CUDBARY'S VISION AND STRATEGY
What Cadbury is doing to achieve its vision of being not just the biggest but also the best confectionery company in the world?
Cadbury's Vision into Action (VIA) plan summaries all aspects of its strategy which deliver on the aspiration and governing objective of delivering superior shareowner returns. At the heart of the plan is the performance scorecard – the financial targets reinforced by: priorities, sustainability commitments and culture. The growth priority is represented by – ‘’Fewer, Faster, Bigger, Better’’. Invest in getting our new product developments into more markets faster, use joined up commercial and marketing programmes to have a bigger impact and underpin the whole plan by executing our initiatives better. Efficiency priority recognises that it is not enough to grow; but also be more profitable. The company focus on cost and efficiency by reducing central functions and costs; consolidating businesses and reconfiguring Confectionery Company in the world manufacturing and distribution. VIA will help increase Companies margins to mid-teens by 2011 with the aim of delivering mid-term margins by 2011. The capability priority ensures investment in the right organisation and skills to win. Cadbury manage its commercial strategies on a global basis through the three categories (chocolate, gum and candy) and strong functional leadership. VIA is underpinned by sustainability commitments which improve both long-term business performance and the impact on wider world. This combination of performance and values characterises the company culture.
CUSTOMER SATISFACTION AND INNOVATION
Customer satisfaction and company’s innovation activities are related to the company’s strategy?
Company’s core purpose of creating brands which people will love. It is worth mentioning that Cadbury is very concerned on its customers. Cadbury’s success is rooted by the desire and ability to really know what people want need and believe. Analyzing the customer’s satisfaction, Cadbury realized that there are four important aspects to be aware of: 1. the pleasure principle, 2. natural is better, 3. being treat-wise, 4. access for all, 5. responsible planet. Cadbury Innovation is right at the heart of creating brands people love. Not just new products and improved recipes, but also innovative packaging formats and world-class brand communication. Cadbury determined to stay close to the people who buy our products and the retail customers who serve them, ensuring winning in-store experiences at the point of buying.
MAIN SHAREHOLDERS
How Cadbury achieve the maximum satisfaction for all stakeholders?
As stated before the governing objective is to deliver superior shareowner returns by realising the vision to be the world’s biggest and best confectionery company. The CEO intends to provide maximum satisfaction for all stakeholders, placing priority on shareholders, focus markets and focus costumers.
SWOT ANALYSIS
Environmental and internal environmental elements of Cadbury expressed through SWOT analysis?
Explanation: Grading based on scale from 1 to 10. Grades - 7 to 10 express opportunities and strengths. Grades - 1 to 3 express threats and weaknesses. Grades - 4 to 6 express neutral impact.
The swot analysis is presented on the following chart, stating graphically its position / placement.
PORTER’S MODEL
Analyse of Cadbury through Porter’s model.
Treat of new entrants - High entry barriers in terms of economics of scale, capital requirements, but low in terms of low switching cost, relatively easy access to distribution channels, industry growth rate is in many markets significant, which goes in favour of the new entrants. Threat of substitute products - This threat is as opposed to other, relatively high since substitutes are plenty, some with lower and some with higher prices and switching costs to buyers don't exist. Suppliers bargaining power - Suppliers are not concentrated and Cadbury has 35000 of them so they have a very low bargaining power. Their products are not very differentiated, and although the switching costs aren't insignificant they can be well covered, since Cadbury is financially stable, they can't threat with forward integration at least at this scale, and therefore can't increase their bargaining power in this way Buyers bargaining power - There are many buyers, but some of them, like the focus buyers are significant in size and therefore have significant bargaining power. They are not a real threat when it comes to backward integration, but Cadbury also couldn't afford to integrate forward, so this advantage only goes so far. These products are good sellers and are so much more important for the buyers, which increase our negotiating power with the buyers Rivalry among Existing Firms - There are many competitors, and some of them are significant in size as in financial strength. Thanks to the high market and industry growth rate, the rivalry is reduced, but is still very intense. In favour of this go the high exit barriers and not enough product differentiation (the products are similar; the brand makes up most of the difference).
SUCCESS TREND
Vision into Action being their guiding principle, Cadbury manages to satisfy its stakeholders over and over again. The reason for that might be the competing strategy that drives growth, with bottom up planning of priorities and actions and stretching but achievable goals. Other source of their success is probably delivering on promises to the stakeholders (especially shareholders) by delivering the Vision into Action targets. No matter what the real reason is Cadbury seems well positioned to capitalise on future growth opportunities. This we prove with optimistic figures from the two presented pictures.
EXTERNAL ENVIRONMENT
Expected profitability of the branch, based on the significance of entrance and exit barrier:
MAIN COMPETITORS
The market is relatively fragmented, with the five largest confectionery companies accounting for around 40% of the market. There are a large number of companies which participate in the markets on only a regional or local basis. We compete against multinational, regional and national companies.
The chocolate share is built on regional strengths as is the case for the other top five chocolate groups. They command strong positions in the UK, Ireland, Australia, New Zealand, South Africa and India. Our number two position in gum is built on strong market shares throughout the Americas, in parts of Europe (including France, Spain and Turkey), and in Japan, Thailand and South Africa. In candy, they have a number one position. Halls is the largest brand in candy and the position is supported by other significant regional and local brands.
KEY STRATEGIC CHOICES
The four key strategic choices are designed to drive growth and market share gains:
- Route to market
- Emerging markets
- Marketing & innovation
- White spaces
1. Route to market
Significant proportion of confectionery is sold through the small format traditional trade:
- Around 50% of products sold through traditional trade
- Rises to around 80% in emerging markets
- Even more important or higher margin gum-
Investment in Route to Market sustains a competitive advantage:
- Creates barriers to new market entrants
- Increases impact of scales and merchandising activities
- Underpins strong positions and leading market shares
2. Emerging markets
3. Marketing & innovation - Cadbury transform out investments in marketing and innovation:
4. White spaces - Down are shown three pictures where we can see countries or existing Cadbury markets (purple colure), as well as adjacent market OPPORTUNITIES (BLUE COLOUR)
TRENDS IN CONFECTIONARY
Spending on confectionery remains high, up 4% in 2009.:
• Emerging markets are sustaining high levels of growth
• The category mix benefits from ‘stay at home’ behaviour
• Private label remains a small segment of the market
• Long-term dynamics for growth in gum remain strong:
- Functional benefits of the product driving per capita use
- Innovation set to broaden mass appeal of the product. Future growth is expected to be driven by higher volumes and further share gains
•Reduced need for significant price increases
- Lower levels of input cost inflation
•Stronger growth from traditional gum markets
- Activity driven demand should respond to economic growth
- Relevant innovation is expected to build per capita consumption
•Our key emerging markets are expected to grow over 10%* in next three years
REFERENCES
- Richard Lynck, Strategic Management 5th Edition, Pearson Education Limited, 2009
- Cadbury Corporate FactSheet, Cadbury, 2009.
- Elena Ruiu, Gum offers best growth opportuinites for Cadbury, Euromonitor, 2007.
- Crating Brands, People Love, Cadbury, 2009.