To what extent has the merger of Cadbury Ltd and Schweppes Ltd has led to improved performance?

In the year 1969, two major food and beverages companies merged together renaming the company to Cadbury Schweppes plc. This merger now has led to improved performance towards the company through innovation, increased profitability, lower costs and higher market shares. These reasons have made the company more profitable allowing it to compete more effectively against its big competitors such as Nestle and Coca-Cola. In this coursework, I will be analysing other important factors that have led to the increased performance of the company.

Both of the companies have an origin of more than 200 years old with Cadbury selling confectionery items while Schweppes selling beverages. This meant that the merger was said to be conglomerate integration as both firms were selling different products in different markets. Conglomerates are formed from the amalgamation of firms with differing products sold in different markets.

Firstly, the joint venture of Cadbury and Schweppes has increased market shares. One of the big advantages of merging is that now you have access to a bigger market than the company did individually. Both of the companies were dependent on the UK market only before but after merging, opportunities have been opened for growth and expansion. Their products are now sold globally which has helped to reduce the risk from failure giving greater protection from market downturns. Apart from reducing risk, their growth has allowed to increase their market share. As reports prove, “Cadbury Schweppes boosted its market share ...

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Cadbury Schweppes are enjoying from the various economies of scale. In mergers, economies of scale are a straightforward motive. They allow to reduce average total cost and therefore make the business much more efficient. The principle economies of scale that this firm have benefited from are the technical and financial, however there are others which have helped to improve its performance on profitability. The multinational has gained from the technical economies of scale where they are able to purchase bigger, better and faster equipment and machinery allowing the firm to produce large quantities more cheaply reducing unit costs. Cadbury Schweppes also benefited from the financial economies of scale. Since the firm is big, it is considered to be a secured firm, hence they have found it easier to borrow capital at a lower interest rate. This is because banks know that the company is less risky now. Apart from all this, the company now operates under a board of directors so the administration costs are shared for the both companies. The company has also enjoyed purchasing economies of scale. These give the business a larger discount for buying in bulk. This has be vital for the company as it reduces costs, which are passed on to the consumers in form of cheaper and lower prices than the competitors, thus gaining a competitive advantage over rival suppliers where price competition is the main form of interfirm rivalry.

In addition, Cadbury Schweppes is a marketing focused company which has always relied on gaining higher performance through innovation. Innovation is the process of developing better solutions and methods of conducting business. Cadbury Schweppes has tried to increase the volume of sales and market share by a process of innovation. They have promoted the culture of innovation which helps the company to stay ahead of the competition. Their touch in the changing business environment and its consumers’ changing perceptions, interests and needs have facilitated to create innovative products which best satisfy consumer requirements. A good example is the Cadbury Yowie’s product. Yowie is an exceptionally successful product which has won a large share of the children’s confectionery market in Australia. The Yowie demonstrates the innovation process of adding more value to a product in a socially desirable way. All this innovation has led to improved performance of which the Yowie is just an example that was “voted best new confectionery product in the world in 1997.”

Furthermore, after the merger of Cadbury Schweppes, the firm has acquired many other brands which are enjoyed by billions of people around the world throughout the year. Since the mid 1980s, Cadbury Schweppes has expanded throughout a programme of acquiring important brands and focusing on its core capabilities in order to concentrate in the confectionery and soft drinks market. Over the years, Cadbury Schweppes has strengthened its product portfolio with some famous brand icons such as Dr. Pepper in 1995, “the third best-selling soft drink in the world” 7 UP and “first sugar free chewing gum” Trident. All these famous brands have helped to integrate into new markets with customer loyalty as these brands have already been established. Thanks to these acquisitions, sales and profits have been increased. Today Dr. Pepper accounts for around half of the volume for US subsidiary Dr Pepper/Seven Up, while Trident accounts for sales of over $850 million per year.

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