can launch
low-fat product to target the emerging segment. Moreover, with the development in technology, Cadbury will be able to enhance its quality. In terms of the nutrition, sponsorship for sporting events can be done. Also, making of diversify into a different market, expand nationally and promote using large marketing strategies. As Student Media (2004) noted, Cadbury's has still got a lot large room for expansion into South Africa, Asia and South American regions. It explained that Cadbury's could look to develop new products in new markets. Due to the growing product range Cadbury's could launch new products. Cadbury's could diversify into new markets e.g. Breakfast Cereal Market.
- Threats
The biggest threat is the concern about high-fat in chocolate. Cadbury’s might lose it sales because consumers are aware of the high-fat which chocolate contains. As Student Media (2004) noted, healthier options could cause problems to Cadbury's with trends tending to favour the new healthier options. Also, Cadbury's main competitor Nestle is launching a new product and more companies diversifying into the chocolate market which results in a large price war, taking Cadbury's off the market. As Student Media (2004) pointed out that Cadbury's have got a lot of competitors in the market and must be wary of their position as market leader. It also explained that the pricing on their products is too high Cadbury's could lose sales if a competitor was to launch a new product to rival Cadbury's best sellers and new products from competitors could cause problems to Cadbury's as they could begin to lose their market share.
The fair-trade issues will also be a threat to Cadbury since the pressure to buy the fair-trade cocoa and will enhance Cadbury cost for the cocoa beans. In addition, the decreasing number
of children is also a threat to Cadbury. Moreover, the low switching cost for customers to buy substitute product, such as cadies and soft drink, is a big threat to Cadbury as well. Besides, as Student Media (2004) noted, legislation on ingredients could cause huge problems.
- Internal Analysis
- Company Structure
According to Cadbury’s (2004), the structure of Cadbury's is hierarchy. The structure clearly illustrates who is in charge, gives orders and who carries them out, after the organization expands and takes on employees. It would definitely show that there are different levels of authority. As the Student Media (2004) noted, Cadbury’s are where the whole structure conforms a triangle shape. It explained that at the top of the triangle is where the ultimate power lies in Cadbury this is J.M Sunderland; he is the Chief Executive Officer. As the triangle broadens out toward the base, this is where the shop workers would be. In terms of the communication flow, figure 6.1.1 below illustrates it.
Figure 6.1.1
Source: Modified from Student Media (2004)
In terms of the corporate governance strategy followed by the Group, according to Student Media (2004), it provides strategic direction for the SBU's through managing a smaller number of related businesses.
6.2. Purpose and Values
According to Cadbury’s, Cadbury’s always ensures the continuation of their own heritage. Their statement of purpose and values provides a clear framework for their strategic intent and how they will conduct their business. As Cadbury’s noted,
“We are an international company, proud of our long heritage, respectful of the social and natural environment in which we operate, supportive of our consumers, customers and colleagues and passionate about success. We make, market and sell unique brands which give or bring pleasure to millions of consumers around the world every day. We have done this successfully for over 200 years. This success has been built upon understanding the needs of our consumers, customers and other stakeholders and by operating to a clearly defined set of vales.”
Also, according to Student Media (2004), Cadbury Schweppes product ranges are not diverse. All products, including acquisitions, are closely related in order to maintain the Groups skills base and competitive advantage.
6.3 Objectives and analysis
As the Student Media (2004) noted, businesses set themselves objectives; they are used as a starting point for decision-making. They also affect the ways that the business operates, they state in general terms what the company wants to be able to achieve in the long-term.
According to the Student Media (2004), the objectives at Cadbury’s are being helped to be met by this management style. For example, being "surviving" and making "profit" because as new ideas are being discussed they are achieving these objectives because the more products that are on the market the more profit can be earned. It also explained that the director will decide if the suggestions are a good idea considering everyone's ideas. In general, as the Student Media (2004) concluded, the Cadbury’s objectives are below.
- They act as management targets
- They are a standard against which performance can be measured
- They help to bring staff together
- When linked to pay or rewards they can encourage staff
6.4. Boston Matrix
Cadbury Schweppes have over 200 products on the market including Cadbury Dairy Milk, Twirl, Flake and Fuse. (Student Media, 2004) However, as Jobber (2001) pointed out that key decisions regarding portfolio planning involve decisions regarding the choice of which brands/product lines to build, hold, harvest or divest.
A leading management consultancy, the Boston Consulting Group, developed the well-known GCG Growth-Share Matrix. (Jobber, 2001) Jobber (2001) explained that the matrix allows
portfolios of products to be depicted on a 2 x 2 box, the axes of which are based on market growth rate and relative market share. As Student Media (2004) noted, this is a method of analysing the product portfolio of a business. According to Jobber (2001), it divides the products that are produced by a business into four categories, according to their market share and the level of market growth. The 4 categories are Stars, Cash cows, Problem Children and Dogs.
Stars:
According to Jobber (2001), these are the market leaders in high growth markets. As Cadbury’s (2001) noted, when Cadbury Dairy Milk chocolate was first introduced in the early 1900s it made an immediate impact quickly becoming the market leader. Since the 1920s, Cadbury Dairy Milk has been the best-selling milk chocolate in both the UK and Australia. Student Media (2004) explained that Cadbury's made their first milk chocolate in 1897. It was a very coarse, dry eating chocolate, made by blending milk powder with the basic chocolate ingredients of cocoa butter, cocoa mass and sugar. Moreover, Cadbury’s explained that the success story has continued. It is still the top selling chocolate brand in the country and the Cadbury Mega Brand's broad family of products today has an international retail value approaching US$1billion. The first two additions to the Cadbury Megabrand family were Fruit & Nut in 1928 followed by WholeNut in 1933. The family has since been extended and there are now 10 varieties of Cadbury Dairy Milk bars in the range. (Cadbury’s)
Cadbury Roses is also in the category. According to Cadbury’s, it was designed in 1938 to compete with 'twist wrap' chocolates. Within a year Roses milk and plain chocolate assortments become one of the company's most important products. According to Cadbury’s,
it positioned Roses as the ideal way to say thank you. As Cadbury’s explained, the distinctive blue cartons are the ideal size to be appropriate as a 'thank you' token gift, and the big blue tins are the best selection for the family at Christmas. In terms of its advertising, according to Cadbury’s, the advertising idea of “say thank you with Cadbury Roses” was first introduced in 1979 and has been associated with the brand ever since. Cadbury’s also noted, the most recent campaign introduced at Easter 2002, is based on the well-known fairytale goldilocks and the three bears. According to Cadbury’s, Cadbury Roses also features as part of the Cadbury Coronation Street sponsorship, where a budgie gives a box of Roses to the Granddad and whistles the well known thank you very much music. According to Cadbury’s Statistic, over 1,300,000,000 Roses chocolates are sold every year in the UK.
Cash Cows:
According to Jobber (2002), cash cow is the high profitability and low investment associated with high market share in low growth markets mean that cash cows should be defended.
Cadbury Dream is in this category. As Cadbury’s noted, the new Cadbury Dream was launched in January 2001, was promoted as “real whiter chocolate, wicked taste”. It took four years of research to perfect the flavour delivery, but experienced astounding success. Before Cadbury’s launched it, it took massive sampling campaigns, magazine advertising, clever point of sale and merchandising material ensured the launch. As Cadbury’s pointed out that Dream was exactly that: a dream. Dream was the highest scanning confectionary line for eight weeks following launch.
Flak bar is in this category as well. According to Cadbury’s, the Flake bar was originally launched in 1920; this was followed in 1930 by the Flake 99 ice cream accompaniment, and
in 2001 by Snowflake which is a crumbly white chocolate Flake centre covered in milk chocolate). Cadbury’s also explained that the manufacture of Flake requires development of specialised technology. It is a new style of chocolate and is unique to Cadbury. Until now, the method of manufacturing Flake remains a closely kept secret.
In terms of its positioning, as Cadbury’s noted, a true chocolate indulgence, its crumbly texture means that it forces you to stop what you are doing and devote your full attention to eating it. With regards to its advertising, Cadbury Flake has a very strong advertising history dating back to 1976 when the strapline 'The crumbliest, flakiest chocolate' was introduced. (Cadbury’s) The advertising always features a woman who is choosing to enjoy her Flake moment in an unique, and dramatically indulgent way. Moreover, according to Cadbury’s, over 100 million Flake 99s are sold every year.
Problem Children:
These are cash drains because they have low profitability and need investment to keep up with the market growth. (Jobber, 2001) Jobber (2001) pointed out that they are called problem children because management has to consider whether it is sensible to continue the required investment. As Student Media (2004) pointed out that Cadbury's breakfast cereal would not be expected to be very successful to begin with due to the more experienced competitors already in the market.
Dogs:
According to Jobber (2001), dogs are weak products that compete in low growth markets. Cadbury's breakfast cereal is in this category. For those products that achieve second or third position in the marketplace a small positive cash flow may result, and for a few others it may
be possible to reposition the product into a defendable niche. (Jobber, 2001) However, Jobber (2001) also warned that for the bulk of dogs the appropriate strategic objective is to harvest to generate a positive cash flow for a time, or to divest, which allows resources and managerial time to be focused elsewhere.
The Boston Matrix is good in identifying several things, such as where the current ranges of products are in the Boston Matrix. It is also helpful to know where Cadbury's would expect the product to go and which products could require more investment to increase profits in the long term and the products that should be removed from the product range. I would make the Boston Matrix below for Cadbury’s most symbolic products.
6.5 Value Chain analysis
According to Student Media (2004), Cadbury’s uses Batch Production. He explained that this is when you produce the product in large or medium quantities and they all have to be the same. As Student Media (2004) noted, this is needed by Cadbury Schweppes because of the products shelf life and if Cadbury's wanted to change the moulds to make other chocolate bars this would be made easy and they use ICT to control and perform some manufacturing processes.
They also use a Just-in-time system, which is controlled by computers. (Student Media, 2004) According to Jobber (2001), this is when the new materials are delivered just before they are needed. I do believe that this is good for Cadbury’s since they will not use much storage for long and it is more cost effective. As Jobber (2001) noted, the just-in-time aims to minimize stocks by organizing a supply system which provides materials and components as they are required. As a result, stockholding costs are significantly reduced or eliminated and thus profits are increased.
6.6. Competitive Advantage
As Student Media (2004) noted, Cadbury’s competitive advantage comes from its SBU's being highly related and producing similar products, therefore building on existing technologies. For example, products such as Time Out Chunky, Wispa Gold, and Wispa Bite can demonstrate this.
Also, Cadbury’s targets similar product markets as well and many of its customer bases overlap. Building on the Groups core competences through acquisitions of established
companies extends its competitive advantage further. (Student Media, 2004) Also, as Student Media (2004) noted, Cadbury Schweppes product ranges are not diverse.
Moreover, Cadbury’s has the ability to offer a big portfolio to meet most consumers’ needs. As Student Media (2004) pointed out that Cadbury’s is also the leading manufacturer of sweets - because no other manufacturer can offer the consumer such a variety. The Batch Production and using computers to produce high quality chocolate is Cadbury’s competitive advantage.
- Strengths
The brand name is the biggest strength of Cadbury’s. As Jobber (2001) noted, Branding allows marketers to create added values that distinguish one brand from another. He explained that Successful brands are those which create a set of brand values that are superior to other rival brands. In addition, Cadbury’s provides Chocolate with good quality enjoys good reputation. As Student Media (2004) noted, Cadbury's has a world known brand name that is associated with quality. Building quality into the core product is vital, as Jobber (2001) explained that a major study of factors that affect success has shown statistically that higher quality brands achieve greater market share and higher profitability than their inferior rivals.
Cadbury's is the biggest name in the chocolate market and is the market leader. As Mintel (2002) pointed out that Cadbury, Masterfoods and Nestlè Rowntree dominate the chocolate confectionery market. Data Monitor also noted that Cadbury Schweppes owns some of the world's best known and most popular confectionery brands.
Moreover, Cadbury's have a large distribution. According to India Infoline (2002),
Cadbury's distribution network encompasses 2100 distributors and 450,000 retailers. Also, its bars can be found all over the world. (Student Media, 2004) Besides, according to India Infoline (2002), Cadbury’s is using of IT to improve distribution logistics. It suggests that Cadbury’s is attempting to improve distribution quality.
Cadbury’s has wide portfolio of products. As Student Media (2004) noted, Cadbury’s has a large variety of chocolate bars to suit everyone's taste. It suggests that Cadbury’s has large target markets as well. In addition, as Student Media (2004) pointed out that Cadbury's has very effective promotions on their products. It also explained that Cadbury's has a very good research and development department leading to new products.
- Weaknesses
As the Student Media (2004) pointed out that a large range of the Cadbury's products has reached the maturity stage of its life cycle. According to Jobber (2001), for all but the brand leader, competition may erode prices and profit margins, while distribution will peak in line with sales. Besides, Student Media (2004) pointed out that Cadbury's has its products priced higher than most of its other competitors. It also noted, the costs of the company are too high. In addition, according to Cadbury, Cadbury's are making a low profit per bar due to the high costs.
- Strategic Options
9.1. Market penetration
It is the most basic method of gaining penetration in existing markets with current products is
by winning competitor’s customers. (Jobber, 2001) However, West (2004) mentioned that this may be difficult in a mature market, where any growth is likely to be at the expense of competitors. He also warned that this strategy may bring retaliation from competitors who find their sales falling. According to Student Media (2004), Cadbury's have done this by putting emphasis on their glass and half of milk. They believe no other product has the same taste.
9.2. Market development
It is adopted in new markets and existing product. As West (2004) noted, it is existing products are sold in what are for the company new markets. Jobber (2001) also noted, this entails the promotion of new uses of existing products to new customers or the marketing of existing products to new market segment. He also mentioned that market development through entering new segments could involve the search for overseas opportunities. According to Student Media (2004), Cadbury's have done this buy marketing the very successful Cadbury's buttons range and tried selling them to adults.
9.3. Product development
According to Jobber (2001), the product development option involves the development of new products for existing markets. As West (2004) noted, it is management’s strategy and it is to develop new products, but to sell these products in their existing markets. Jobber (2001) mentioned that one variant is to extend existing product lines to give current customers greater choice. According to Student Media (2004), a good example is Nokia selling new mobile phones to the same market with only small product changes. Cadbury's have done this by releasing the Dairy Milk Orange and it was successful.
9.4. Diversification
According to West (2004), diversification is when company attempts to move away from its existing product market base by selling new products into new markets. As Student Media (2004) noted, diversification is to sell a new product to a new market.
- Strategic Choice
10.1. Summary of options
As Johnson and Scholes (1999) noted, competitive strategy is the basis on which a SBU might achieve competitive advantage in its market. It will be difficult to adopt market penetration since it is a matured market. Diversification, as Jobber (2001) noted, this is a very risky strategy. Market development is adopted by Cadbury’s already, as Cadbury’s noted, Cadbury now has factories all over the world - Australia, New Zealand, Malaysia, India, Indonesia, Japan and several countries in Africa. As a result, after the internal analysis and the information gathered form the questionnaire, I would suggest product development option.
Besides, Cadbury’s can develop internal development or acquisition of similar industry companies. As Student Media (2004), all products, including acquisitions, are closely related in order to maintain the Groups skills base and competitive advantage. I believe Cadbury’s must carry on this strategy.
10.2. Evaluation
Cadbury’s can carry on using family brand name to help the promotion of all of its brands. Also, Cadbury’s can focus on what it currently performs effectively, and then using this as the base for developing new products or breaking into new markets. As Student Media (2004) noted, this refers to the situation where a business develops its strategy based upon its existing strengths and assets. However, as Jobber (2004) also warned that the risk is that if
one of the brands receives unfavourable publicity or is unsuccessful the reputation of the whole range of brands can be tarnished. Cadbury’s needs to be aware of this risk.
After conducting a questionnaire on 50 people, I found that chocolate market would be the most sensible market segment to create a new product in as it has the greatest sales. As Student Media noted (2004), in the United Kingdom, chocolate confectionaries make up 70% of confectionary sales. It corresponds to the information I got from questionnaire as it is showed in Figure 10.2.1.
Figure 10.2.1. Favourite type of confectionary
Also, according to the information from my questionnaire, most people buy tasty and famous brand chocolate as it is illustrated in Figure 10.2.2. It implies that Cadbury’s could capitalize its brand reputation to develop its new product.
Figure 10.2.2 Factors influencing buying chocolate
Moreover, a low-calories confectionaries segment is emerging as it is showed in Figure 12.2.3. Cadbury’s could introduce the new low-calories product into.
Figure 10.2.3 Which will you buy
- Implementation plan
11.1 Develop New Product
Since the target segment for the new product has been decided, the new low-calories chocolate needs to be produced. As Jobber (2001) noted, at this stage the new product concept is developed into physical product. In the chocolate bar, there will be a new Cadbury’s low-calories chocolate bar. This new chocolate must be as low calories as possible, while still keeping it tasty. The reason is as Jobber (2001) pointed out that product testing focuses on the functional aspects of the product and on consumer acceptance. According to my questionnaire, tasty is still the most important factor to buy chocolates.
11.2 Package Design
As Student Media (2004) pointed out that the packaging plays a critical role in the success of the new product. As a result, the new chocolate has to communicate the side of giving a low-calories image. The packaging for the product should have a red background, as red is used by skimmed milk, which represents nearly no fat to let customers recognize it soon. There would need to be pictures of a fit girl or boy on the packaging to appeal to give people an idea of becoming a fit girl or boy.
11.3 Brand Name
As Jobber (2004) noted, another key decision area is the choice of brand name. The brand name has to stand out from the rest of the chocolate bars, and has to portray its' low-calories image, whilst still appealing to the target audience. I would use family brand name strategy
since Cadbury’s could capitalize its famous brand. As Jobber (2001) explained, the good will attached to the family brand name benefits all brands, and the use of the name in advertising helps the promotion of all of the brands carrying the family name. I have chosen the name as “Cadbury Fit”
11.4 Launch Strategy
So far we have already finished the development process, we will move to launch the new product. As a Jobber (2001) noted, the basic idea is to launch the new product in a limited way so that consumer response in the marketplace can be assessed. I would use test marketing because it is a more realistic test than the simulated market test and therefore gives more accurate sales penetration and repeat purchasing estimates. (Jobber, 2001)
If it is accepted generally by customers, I think that the second thing should be done is to contact the major retailers, and persuade them that selling the new bar at their shop with special offer to stimulate customers to buy the new chocolate.
The next step is to create a televised advertisement. As Jobber (2001) pointed out that advertising can create awareness, stimulate trial, position products in consumers’ minds, correct misconceptions, remind and reinforce, and provide support for the salesforce. The advert would have to be eye catching. In the advert, a fit and pretty woman explains she is fit because she only eats Cadbury’s Fit for indulgence to maintain her fit figure.
- conclusion
12.1. Key findings for the industry
As Student Media (2004) noted, in chocolate and sugar confectionery the Groups' strategy is to build strong positions in prioritised markets through internal growth and value enhancing acquisitions, in addition to identifying best practices within its operations and implementing them across the stream to realize efficiencies and enhance competitiveness.
Also, as Tsai (2004) noted, general environment so far is good for the industry, even though health is a big issue. Besides, in confectionery the Group follows a variation of a "no-frills" price strategy combining a low price with the low perceived added value of the majority of its products to the customer to focus on a price sensitive market. (Student Media, 2004) It suggests that it does not compete on price alone but the strategies adopted by different SBU's target cost reduction in the value chain. Keeping Developing new product is very important in this industry.
12.2. Key findings regarding Cadbury
Cadbury’s brand is so successful. I believe that it is associated with Cadbury’s being first in the market. As Jobber (2001) pointed out that pioneer brands are more likely to be successful than follower brands. He explained that being first gives a brand the opportunity to create a clear position in the minds of target customers before the competition enters the market. It also gives pioneer the opportunity to build customer and distributor loyalty.
As Student Media (2004) noted, if a Cadbury Schweppes product were to start to decline in their product life cycle, then they could bring out a new chocolate bar or alter the one of the chocolate bars that is not doing so well.
According to Student Media (2004), Cadbury’s are facing some problems at the moment and will have to make 10% of their workers redundant over the next 12 months. This is because of the competition and the slight drop in sales.
As Student Media (2004) noted, Cadbury Schweppes uses a technique called "MOTHERBRANDING", which is where they take their leading chocolate bar "Cadbury Dairy Milk" and add different fillings to it, for example "Cadbury Dairy Milk with Caramel" and "Cadbury Dairy Milk with Turkish Delight". It explained further that the wrappers are moved on a computerised conveyor belt to be packed by another computerised machine and the wrappers are used to promote the brand name and the slogan. As a result, they could change the slogan or the material they use to make the wrappers more attractive. As a result, Cadbury’s can advertise to or more products at once for example Cadbury Dairy Milk and Cadbury Dairy Milk with caramel. This way the advertising budget will be cheaper. (Student Media, 2004)
12.3. Findings and recommendations
As Student Media (2004) noted, as a market develops, consumers become more experienced and discerning and look for more benefits from the products they choose. Although some organizations' products may appear unchanged at this developed stage of a market, the more successful businesses re-work existing brands and continue to develop new ones to meet changing consumer needs.
I believe that the use of computers at Cadbury’s is good. As Student Media (2004) noted, the chocolate is made fast and safely and the computers can control the texture of the chocolate
better then any of the employers could do themselves. Besides, the computers are also good for keeping the accounts and things like that.
Moreover, Cadbury’s will need fewer employers since the computers will do all the work, all they need workers for is to look after the computer and to fix them if there are something wrong with the computers. As a result, it will reduce some of the workers redundant and Cadbury’s will save some overheads.
Also, as Student Media (2004) noted, Cadbury’s could also use ICT in a niche market to make low-calories barss. And they use ICT for advertising like the animation on the Coronation Street advert or to advertise on the internet. I believe that using ICT is beneficial to Cadbury’s. As Student Media (2004) also pointed out that it should be further developed to help raise the profits and standards of the company.
Moreover, according to Jobber (2001), as sales peak and stabilize the strategic marketing objective will be to hold on to profits and sales by protecting market share rather than embarking on costly competitive challenges. I suggest that Cadbury’s would be able to utilize the flavours and styles of existing Cadbury's chocolate bars to capture a currently unfulfilled market segment, such as putting different fillings in. I believe Cadbury’s will be still a profitable company.
Reference
Books:
Daniels, John D., et al, 2004. International Business Environment and Operations. N.J.: Prentice Hall.
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Website:
BBC, 2001.
Cadbury, 2002. Chocolate and confectionery market review
on 8 August 2004
Clarke, Belinda. 2002
on 5 August 2004
Co-Op, 2003
on 9 August 2004
Divine
on 13 August 2004
Fisher, Sylvie 2002
on 13 August 2004
Food and Drink Europe, 2003
on 13 August 2004
FSA News Item, 2003
House of Commons Health Committee
on 8 August 2004
ICCO, 2000
India Info
on 17 August 2004
Kumar, Nanda. 2004
on 12 August 2004
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on 8 August 2004
National Statistics Online, 2004
on 8 August 2004
NI, 2001
on 13 August 2004
Recklies, Dagmar, 2001
on 16 August 2004
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on 5 August 2004
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on 5 August 2004
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on 5 August 2004
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on 10 August 2004
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Report:
Mintel, 2002. Chocolate Confectionery – UK December 2002. Mintel International Group Limited
Lecture Handout:
West, Stuart. 2004 Lecture Handout for BAP2.
Papers:
Tsai, Destiny. Chocolate confectionary industry analysis. 2004
Appendix
Questionnaire
- What is your gender?
1. male 2. female
-
What is your favourite type of confectionaries?
1. candy 2. biscuit 3. chocolate 4. Others
- Which company’s chocolate do you buy most?
1. Nestle 2. Cadbury’s 3. Masterfood 4. Others
- Which kind of chocolate do you like most?
1. plain chocolate 2. milk chocolate 3. contain nuts or fruits 4. Other
5. What is the vital factor to influence you when you buy chocolates?
1. calories 2. tasty 3. brand 4.Others
6. Where do you normally buy chocolates?
1. supermarket 2. vendor machine 3. small shop 4. others
7. Which chocolate below will you buy?
1. low-calories 2. organic 3. fair-trade 4. others
