Cadburys – Business Environment

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Cadburys – Business Environment

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Cadburys Chocolate UK ??“ An Introduction

Cadbury??™s as a brand is one of the most recognised and reputable organisations on the planet. Formed in 1824 as a small cocoa, tea and chocolate franchise in Birmingham, England by John Cadbury, the business has gone from strength to strength and continues to conquer 20 out of 50 confectionery markets around the world today and has 13 of its bars in the list of the top 30 chocolate bars.
Cadbury??™s have three confectionery attributes: Chocolate, Gum and Candy of which, are on sale virtually all over the planet focusing across four geographic regions and 12 markets from USA to Turkey, Russia to Australia. To achieve such success Cadbury??™s employs around 50,000 people, work with 35,000 various suppliers and millions love their products every day.
Profits are also on the constant increase even with the current ???credit crunch??™ sales have increased by 6%, giving people comfort in times of crisis as it confectionery is still classed as an affordable treat.

Why buy Cadburys

Cadburys have a reputation to constantly live up to and in order to do this they have made it a priority to find out what people want and are always researching this. In the past 5 years they have interviewed over a quarter of a million people in 47 market places alone. Cadburys do not want to be complacent in the market and with the help of the people buying their products they are able to achieve their purpose of creating brands that people love.
A customer of Cadburys expects a good quality, easily obtainable, affordable and enjoyable product. With every product Cadburys provide this high standard. Their customers expect variety too as well as retain-ability of firm favourites. For example, the Creme Egg is fundamental to Cadburys for its uniqueness and is a leading product over other eggs on the market and people return to buy them again and again.
Confectionery though is a competitive market and Cadburys have 2 main rivals in Mars and Nestle with smaller rivals too; so it is imperative to retain custom and a good way to do this is by developing new products/adhering to customer trends in order keep the consumers wanting more.

Factors of Production

In order to produce their chocolate, Cadburys do this mainly in bulk production due to the vast orders they have. They do though offer a service called ???Job Production??™ for times such as, when they need to personalise products with melted chocolate for example. The Main factors Cadburys consider when producing their chocolate are:

Land

? Land for the factories, Worldwide
? All stages of producing chocolate

Labour

? Management
? Designers (Packaging etc)
? Consultants (Ingredients etc)
? Machine Operatives
? Transport Staff
? Other Staff (Pick/Pack, Testers, Cleaners etc)

Capital

? Fixed ??“ The Factories, Machinery etc (Assets)
? The Product itself!

Entrepreneur:

John Cadbury ??“ The man whom without, Cadburys would not exist.

The Stakeholders

Cadbury??™s set their own standards within the industry and with the help of their Stakeholders they strive to achieve them with their Vision and Purpose:

One Vision; ???To be the World??™s Biggest & Best Confectionery Company??™??™,

One Purpose; ?????™Working together to create brands people love??™??™.

Cadburys could not achieve their Vision and Purpose without their Stakeholders and without them the company simply could not thrive. There is a downside with Stakeholders though, that being sometimes not everybody can be kept happy, causing a conflict of interests. In order to try and keep a level balance a company needs to prioritise the worst possible outcomes with the least and try to adhere to the key needs but to also -understand the less damaging needs from Stakeholders too. An example would be The Environmental Groups want less packaging but the Suppliers don??™t want you to buy less of their materials so in the long run one loses out but the good press from Cadburys being more eco friendly outweighs the bad.

There are three main types of Stakeholders to consider in business, they are: Internal, Connected and External Stakeholders, examples of each are listed below:

Internal Stakeholders

The Management and Employees have a large affect on the day to day running of operations. In order for the running of the organisation to go smoothly though it is vital for both parties to ascertain a good 2-way relationship with one another, both have needs and therefore a happy workplace amasses to a successful partnership. Requirements from both involved are as followed:

Management & Employee Needs Company Needs

? Security
? Development
? Good Salaries/Rates of pay
? Job Satisfaction
? Nice working environment
? Productivity
? Loyalty
? Commitment
? Trustworthy
? Reliable

Should the above not be provided, morale and enthusiasm for a role can be lost, resulting in de-motivation, which can have a profound effect on the business such as: poor attendance, low standard of work, poor customer – relations (which could lead to loss of business), high turnover of staff and media leakage leading to bad press and reputation. Staff simply need to know that they are valued within the company and it??™s the small recognitions and investments that go a long way.
As well as providing good salaries and a sound-working environment for their staff, Cadburys provide other incentives for them to ensure they feel valued and motivated enough to give their employers their best, they include:

? Internal & External Training Courses
? An ???Open Door??™ Learning Centre
? Personal Development Plans
? Yearly Objectives
? Performance Reviews (i.e. Appraisals)
? Welfare Benefits
? Opportunities Overseas

Connected Stakeholders

There are four categories of Connected Stakeholders, all of which can have a large impact on the business thus a two way relationship is required once more as both the Company and the Stakeholder need each other in order to be successful. (See Appendix 1 for breakdown of Connected Stakeholders).

External Stakeholders

An External Stakeholder, though not as obvious as the others can still have a profound effect on a company. (See Appendix 2 for breakdown of External Stakeholders).

Other External Stakeholders include Financial Analysts and the Central and Local Governments.

There is a downside with Stakeholders though, that being sometimes not everybody can be kept happy, causing a conflict of interests. In order to try and keep a level balance a company needs to prioritise the worst possible outcomes with the least and try to adhere to the key needs but to also -understand the less damaging needs from Stakeholders too. An example would be The Environmental Groups want less packaging but the Suppliers don??™t want you to buy less of their materials for packaging so in the long run one loses out but the good press from Cadburys being more eco friendly outweighs the bad.

The Marketplace

Cadburys belong to the Confectionery Market, a large industry and is the world??™s fourth largest packaged food market. 5 confectionery companies between them, including Cadburys account for 40% of the market share. The other proportion of the market has a number of companies that operate on a regional or local basis whereas Cadburys operate on a multi-national, national and regional basis.
For Chocolate, Cadburys are among the top 3 suppliers in the world alongside MarsWrigley and Nestle; they the 2nd top supplier of Gum and are Number one supplier of Candy. Cadburys have the number one and number two confectionery market positions in 20 of the world??™s 50 largest confectionery markets by retail sales value. These markets accounted for near three quarters of the revenue for Cadburys in 2007.

(Competition chart courtesy of www.cadbury.com)
Considering all information above it would be right to assume that Cadburys are within an ???Oligopoly??™ type market. They have 5 main competitors to consider, those being: MarsWrigley (being their main opponent), Nestle, Hershey, Kraft and Ferrero and alongside these there are smaller companies but none in comparison to the main few. For example, similar products are fairly matched in prices, with no big ???price hikes??™; Profits can be very high, abnormal as such and though barriers to entry aren??™t quite as high as a company within a Monopoly they are still high to reach a standard like Cadburys. The 6 main companies will also concentrate on their business but will also pay close attention to that of each other.
Customer Demand
The demand for chocolate is always high. It is seen as an affordable luxury to the consumer so there will always be a steady flow of sales and at some times, the demand is likely to shift for the good, or for the bad, examples of these shifts are:

? Seasonal Requirements; Like Easter and Valentines Day for example, the demand at these times would increase for essentials such as Easter Eggs and Chocolate Selections such as ???Milk Tray??™; Cadburys top selling Box of Chocolates.
? New Product Promotions; All chocolate lovers are intrigued by a new product and therefore demand will increase as popularity and word of mouth sours about the product.
? Unexpected Events; For example in June 2006 Cadburys had to recall over a million chocolate bars due to fears that they could be contaminated with Salmonella. This caused the demand to fall due to the consumer being concerned that they would become ill should they eat the chocolate. Though the amount of Salmonella in the product was miniscule and probably not enough to cause sickness, it was enough to damage the reputation and sales for a period.

Supply Issues

As with Demand the supply of chocolate can also be affected by certain factors, below are 3 examples:

? Number of Suppliers; This could affect the production as consumers could be persuaded to go elsewhere for their product, namely to a key competitor, so a firm eye on the business is vital.
? Technology; The machinery within the production process could fail causing crucial time delays of deliveries. It is imperative that regular maintenance checks are done as well as appropriate upgrades to newer technology where deemed necessary.
? Uncontrollable Influences; For example, with the recent ???Blue Tongue??™ and ???Foot & Mouth??™ viruses, these lead to causing disastrous delays in the receiving of milk; a key ingredient to Cadburys chocolate, leading to substantial delays in the production of chocolate, therefore delaying the supply.

(See Appendix 3 for examples of Demand and Supply Curves).

Complements

Complimenting chocolate is a harder task than most other consumable products. It is seen as an already ???perfect??™ product to those it is adored by so how can it be complimented
Almost certainly when somebody eats chocolate they want a drink so a common compliment would be milk or to get the best out of chocolate Cadburys produce Hot Chocolate for that melt in the mouth feeling.
Another compliment that isn??™t actually thought about but would actually be the biggest compliment is the adding of different ingredients to a chocolate bar. For example, adding honeycomb to Cadburys chocolate produced the high selling ???Crunchie??™ bar or adding pralines to the already successful ???Flake??™ bar gave an old favourite a modern re-vamp. It is these compliments that Cadburys thrive on as it gives them more opportunities to provide variety within their product range.

Substitutes

Even though Cadburys are one of the top chocolate manufacturers in the world they still need to know of influences that can affect their position within the Marketplace. Substitutes can affect/acquire the consumers decision to buy, examples being:

? Supermarkets own brand
? Competitors products
? Marketing/Promotional campaigns
? Another ???treat??™ instead of Chocolate, i.e. sweets or cakes

To avoid substantial loss of business it is important that a company studies their market and any key changes, for example if a rival releases a new chocolate bar it would be advisable for Cadburys to act themselves on this in order to retain custom; this can be by reviewing prices on a similar product they produce, promotions, new launches etc, basically making their product appeal first to the consumer.

Facilitators

A product should be easily accessible for the consumer. If a consumer has to search for it they are likely to give up and use a competitor. Therefore for a confectionery company it??™s the small things that make a difference, for example in supermarkets and shops it is great business for Cadburys to have their chocolate near the checkouts as it is the last ???point of call??™ as such for the customer. Another ease of access facility is vending machines/contracts within the working environment.
Cadburys chocolate though is available in virtually every geographical location in the world and has operations in over 60 countries, making their products an everyday ???vision??™ as such to the potential consumer.

Finances so far in 2008
In the UK revenues have grown 10% in 2008 despite competition from others and despite the current ???credit crisis??™. In 2007 total profits reached their highest ever and Cadburys look set to smash that record in 2008. Below is the Financial Summary for the past four years, showing between 9 and 10% increases per year, so as stated above the 10% growth already estimated in 2008 shows that Cadburys are as a strong a company as they were 5 years ago.

?m 2004 2005 2006 2007
Revenue 4,326 4,651 4,861 5,093
Underlying operating costs (3,882) (4,150) (4,372) (4,596)
Profit from operations 340 458 347 302
Underlying profit from operations* 444 501 489 497
Underlying operating margin 10.3% 10.8% 10.1% 9.8%

(Financial Summary courtesy of www.cadbury.com)

Cadburys Chocolate ??“ Conclusion

From my assessment of Cadburys UK it is safe to say that they are a highly organised, professional and well established company with exceptionally high standards. Everything from the innovation of thought to the production of the product itself is meticulously planned. Since they were founded they have gone from strength to strength and have exceeded the initial expectations of Founder John Cadbury by going from a small Birmingham back street outlet to a Multi-Million if not Billion Pound Empire.
They are not complacent in their market and are always striving to do more and commit to more, not just in business but in the environment too and with profits predicted to sour by the end of 2008, the confectionery world is most definitely their for the taking.
Appendices

Appendix 1

Customers A company simply could not survive without its customers; they are the focal point of a business. In order to maintain a good relationship with customers it is important to provide a product that is good value for money (confectionery being an affordable luxury), quality, availability, convenience and also developing/growing, everybody likes a new and better version of a product but also one that doesn??™t distain itself from its originality and purpose. Cadburys have a wide spectrum of customer ranging from the young to the old so have to consider all opinions.
It is very easy though to discourage a customer by not providing all that they expect. This can lead to bad publicity/press, loss of business and reputation therefore it is vital to listen to their needs with, for example, market research campaigns, customer studies etc.
Creditors It is highly important not to upset Creditors as they can provide a company with the funding capabilities to continue and expand the business. It is vital to pay on time or even early to maintain good credit and reputation otherwise the company stands to gain bad credit history, limited or no further funds and maybe even face legal action.
Distributors Cadburys being the large company they are have a high demand for the their distributors and therefore require extreme reliability and flexibility, on the other hand, rather like a creditor the distributor requires prompt payment and integration.
Suppliers

Suppliers Cont.
Suppliers again are quite similar to Distributor in their requirements, but from them Cadburys require regular ??“supplies, reliability and development support, examples of top suppliers of Cadburys are:

? Sugar – British Sugar
? Packaging – Alcan, DSmith, Field packaging
? Cocoa beans – Ghanaian Cocoa Board (Ghana)
? Milk – Selkley Vale are contracted to Cadurys and supply them with 50% of their milk

Appendix 2

Communities A community can be affected should a new Cadburys be built locally therefore keeping them happy is key. By holding forums they can ascertain their issues and requirements as well as showing the positives to their negatives, for example the creating of jobs provides a good starter as well as charity work and quality of life. Negatives from them can include: congestion, delays in planning applications and bad press.
Media Its is important to keep a good relationship with the media because on a broad scale they can give news about your company to a great deal of people which can be beneficial or damaging to the company. They are also a ???good-friend??™ of the previous stakeholder so it is important to work with them both on same level.
Environmental Groups Environmental Groups are also linked with the media and can cause a lot of bad press. This can be reversed though by helping to understand the set issues. For example, Cadburys began their ???Purple Goes Green??™ campaign in 2007 where they became the first manufacturer to promise ???absolute rather than relative??™ carbon reduction resulting in them cutting 50% carbon emissions and 10% less packaging.

Appendix 3

Demand Curve of the Crunchie Bar

40p

P
R 35p
I
C
E 30p

25p

0
100 200 300 400 500

QUANTITY

The demand curve will shift to the right as demands increase and will shift to the left as they decrease. For example when at a higher price the demand for the Crunchie bar is lower but when at a lower price the demand is higher.

Supply Curve of the Creme Egg

20p

P
R 15p
I
C
E 10p

5p

0
100 200 300 400 500

QUANTITY

As prices rise, demand will rise and as prices fall, supply will fall.
For example at Easter the price will rise due to the demand of the product.
Bibliography

Cambridge Dictionary – http://dictionary.cambridge.org/define.aspkey=77368&dict=CALD 05/10/2008

Cadburys, Company Website – http://www.cadbury.com/ourcompany/ouroverview/Pages/ourcompany.aspx 13/10/2008

http://www.cadburyinvestors.com/cadbury_ir/financials/financial_summary/ 13/10/2008

http://www.cadbury.com/SiteCollectionDocuments/CA_Corp_Brochure_AW_Double.pdf 13/10/2008

http://www.cadburyinvestors.com/cadbury_ir/overview/our_strengths/ 13/10/2008

http://www.cadburyinvestors.com/cadbury_ir/press_releases/2008press/2008-07-30/ 04/12/2008

http://www.cadbury.com/ourcompany/ourmarketplace/Pages/ourmarketplace.aspxTabIndex=3 04/12/2008

http://www.cadbury.com/ourcompany/ourmarketplace/Pages/ourmarketplace.aspxTabIndex=0 04/12/2008

Sloman, John (2008) Economics & the Business Environment Second Edition Prentice Hall, p35 – 42