Cadbury Strategic Analysis

The individual report assesses the critical aspects of the strategic choices available to Cadbury. Recommendations are given to assess the company’s perspectives on the revenue growth and profit as well as market share. The report assesses marketing strategy models applied by Cadbury to indicate its market and competitive position.

Furthermore, strategic segmentation is critically evaluated on the basis of the multi-step process to identify the most financially attractive segments for Cadbury. Available industry position strategic options are identified on the basis of the strategic framework. Competitor reaction provides critical assessment of possible competitors’ reactions as well as competitors’ strategic options that are counteractive to Cadbury’s strategic plans. Finally, the report proposes and justifies the most preferable strategic option for its further business operations.

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Cadbury’s background

In 1831 John Cadbury founded his company Cadbury which has successfully covered and revolutionized the cocoa processing market since 1866. In 1969 Cadbury successfully merged with Schweppes. Today, internationally acknowledged as a reputable corporation with the acclaimed international status, Cadbury Schweppes PLC (hereinafter referred to as – Cadbury) successfully employs more than 50,000 people in 60 countries of the world [1] .

The company is strategically positioned as the fourth top supplier of sugar confectionery and chocolate in the world. The most successful product promoted by the company since 1905 is ‘Dairy Milk’ which has become the most popular moulded chocolate in the UK as well as internationally acclaimed chocolate bar in terms of revenue [2] . Overall,

Cadbury’s strategic success is due to three core pillars: high quality, sound advertising, and value for money [3] .

1. Marketing Strategy Models

Cadbury strategically applies marketing models as a combination of activities to transfer its products to the end-customers. Vast variety of marketing activities requires proper management of to effectively promote products on the confectionary markets through marketing channels. In its strategic choice of appropriate marketing model, Cadbury emphasizes on such strategic issues:

• Connecting Cadbury with customers;
• Performing sales, promotions and advertising;
• Impacting Cadbury’s pricing strategy;
• Influencing product strategy through willingness to stock, branding policies, and profit customizing [4] .

The selection of the most advantageous marketing strategy for Cadbury depends on a number of factors. Thus, marketing strategy should be perceived as the designated action plan which will help Cadbury to reach its strategic aims and objectives. Cadbury’s long-term marketing strategy (based on Ansoff matrix) concerns the launch of new chocolate brands and their promotion on the global markets. Alternatively, the company should win more international markets through the manufacturing and exporting new products (e.g. cereal bars). Further recommendations concern the appropriateness of the strategic choices to be made by Cadbury in the nearest future [5] .

In terms of further strategic growth, Cadbury should apply Ansoff Growth Matrix while focusing on new products and perspective markets. Apparently, there is no need for Cadbury to advance and promote the existing chocolate products since they are already widely acknowledged in terms of quality and high reputation among the Cadbury’s target markets [6] .

Appropriate marketing channels set up the strategy which enables Cadbury to win competition, avoid tactical mistakes, maximize profits and achieve success. Cadbury should therefore figure out how it measures success before it can go out and conquer it, whether it is market share, profit margin, return on investment, residual income, brand image, a reputation for being environmentally green, stock share price, or some other measure its stakeholders deem worthy [7] .

Most companies compete in the market by applying competitive priorities, including quality, cost, flexibility as well as other priorities, depending on their manufacturing capacity. Top management support is the major driver of quality management, which significantly correlates with other quality management practices. In addition to this, customer orientation is not significantly correlated with external quality results (profitability). At that, top management support, employee training, and employee involvement are the three statistically significant variables in explaining the variability in internal quality results [8] .

Cadbury’s marketing channels are aimed at the consumer market. The company is focusing much on the needs and wants of the consumer and what exactly differentiates its products from the competition to develop more sales in this market. Thus, Cadbury is working on the promotion of its direct model to create a better position for itself in the consumer market. The peculiarity of Cadbury’s advertising campaign consists in its focus on the emotions of the chocolate lovers compared to merely logical side of marketing and sales. In such a way, Cadbury reassures its customer support by applying strong emotional advertising campaign focusing on the preferences and likes of the consumers when they opt for a chocolate purchase. In addition to faster transactions, shorter lines and happier customers, such strategic approach to market modeling enables to see interaction with the business through the eyes of the customer, understand customers’ values and demands, and seek ways to disrupt the competitive balance. For these purposes, the company is applying such customer-oriented sources as print media, television, radio, Internet, as well as social networks.

While aiming to increase Cadbury’s sales, the company’s management emphasizes on the appropriateness of particular marketing activities that would best encourage the demand for Cadbury’s products. Cadbury’s marketing objectives coincide with its business strategy priorities ultimately targeted at profit-making and sales increase. Strategic marketing models for Cadbury are identified as follows:

(1) Profit maximisation;

(2) Survival;

(3) Growth;

(4) Sales maximisation;

(5) Diversification; and

(6) Improvement of product image.

The rational combination of these strategic marketing models determines the competitive market position of Cadbury’s. Through profit maximisation, Cadbury solves dual strategic task – withstanding competition, on the one hand, and restoring its financial health, on the other hand. Through growth, Cadbury sells new products and expands its exports overseas. This strategy model enables the company to cover new market niches internationally [9] .

As for now, the company is present in 60 countries worldwide. Meanwhile, the company permanently increases and maximizes its sales. Through diversification, Cadbury spreads its business risks regardless of the successfulness of the sales of one particular product. In marketing terms, it is of utmost strategic importance that Cadbury constantly improves the image of its products by: (1) launching new brands; (2) introducing innovative logos; and (3) applying attractive and convenient packaging.

For instance, while promoting one of its chocolate products – ‘Fuse’, Cadbury marketing strategy was aimed at the growth of chocolate confectionery market, as well as the intensification of its presence on the snacking sector. Prior to launching ‘Fuse’, Cadbury ensured that ‘Fuse’ differed (had relevant points of difference) from the already existing competitors’ chocolates. While conquering the snaking sector and establishing its competitive share therein, Cadbury created USP (unique selling proposition) which meant that ‘Fuse’ had unique appeal which differed from any of the existing rival chocolates.

It is apparent that the implementation of a successful marketing strategy model requires solid investment. While promoting ‘Fuse’, Cadbury heavily invested into testing product’s ingredients. As a result, final recipe of ‘Fuse’ included a combination of more than 250 ingredients. This indicates that in marketing terms Cadbury closely related product development to the specialized testing. This helped the company to reach proper consumer demand.

The desired outcome was to make each customer feel comfortable with purchased product and not regret their choice. At that, Cadbury is not applying the methods of extreme advertising since its most powerful advertising tool is ‘the word of mouth’. In addition, purchasing the products, the customers are feeling they are backed.

To enhance consumer demand for its products and establish line promotion Cadbury actively applies available consumer media and advertising sources (including popular magazines, Internet, radio, TV and newspapers). Since 1990s, the company promotes its brands through the taste-stimulating approach which claims that ‘Chocolate is Cadbury’. Such high recognition is owned to the brand values previously promoted by the Company, and so now the consumers associate the name of a company with the ‘chocolate’ as well as the pleasure of chocolate tasting.

Since 2000, Cadbury Schweppes enters international markets with ‘Choose Cadbury’ marketing strategy. The promotional strategy considers consumer awareness as well as the rationality of consumer buying behaviour. The choice of Cadbury’s marketing strategy is built on the consideration of universal consumer choice. In its strategic consumer-oriented thinking Cadbury developed proper texture and distinctive taste that appeal to the consumers all over the world regardless of their national chocolate preferences [10] .

Cadbury’s strategic marketing model was designated in a way to satisfy the major preferences of chocolate lovers. Therefore, the company produced its two most successful brands – Dairy Milk to suit dark milk chocolate admirers, and Cadbury’s ‘Whole Nut’, ‘Dream’ and ‘CDM’ to suit cream milk chocolate lovers [11] .

Cadbury’s product-specialized market strategy enabled the company to grow its market share and lead competition with its main competitors on the confectionery market.

2. Segmentation

The annual sales on the UK confectionary market ranges from 5 to 6 billion. Herewith, chocolate sales amount to about 70% and worth 3-4bilion accordingly. Since 2003, Cadbury has been increasing own share on the UK confectionary market which makes up about 1/3 of the market. The remaining part is distributed among Cadbury’s main rivals Nestle and Mars.

While segmenting its target market Cadbury divides heterogeneous demand markets into homogenous groups which are grounded on similar features. Homogeneous segment enables the company to divide its target markets on the basis of homogeneous features [12] . While dividing its target market into segments, Cadbury applies segmenting criteria that particularly feature each part of the market:

• Geographic Segmentation;
• Demographic Segmentation;
• Benefits-Sought Segmentation;
• Psychographic Segmentation;
• Behavior/Usage Segmentation; and
• Situation Segmentation

Segmentation Base groups diversify target markets on the basis of such criteria as: social class, lifestyles and psychological features (attitudes, interests and opinions), and include the following:

• Social class;
• Life-cycle;
• Income Level;
• Education; and
• Ethical background [13] 

Cadbury’s target market is segmented on the basis of the benefits demanded by the customers with regard to specific chocolate products. Purchase situation assumes:

• Social surroundings;
• Physical surroundings; and
• Temporal perspective

The segmentation of Cadbury’s target markets is made with the consideration of how often consumers buy chocolate products. In this regard, Pareto’s Principle of 80/20 indicates that 80% of revenue is generated by 20% of customers.

Segmentation variables used to segment business markets:

• Industry;
• Size;
• Product demand;
• Purchasing approaches;
• Geographic factors;
• Situational factors; and
• Seasonal trends

In addition, while segmenting its target markets, Cadbury considers the following issues:

• Differences in consumer preferences for particular chocolate products;
• The co-relation of the variability of individual customer preferences with the measurable variables;
• The profitability of the targeted market segment considering its purchasing power and size capacity; and
• The accessibility and attractiveness of the targeted market [14] .

3. Industry position strategic options

Cadbury’s strategic positioning is determined by the choice of appropriate pricing techniques. While emphasizing on high quality of its products, effective promotion and sound advertising, as well as value for money, the company applies competitive pricing strategy to ensure that the adjusted prices do not exceed those of the competitors’ [15] . This strategic choice is reasonable and justified since regardless of individual taste preferences or any other essential factors, consumers regard product value as one of the most decisive factors while making their purchasing decisions. Therefore, Cadbury cannot apply skimming pricing technique in the course of designing and launching a new product. This technique can be applied under the conditions of inelastic demand [16] .

In addition to the effectively applied competitive pricing strategy, Cadbury focuses on cost plus pricing which helps the company to maximize it profits. While accurately accounting all its costs, Cadbury reaches optimal supply and demand balance and well-balanced positioning on the market compared to its competitors. Alternatively, Cadbury applies positioning pricing to set up the prices with the consideration of demand-side concerns. Through polling and surveying its target markets, Cadbury’s experts designate the optimal price range that would satisfy the majority of the consumers. This positioning technique is particularly applied to better sell Cadbury’s chocolate bean, for example.

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Optimal trading also depends on the financial capacity of the demand-side. Therefore, Cadbury applies demand-based pricing to critically assess the purchasing power of the majority of its consumers. Only under such conditions the company is able to trade its products in accordance with the strategically planned volumes. Hence, selling at the customer’s price brings Cadbury profits, good reputation and positive feedback from the majority of its customers.

4) Competitor reaction

Cadbury should develop new products and promote them domestically as well as internationally. Such product/market growth approach will ensure that the company has diversified range of products which are available and well-recognizable in many countries of the world [17] . Such strategic choice will provide the company with enormous comparative advantages over its competitors and will help it to better cope with the hurdles of the global economic crisis.

Most importantly, such strategic step will erase the common stereotype claiming that consumers mostly associate Cadbury with chocolate. Evidently, ‘Chocolate is Cadbury’ marketing approach much facilitated the company’s success over the last decade. However, considering the challenges of the global competitive markets, this strategy will not be suitable any longer. Hence Cadbury should transform it into more powerful and innovative global image.

The variety of new high-quality and reasonably-priced products will add value to the business activity of Cadbury and will win new overseas markets for the company. This task would require the company to carefully design and develop innovative brands of its products which are not yet present on any of the foreign markets, and which will be potentially demanded by the consumers (i.e. target markets) [18] .

While developing innovative products and penetrating overseas markets, Cadbury should initially consider the demand-side of its target markets. Among the most important criteria are the following:

(1) Average income;

(2) Average spending amount on one-time supermarket/store purchasing;

(2) Average amount consumers are ready to spend on chocolates, candies, cookies, and/or sweets;

(3) PESTLE analysis of the target market with the consideration of the adverse affects caused by the global economic meltdown; and

(4) Porter analysis of the targeted market.

Such wide coverage of strategic issues will win Cadbury competitive advantage and increase its share on the foreign markets.

5) Preferred strategy

Cadbury’s choice of the optimal marketing strategy should consider their chances of success in terms of market diversification. To reach optimal market diversification, the company should ensure that its new product adheres to the customers’ needs and preferences. Extensive market research will help Cadbury to explicitly identify its potential target markets for a new product. Herewith, Cadbury’s marketers should consider the following strategic factors:

(1) Financial health of the targeted market;

(2) Purchasing capacity of target market;

(3) National and individual preferences of target market;

(4) Previous experiences of target market in terms of buying and tasting the similar products produced by competitor companies;

(5) SWOT analysis in each individual case will ensure that Cadbury eliminates all the possible constraints to the minimum and transforms the threats into potential opportunities.

Realistic and achievable strategic objectives should be set in accordance with the SMART approach which designates specific, measurable, achievable, realistic, and timed steps. All strategic steps should be done within the framework of the ongoing marketing research of the target markets as well as vast communication with the potential customers. Questionnaires, opinion polls, surveys, feedbacks and any other networking and communication approaches should be widely applied to critically examine the perspective of the product export to the new market. Prior to designate consumer-friendly price, Cadbury should make the consumers want more. Thus, one of the commonest practices will be free-trial approach that will help Cadbury to seduce consumers with the quality, design, taste, and odour of the new product.

Eventually, in addition to the marketing research and consumer communication, Cadbury should vastly apply psychological approaches to evaluate the degree of rationality of the buying behaviour of target market. Contrary to popular belief, most buying decisions and purchasing choices are made irrationally. This is because most purchases are made in a rush as well as under the influence of many additional factors, such as in-store influencers, advice from relatives and/or friends. Normally, buyers do not consult experts of which brand of chocolate to choose. This indicates that Cadbury should consider contingency and diversity of consumer choices [19] .

Summing up the critical examination of Cadbury’s strategic marketing choices, it is obvious that one-suit-it-all strategic approach will not bring the company long-term benefits. This means that under the conditions of booming globalization of goods and services, Cadbury should win competitive advantages, new markets, and most importantly – consumers through flexibility, innovation, and individual-based approaches to its target markets. The company’s market diversification should involve all the domestic factors and conditions as well as consumers as such if the company attempts to reach optimal supply and demand balance, add value, and maximize its profits.

The analysis has also shown that single marketing strategy is not enough to achieve strategic objectives and financial success in the contemporary business conditions. Thus, Cadbury should permanently experiment and apply the mix of strategic marketing models which optimal combination will depend on the individual conditions particular to the individual targeted markets. The successful implementation of any strategic marketing model would therefore require situational flexibility as well as the readiness to change under the circumstances. Such variability will enable the company to designate and implement strategic marketing mix which will be individual and particular to each strategic marketing model [20] . For instance, the strategic marketing combination of approaches to diversifying Indonesian market will be not the same as the strategic marketing mix applied to the Norwegian market. This is because both markets present heterogeneous cultures, backgrounds, national traditions. These economies are different and diverse. This means that Cadbury should vary its strategic approaches on each individual market.