Business IT Systems : 693806

Question:

LO1

:

Demonstrate understanding of the role of different IT systems in support of

organisational objectives.

LO2

:

Analyse flexible and reliable

IT systems that respond to organisational requirements.

LO3

:

Evaluate IT systems that support value

added change within organisations.

LO4

:

Recommend practical IT systems solutions to given organisational scenarios.

Answer:

In the following report, Porter’s generic strategy model has been devised for Cadburys Company which is planning to launch a new product. The model will allow the company to gain competitive advantage. The report also contains Cadburys strategic planning and how they execute it properly. The Ansoff matrix has been provided which will help the managers and executives of the company to make proper strategies for growth prospective in the future.

Strategic planning for Cadburys

The name of the strategy that Cadburys is pursuing is called Vision into action. The main aim of the strategic planning is to achieve a 5% revenue growth by the end of 2018 (Anon 2018). If the strategy becomes successful, Cadburys will be in an excellent financial position and can focus on releasing new products such as Boost Guarana.  Cost reduction is important as it will boost profit margins. Local competitors and global competitors like Coca Cola made it difficult for the organization to compete in UK markets. Moreover, the strategy incorporated selling diversified businesses (unrelated) of the company which would have brought in more cash. Wasting resources and time on products which does not have long term benefits proved to be disadvantageous as it raised management costs, increased the complexity of bureaucracy and decreased financial performance (Steensen 2014). Acquisition of Adam Business proved to be beneficial for the company as it helped to diversify their product range effectively. Instead of four, seven business units was introduced in the new group structure. For faster decision making and administrative cost reduction, the organization was de-layered. Moreover, to boost market shares, the company invested on positive marketing.

Porter’s generic strategy model

Differentiation to achieve competitive advantage

Cadburys uses differentiation strategy which evaluates its products and services based on functionality, durability and quality.

Quality based differentiation

Cadburys Company has always been obsessed with quality and serves its customers chocolate products that are derived from the highest quality cocoa beans. It can go to any length to provide its customers with the best services possible to provide superior satisfaction and taste. For the new product Boost Guarana, Cadburys has ensured that the Guarana derivative is collected from the best quality plants available in South America.

Customer oriented brand imaging

Product quality can be good for differentiation strategy but it has to have a good brand imaging. With proper advertisements and brand endorsement, Cadburys has created an excellent customer service profile which gives it a competitive advantage. It has focused on responsible sourcing and serves its farmers well with proper CSR strategy (Johnson 2016).

 

Intensive strategies of Cadburys with Ansoff Matrix

Figure 1: Ansoff Matrix of Cadburys

(Source: Created by the author)

Market penetration

This strategy is used by Cadburys to focus on selling products in existing markets. This strategy helps the company to increase its revenue. For example, Bournvita, Dairy milk and Perk comes under this strategy.

Market development

Cadburys has devised a strategy of introducing existing products in developing markets to a new audience. It has introduced gum products around UK and in the neighbouring developing countries and has accounted a net income of 200 million dollars (Hussain et al. 2014). It focuses on value creating and fewer initiatives

Product development

Cadbury has invested a lot in research and development and sourcing of raw materials such as Guarana from South America. It has focused on the development of innovative products and with Boost Guarana, it aims to take over the energy bar segment of the market.

Diversification

This strategy is used by Cadburys to move into new markets with new products. This strategy is very risky. Cadbury Bytes, Gums and Boost Guarana comes under this strategy.

 

To conclude the report, it can be stated that a strategic management plan with tactical strategic objectives has been provided for Cadburys. A range of theories and models have been proposed which will allow the company to make proper strategic decisions for taking the company to a whole new level. Proper competitive as well as environmental analysis have been provided with the help of Porter’s generic model and Ansoff matrix.

 

 

 

Anon, (2018). Cadbury Chocolate | Cadbury.co.uk. [online] Available at: https://www.cadbury.co.uk/ [Accessed 21 Mar. 2018].

Hussain, S., Khattak, J., Rizwan, A. and Latif, M.A., 2013. ANSOFF matrix, environment, and growth-an interactive triangle. Management and Administrative Sciences Review, 2(2), pp.196-206.

Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.

Steensen, E.F., 2014. Five types of organizational strategy. Scandinavian Journal of Management, 30(3), pp.266-281.

The impact of the Macro environment and stakeholder analysis of Cadburys and Boost Guarana has been evaluated in the following report.

 

The stakeholder and PESTL analysis are written as follows:-

Political

As the government of UK changed to Conservative democrat from labour party, it is going to influence operations of Cadburys. Restrictions for skilled labour entry from Europe can hurt the hiring process of the organization. Moreover, tax imposition is another hurdle as in 2010, the tax rate rose by 2.5% increasing the price of chocolates (Anon 2018). Reduction in disposable income and austerity are other political decisions which affected the sales of chocolate around the country and estimates suggest that the trend will continue due to Brexit process.

 

Economic

Cadburys expansion plans were stalled due to the global economic downturn but it did not affect their sales as they managed to gain over 30% in annual profits. Still, in 2009 due to recession, the revenue sales dropped to 5%. Kraft managed to buy Cadbury in 2010 at a low value (Gupta 2013).

 

Social

Cadbury has always catered to consumer demands and were against alcohol products strictly. They are recently mired up in controversies due to their latest Halal certified line-up of products. Increasing cases of obesity and increase in nutritional behaviours has affected the sales of Cadburys’ products.

 

Technological

Production and packing of Cadburys products have changed with technology. Patents related to heat resistant chocolates and pathogen systems have been considered in the technological aspects of the industry. Improved manufacturing processes will help to address the increasing costs of raw ingredients. App based gameplay was introduced by Cadburys in 2012 London Olympics to increase customer engagement (Ho 2014).

 

Legal

Legal issues include providing appropriate requirement of the calorie and ingredient details on the products to help customers make proper choices regarding the fat content. Review of the regulatory information and accusation of Cadbury by Kraft are other legal issues that needs to be considered. Due to EU membership, the food manufacturers have to address increased legal requirements which will decrease after the completion of the Brexit process

 

Stakeholder analysis

The government is one of the biggest stakeholders of Cadburys as they can earn taxes as well as VAT from every product that is sold by Cadburys. Also, the company creates lot of job opportunities and provides incentive for the company for building new factories in places with high unemployment (Eskerod and Jepsen 2016).

The next stakeholders are the employees of the company who work hard to meet the company objectives.

The third stakeholders are the customers who buy Cadburys’ products. People who work in retail chains also fall into this category as they help the company to sell the products to other prospective customers.

The local communities are the next stakeholders as they are interested in how they wil be affected by the business. New transportation routes could help the company in the long run.

 

To conclude the report, all the five element of PESTL analysis have been properly analysed and evaluated. The stakeholders of Cadburys have been identified and analysed as per the report requirements.

Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European academic research, 2(5), pp.6478-6492.

Gupta, A., 2013. Environmental and pest analysis: An approach to external business environment. Merit Research Journal of Art, Social Science and Humanities, 1(2), pp.13-17.

Eskerod, P. and Jepsen, A.L., 2016. Project stakeholder management. Routledge.

Anon, (2018). Cadbury Chocolate | Cadbury.co.uk. [online] Available at: https://www.cadbury.co.uk/ [Accessed 21 Mar. 2018].

Topic: Porter’s Five Forces model and strategies to improve competitive edge of Boost Guarana and Cadburys

 

Porter’s five forces model is an analysis model for businesses which is used for determining the market conditions and how multiple profitability levels are sustained by different industries. The model was first proposed in 1980 and is used to evaluate corporate strategy as well as the industry structure of the organization. Five forces were identified by Porter which was used to measure the profitability, attractiveness and competition intensity of the market and industry.

Figure 1: Porter’s five forces model

(Source: Created by the author)

For analysing the competitive forces of the chocolate sector namely Boost Guarana and Cadburys, a strategy tool named Five forces model of Porter is used. By fundamentally identifying five competitive forces, Porter’s five forces helps to evaluate the market environment that the company is operating in.

The first force is analysed by the entry of competitors. Although energy chocolate bars have a low growth rate in UK markets than energy drinks, Cadburys is confident that the energy bar has significant potential with normal customers (Rothaermel 2015). But the proposed claims are difficult to prove as the UK markets have already well established companies namely Hershey’s, Ferrero and Kraft. With their own chocolate bars and energy drinks, these companies have dominated the markets for a long time. With superior marketing techniques, prices and substitutes, these companies can make the entry of Boost Guarana difficult in the already saturated confectionary market. The effect of the first force is low.

The second force is threat from substitutes.  The main threat comes from the self-branded products of the supermarkets. From previous examples of Kit Kat and Nestle, UK supermarkets have copied their products and provided a cheaper substitute on their shelves. With the launch of Boost Guarana energy bar, such a move from the supermarket chain is not a question of why but when. Moreover, the energy bar requires a special ingredient (plant) from South America which can be difficult to gather initially and might provide hindrance in the organizational operations (Anon 2018). The effect of the second force is high.

The third force is the buyer’s bargaining power. Due to their branding as one of the largest confectionary producers around the world, Cadburys have a huge bargaining power with their loyal customers as well as UK’s large retailers such as Asda and Tesco (Tassabehji and Isherwood 2014).  Increasing competitors with same products at lower prices are the only threat that can change customer loyalty. Competition for shelf space in the retail chains is another issue. The effect of the third force is high.

The fourth force is supplier’s bargaining power. This force is controlled by the people who has an impact on the final product with regards to price and quality. To make Boost Guarana, a plant extract is needed from South America along with sugar, milk and cocoa. A change in the availability and pricing of the commodities will directly reflect on the pricing of the energy bar. The effect of the fourth force is moderate.

The fifth power is rivalry among existing competitors. Existing competitors like Ferrero, Hershey’s and Nestle are established brands and have a wide range of innovative products. Just like Boost Guarana, many companies already have energy bars in their product line-up and will not give up the competitive space so easily with Cadburys. As high competition will eventually result in Cadburys working in lower margins, the effects can have serious implications. The effect of the fifth force is high.

To improve competitive edge, appropriate strategies need to be taken. Just like Cadbury cocoa partnership (which created a sustainable source of Cocoa for the company), Cadburys can create a Cadbury Guarana partnership to ensure a smooth supply of Guarana for the final product (MUIGAI 2013). Other strategies can include proper marketing of the side effects of Guarana so that customers can rely on the product for providing mental energy.

Cadburys can also incorporate strategies like strategic alliance and brand extension. This strategy is used by well-known firms with good brand image to launch a new product in a different category. The main goal is to increase brand loyalty and customer base by offering a new product to increase profit margins. Strategic alliance happens when two or more parties come together to meet certain objectives while they remain independent. In this case, with the launch of Boost Guarana, Cadburys will benefit from adopting brand extension.

To protect itself from the threat of industry rivalry, Cadburys can uses mass customization. The process of satisfying customer expectations by delivering custom made products and services is known as mass customizationMass customization has the added advantages of high customer retention, reducing overhead costs, efficient process of production, higher profits for new products and better software systems to manage customized orders. For Boost Guarana, the two strategies for achieving mass customization from Pines five ways are high levels of automation strategy for achieving low prices and a modular strategy where the development cost of the customized product can be spread around the production process.

Cadburys is an established company which is known all around the world. For the competitors to overcome its popularity they have to bring innovative strategies into the market environment. Moreover, the company needs to work on strategies to maintain its brand loyalty and design an efficient management system for its supply chain.

 

References

Anon, (2018). Cadbury Chocolate | Cadbury.co.uk. [online] Available at: https://www.cadbury.co.uk/ [Accessed 21 Mar. 2018].

MUIGAI, S.M., 2013. STRATEGIES EMPLOYED BY CADBURY KENYA LIMITED TO GAIN SUSTAINABLE COMPETITIVE ADVANTAGE (Doctoral dissertation, UNIVERSITY OF NAIROBI).

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

Tassabehji, R. and Isherwood, A., 2014. Management use of strategic tools for innovating during turbulent times. Strategic Change, 23(1‐2), pp.63-80.

In the following report, the capabilities and internal environment analysis of Cadburys have been conducted. The strengths and weaknesses of the internal structure, skill set and capabilities of Cadburys have been analyzed and evaluated. A SWOT Analysis and Mc Kinsey’s seven S model has been conducted on Cadburys to understand the internal environment of the organization.

 

The SWOT analysis of Cadburys and Boost Guarana are written as follows:

Strengths

Cadburys is a renowned brand and enjoys high brand equity. It has a loyal customer group and has a strong brand recall. It has over 70000 employees from multicultural backgrounds. The marketing strategies of Cadburys are successful and proper advertising campaigns will ensure the success of Boost Guarana (Anon 2018). It has a wide number of products and has a strong research and development team for innovating chocolate products. It enjoys a strong networking and distribution network all around UK. The Boost Guarana being an innovative product has the potential to become famous under the brand name of Cadburys.

Weaknesses

Controversies regarding salmonella and worms present in packaged products of Cadburys affects the brand reputation. Moreover, product recalls also damage the brand image. As the products of Cadburys are dependent on confectionary, changes in regulatory plan in taxation of high fat and sugar foods can have serious impact on the final product (Rothaermel  2015). Moreover, controversies regarding Guarana that it is not suitable for pregnant women and children under 15 can have serious consequences.

 

STRENGTHS WEAKNESSES OPPURTUNITIES THREATS
·         Renowned and well known chocolate brand

 

·         Competitive pricing

 

·         Strong distribution and marketing channels

·         Established market with wide range of products

·         Lack of penetration in remote areas

 

·         Population suffers from diabetes and cholesterol disorders

·         Celebrations and festivals

 

·         Increasing acceptance of globalization

 

·         Increase of 30% in the recent chocolate market

 

·         Sugar free candies

·         No brand loyalty in chocolate markets

·         Competition from other similar companies

·         Substitute products

·         Introduction of innovative products by existing brands

 

 

Opportunities

Emerging markets can increase the reach of Cadburys which can result in increased global market share. Production can be shifted to developing countries where availability of cheap labour is plenty which will help the company to place its competitive pricing effectively (Verboncu and Condurache 2016). Product diversification in food segments such as energy drinks and energy bars can be an effective strategy.  Acquiring the existing competitive companies could be beneficial as well.

 

Threats

Health conscious consumers can decrease their intake of chocolates. Raw material costs can increase. Reduction in sales can occur due to inflation and higher competition from local brands can decrease the company’s market share.

Mc Kinsey’s 7S model to Cadburys

Mc Kinsey’s 7s model is used for several strategic purposes in an organization.  The model is used as a strategic tool by managers and owners of businesses (or organizations) to determine if the organization is meeting its objectives properly and how the objectives can be improved for better organizational efficiency. As evident from the above diagram, there are seven elements that determine this model- staff, style, skills, shared values, systems, structure and strategy. If all the separate elements of the organization come together, then it is determined that the organization is going in the proper path.

Figure 1: Mc Kinsey’s 7S model

(Source: Singh 2013)

 

The model has several advantages. It helps the organization to improve performance and align with the organizational objectives. The model is used to understand and evaluate the core strategic factors of the organization. It helps in the realignment of an organizational strategy to a new strategy or design and helps to determine the current workings of the organization and the relations it exhibits.

The McKinsey’s 7s model has been applied to Cadburys in the following detailed table:-

7s FRAMEWORK OPERATION OF CADBURYS
STRATEGY Cadburys have developed the products with the help of behavioral, demographic and psychographic factors (Singh 2013). For effective growth of the company, Cadburys has also adopted strategies related to effective distribution and brand equity to gain a competitive edge in the market.
SKILLS For Cadburys to gain valuable feedback, the skills and members of the R&D team need to be integrated with the geographical divisions. Cadburys needs to reallocate its technological staff to implement innovative ideas.
STRUCTURE Cadburys has restructured their organizational structure and divided them into global scale and regional scale. This allows regional managers to control the factors related to their specific region. To ensure that the operations are managed at their peak efficiency, Cadburys has adopted a decentralized organization. Due to their presence in different regions and their sales structure of multiple brands and products, the decentralized structure works best for this particular organization. Cadburys have a head office to give a direction to the company. Other than that, Cadburys has a number of regional offices to meet specific consumer demands.
STYLE Cadburys has adopted three unique styles for giving its company a direction and vision. Cadburys emphasizes one company, one team and one passion as its operational style. One company emphasizes the cooperative efforts of all the staff members of Cadburys. One team emphasizes cooperation between all the regional centers of Cadburys. One passion emphasizes sustainability of the products of Cadburys.
STAFF Cadburys has always encouraged its employees to grow with the company.  To increase employee satisfaction and lower turnover rates, Cadburys provides its employees with attractive incentives.

 

SYSTEMS Cadburys has reduced its inventory cost to 200000$ with the help of JIT product line. With reduced stock holdings, Cadburys has cut down the assembly system timing.
SHARED VALUES Cadburys has adopted some shared values that defines the main vision of the company. One of its shared value is to create a brand that people love. Working together is essential. The other shared value is to to deliver quality products to its prospective customers.

 

To conclude the report, it can be stated that the capabilities and internal environment scenario of Cadburys have been evaluated and analyzed effectively. The strengths, weaknesses, opportunities and threats have been discussed with the help of SWOT analysis and the working principles of the organization has been evaluated with the help of Mc Kinsey’s seven S model.

References

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

Verboncu, I. and Condurache, A., 2016. Diagnostics vs. SWOT Analysis. Revista De Management Comparat International, 17(2), p.114.

Singh, A., 2013. A study of role of McKinsey’s 7S framework in achieving organizational excellence. Organization Development Journal, 31(3), p.39

Anon, (2018). Cadbury Chocolate | Cadbury.co.uk. [online] Available at: https://www.cadbury.co.uk/ [Accessed 21 Mar. 2018].

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