Cadbury Case Solution

1. Introduction 

In the contemporary business world, successful business organizations are actively incorporating changes to existing business models and practices as competition is on the rise and consumers’ preferences are rapidly changing due to increasing health and environmental awareness. Although, confectionery products are highly demanded by consumers due to their unique positioning but, the confectionery industry is being severely criticized by health protection groups for its contribution to several diseases like obesity and diabetes (Raines, 2021). This report discusses about Cadbury, which is a UK-based multinational confectionery enterprise owned by Mondelez International since 2010 (Cadbury, 2021a). In this report, external and internal environmental analysis is conducted by utilizing several strategic management tools- Porter’s five forces, SWOT, VRIO, and BCG matrix to propose strategic recommendations to Cadbury.   

2. Discussion 

2.1. Porter’s 5 forces analysis

2.1.1. Bargaining power of suppliers

Cadbury has around 40,000 direct and indirect suppliers worldwide and each supplier accounts for only ten percent of raw material purchases. Ghana (West Africa), Ecuador, Venezuela, Queensland (Australia), India, and Indonesia are considered as major Cadbury’s sourcing destinations for sugar, cocoa beans, and cocoa butter (BCS, 2019). As there is a large number of suppliers available to Cadbury, so bargaining power of suppliers is low.  The Cadbury’s Cocoa Life partnership and industry’s reliance on complex agro-business supply chain further strengthen Cadbury’s position, and it is in well position to purchase inputs for cheaper and more in bulk than medium-level businesses (Egebjerg, 2016).

2.1.2. Bargaining power of buyers

Cadbury’s buyers are categorized into retailers (like Tesco, Metro Group, 7Eleven, Lidl, Carrefour, Costco, and Asda) and end-consumers. Previously, Cadbury had greater power as it was one of the largest confectionery brands in the world, and consumers were involved in impulsive buying of chocolates due to gift positioning (Del & Samoggia, 2020) but now the competition has significantly increased in the confectionery market for shelf space and there is the large number of rivals that are offering similar products at affordable prices, so the purchasing power of buyers has become increased. Moreover, the increasing incidents of product recall and rising health awareness are altering end-consumers’ preferences and ultimately lowering their switching cost to move towards more ethical and socially responsible brands (Mehmet, 2019).   

2.1.3. Competitive rivalry

Competition has become intense in the confectionery industry with the presence of the large number of national, regional, and international brands. The global confectionery industry is currently dominated by well-established brands like Mars-Wrigley’s, Nestle, Hershey’s, Ferrero, and Mondelez International-Cadbury (as shown in below graph). Due to stiff competition, there are ongoing price wars between confectionery brands. Like Cadbury, other major confectionery brands are also investing heavily on research and developments to effectively compete in terms of quality and flavor of chocolates and other related products. As product lines are also similar and they are available at the same retail outlets, so competitive rivalry is considered strong among existing players (Mordor Intelligence, 2020; Wunsch, 2021). 

2.1.4. Threat of new entrants

The above graph shows the global market share of leading confectionery brands. According to statistical reports, the confectionery market is rapidly growing as the total market value of global confectionery is reported as 210.3 billion dollars in 2019, which is estimated to reach 270.5 billion dollars by 2027 (Hershey Kisses, 2020; Allied Market Research, 2020). Thus, it would be difficult for new businesses to enter into this highly competitive and crowded marketplace and capture market share because such well-established confectionery brands have already gained considerable brand recognition and built trust among customers, and they have an extensive distribution network. Furthermore, other barriers of entry in the form of high initial investment cost, strict foreign investment policies, and high cultural differences also indicate that threat of new entrants is low.

2.1.5. Threat of substitutes

Threat of substitutes is moderately high as there are the number of substitutes emerging in the market to substitute chocolate and other related confectionery products, such as- fruit bars, cereal bars, savoury snacks, non-chocolate snacks and frozen dairy products. Due to increasing health awareness, there is the likelihood that customers can move towards healthier alternative options/substitute products (Komiljonovna & Babadjanovich, 2019).     

2.2. SWOT analysis