SWOT/PEST (LE) Analysis on Cadburys PLC Report

Introduction

Table of Contents

Cadbury is the brand of a reputable confectionary company with a diverse assortment of chocolates, gum and candy. The company’s kernel stretches back to 1824 when the company’s pioneer, John Cadbury opened a chocolate shop in Birmingham (Watson 6). Currently, the company is dominant in the chocolate business and boasts an extended global presence and influence. On May 7, 2008, the American beverage businesses sector and the confectionary sector completed their separation and Cadbury became Cadbury PLC.

SWOT Analysis Of Cadbury Plc

SWOT analysis is a calculative strategic technique used in organizational planning to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a business project or the business as a whole. SWOT analysis entails the identification of targets of a project or a business venture.Once identified, the process in achieving the targets is examined together with the interior and peripheral influences that affect the process leading to favorable or unfavorable achievement of the target. In analyzing Cadbury PLC, it is imperative to study the organization’s performance against a similar scale to that of the competition (Leikin 3). The competitors in this case are other confectionary companies like Nestle which have over the years challenged Cadbury PLC.

Strengths Of Cadbury Plc

The first strength Cadbury PLC has is the advantage of numbers considering the organization has business units all over the world. The units are present in Britain, Ireland, Middle East, Africa, north and South America, Europe, Asia and the pacific (King 1). All the units have commercial inclinations as their principle driving force, but the units also do have supply chain and science and technology functions. The interior organization of Cadbury PLC creates room for four corporate functions in all the units.The functions are human resource & corporate affairs, strategy, information technology, legal and secretariat. This kind of functional structure allows for the business units to focus on commercial programs while aiming at internal growth (Leikin 1). Cadbury PLC also has the advantage of having internationally well known and respected brand names. The goodwill of the brands generates approximately 50% of the organization’s revenue and this implies that the brand bears higher profitability than the confectionary collection.

Weaknesses Of Cadbury Plc

One of the organization’s unyielding weaknesses is the reliance on confectionary market for profitability. Other companies with a similar target market to that of Cadbury PLC for instance Nestle have more diverse products including but not limited to confectionary products, baby foods, and cereals among others (Leikin 1).Cadbury has also been mainly Europe based for a long time and only recently diversified into massive consumer markets like America. In comparison, other confectionary companies of Cadbury PLC’s caliber have diversified their target markets and can be found in almost all major international consumer markets hence gaining leverage over Cadbury (Rosenfeld 9).

Opportunities

The confectionary market is the fastest growing packed food market with a 5% p.a growth rate meaning Cadbury still has various unexploited markets like China, India and Russia where consumer wealth is increasing directly proportional to the population(Miller 16). There is also increased demand of confectionary products in such growing markets.The confectionary industry has over the recent years witnessed several successful mergers and acquisitions. Targeted acquisition will increase the market share and product diversification. There is an increased demand for healthier low calories snacks which could lead to new products for instance organic snacks, sugar free snacks or low fat confectionary products crating room for innovation (Miller 1).

Threats

There is a rising occurrence of obesity in both adults and children which has led to increased weight watching and need for healthy foods and lifestyle. The social changes in nutrition and lifestyle have definitely affected the demand of Cadbury products (Watson 1). Aggressive competition from other confectionary organizations in developed markets has led to possible price wars between the companies (Leikin 1). The global demand for cost reductions in environment, transport, energy and supply has threatened to incapacitate the operational structure of Cadbury PLC (Rosenfeld 4).

Pest(le) Analysis Of Cadbury Plc In The U.K

PEST (LE) analysis is the strategic analysis of the comprehensive peripheral conditions surrounding a business operation. Such conditions are normally above the control or influence of the business, but bear pivotal influence on the outcome of product development, business planning and strategy. They include:

Political Conditions

A number of MPs fear jobs will be lost if Cadbury shareholders accept an 11.5 billon pound offer from Kraft foods in a take over bid. Cadbury currently employ 2,500 individuals at its factory at Bourneville in Birmingham and a further 1200 in Herefordshire (King 11). The MPs further view the take over by Kraft as a threat to the creativity of Cadbury employees and innovation of the West Midlands.The MPs are not happy with the fact that Kraft has its base in Illinois meaning decisions will be made based on factors in Illinois not West Midlands (Rosenfeld 9). Such political interferences are likely to influence the public and elicit angry reactions from both the employees and members of the public (Watson 6). However, The Competition Act of 2000 stops interference by the government on the basis of public interest in cases such as this (Watson 3).

Economic Conditions

Current economic conditions in the U.K are rife for successful operation of the confectionary industry. The global economic downturn is reversing and many companies are now able to secure resources and support production (Rosenfeld 5). Cadbury PLC was not that stable economically during the global recession and had to bid its shares in the international market.Kraft foods, a U.S based company proposed to take over Cadbury and offered a relatively high bid for it. Hence, even though the current economic conditions are stable, the preceding economic conditions were detrimental to Cadbury leading to massive debt eventually leading to the take over bid/ merger (Miller 16).

Social Conditions

There has been an exponential growth in the occurrences of obesity cases in the U.K as well as obesity related illnesses both in children and adults. Health and fitness experts in the U.K are warning that if society does not change their eating habits by the year 2025, one in three deaths will be weight related (Miller 8).Such observations have stirred sharp adjustments in the eating habits and lifestyles of the general public. Confectionary products are considered high in calories and the social attitude towards such products is changing meaning the public is more interested in organic foods and confectionaries are now being considered attributes to obesity.

Technology

Cadbury PLC considers technological advancement as one of the key pillars of the company’s success through out the years. The company has a graduate program that is supported by technical training and the aim of the program is to encourage innovation (King 15).The company has realized several new production and processing methods through this program, like the candy churner and the chocolate whip which are advanced inventions for higher and faster production (Miller 5). Cadbury still falls behind the competition as far as diversification is concerned because they lack cereal making machines as wells as baby food technology (Miller 10).

Conclusion

Cadbury Plc has been a stable and successful confectionary company since its establishment in the mid nineteenth century. A SWOT analysis of the company has helped identify some of the strong points Cadbury Plc capitalized on to perpetuate global expansion. A potent weakness has also been revealed and that is the late entry into the American market, one of the largest consumer markets in the world.The PESTLE analysis examines the performance Cadbury Plc in the U.K relative to its environment. The recent merger which has come to be known as a hostile take over by the U.S based Kraft foods generated a lot of controversy. However, it is clear from the analysis that Cadbury Plc was undergoing tough economic conditions and Kraft’s intervention was timely though the operation strategies of the two companies differ greatly.