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  • Published on: 21st September 2019
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Executive summary

Kraft took over Cadbury in 2010,it’s making a stir in all over the world at that time for a new candy empire will born. There are more than 40 candy brands after they got married, which can be as an equal for Mars and Wrigley. This merger is a very good example for studying the benefits of business combination. There must be some world-shaking changes for these two companies. Such as management style, leadership, motivation factors ,and managing change. Thousands ofCompanies around the world choose to merge every day. It is very meaningful tostudy theiradvantages and disadvantages. It is also a good guide for those enterprise and entrepreneur who is eager to choose a right way for his business. Merging is a sweet upgrade for Kraft and Cadbury. Both of them can benefit from it. Kraft took over Cadbury, which is one of the most iconic manufacturers in the UK. It is a great challenge for these two companies because of operating differences. In my opinion, changing is a necessary tendency,some obvious benefits can be admitted. In this easy,firstly,I will discuss the powerful leadership, and then I will introduce the changes of management, including scale economy, Integrated distribution system, and Industrial structure optimization, thirdly, I will emphasis the value of brand, which can be concluded from the merge. Finally, I will put forward to my suggestions.

The introduction of Cadbury

Cadbury was founded in 1824.Cadbury is a food giant in UK who has always been seen as an iconic English brand. It is the UK's largest chocolate maker and the world's largest confectionery company, which has more than fifty thousand employees worldwide. It is one of the oldest chocolate brands in the UK and the biggest chocolate producer.The most important is that Cadbury is the world’s largest candy company. Craft took over Cadbury is based on the common interest and long-term development.The win-win co-operation of two companies must have the deep reason of it’s business (Miller,Vandome,Mcbrewster,& Cadbury,2010).

The changes after merge

section1: leadership

Human resources management is very important.Ensuring the list of leaders and key Talents is equally important. The brandvalue of Cadburyis recognized by customers, so Kraft has right to be heard after taking over Cadbury.Kraft has become the leader of candy industry. Even so it has a leading position in coffee, drinks, milk, and cookies. The merge is also a new development for him in the candy industry.This is what we often saywin-win co-operation.

Taking Mars and Wrigley for example,Mars spent $23 billion to buy Wrigley,which is a famous chewing gum maker, itget a full global network and a healthy image of the businessquickly. What’s more,Mars became the world's largest candy maker, itControl 14.5% of global confectionery market share,The failure of merger cases is due to many cases,likecultural conflict, weak management,Loss of important managers. These three factors can be boil down to leadership. As far as I am concerned, if Kraft wants to master the right to speak,they have to regard key personnel as the first thing. Talents with market competitiveness are most likely to jump ship. Ensuring fair and transparent of the personnel selection process is of vital importance. Former chairman of Citigroup Sandy Weill said: “Make a decision faster than usual,and not slow……this will help you seize the excellent talents,and convey the right information to every employee.”(Claman,2011)

section2: management style

Entrepreneurs support association between strong enterprises so that they can take advantage of each other's strength, includingMarket development experience,staff, market potential and values. It can realize optimization ofresource distribution. Thus, the company can achieve economies of scale.

This kind of phenomenon is quite normal. It is similar to “international division of labor” in some degree.

After the merger and acquisition, integrated management is the key to your decision control efficiency. According to the basic principle of management,The managers should keep strategic planning, organization, leading, coordination control,financial operation and management of human resources and enterprise culture etc factors, it is called overall systematic coordination(Chauhan,2010). It is very important to know management integration,the part 1 is operation strategy integration.The companies pay more attention to strategic complementary relationship with their enterprise. Becauseof the rapid development of confectionery market, it is growing at about 5% a year.Craft is eager to enter the confectionery market. Furthermore, organization and system integration is also very important.For example, the management teams of two enterprises have different efficiencies.Enterprises with high management efficiency have excess management ability. Mergers can enable businesses with low management efficiency to improve efficiency(Sudhaman,2010).And the remaining capacity of high efficiency enterprises is fully utilized,This is called management synergy.Although horizontal mergers can bring benefits to the enterprise,there are also potential risk factors that can not be ignored.For example, although a merger can benefit the enterprise from the benefits of cost reduction.If there are some elements not fully utilized, such as labor-intensive textile food industry, etc. It is easy to see overproduction. Craft focus on the confectionery market for it’s promising market. In my opinion, the first thing to note is the market prospect. There will be better development space and opportunities. Kraft and Cadbury are all powerful enterprise, They have the ability to avoid risk and achieve complementary advantages.

section3: motivation factors

However, there are some potential risks after those two have merged. Kraft owns 11 iconic brands which worth more than $1 billion and More than 70 brands worth more than $1 billion, like Oreo, Milka cookies, Trident, Maxwell, and so on. It is very likely caused by the strengthening of dominant market power and monopoly,itmainly displays inimproving the product price,preventing new firms to enter,expelling competitors.Kraft is the second largest food company in the world,while Cadbury is the second largest candy maker in the world. Craft will be the largest snack kingdom in the world (Tiltman,2010).The vertical merger will lead to the products on the market of highly integrated process of production, and it will greatly improve the management risk of the new enterprises to enter the market. We call it “Barriers to entry”Michael Porter, a famous master of strategy management said industry barriers to new entrants, often from six aspects, the first one is economies of scale, and the second one isproduct differentiation (Smith& Helen, 2015). As far as I can see, Kraft obtained some or all of the control over the assets of the target enterprise-Cadbury, it based on the inherent demand of expanded profits, and seeks to expand the current business scale, accessing to new technologies, developing new markets.Kraft used money to exchange resources for Cadbury's business.

section4: managing change

Kraft took over Cadbury,First of all,it can gain economies of scale,The second largest food company-Kraft and British candy giant-Cadbury must can expand the scale of production and sales.Consequently, it will reduce the average cost of production and cost of sales. Meanwhile, they can through the integration of the distribution system and new product development to increase revenue.The Economist hadpublished an article called "package".The article said:As the largest food distribution companies in America-Francisco,one reason for the success of the company lies in its acquisition strategy and tireless(Cadbury,2011).It also helps America to establish a modern and efficient food distribution system. Obviously, I think if two enterprises merger can form complementary advantages, they will form a huge economy.There will be a centralized and rationalized management and of the original enterprise after the merger.Enterprises can also refine the division of labor tomake the production process more specialized.

Conclusion

By analyzing the case of Kraft takes over Cadbury. We learn that twopowerful enterprisesmerger will produce a great economy of scale.The ideal state of Kraft is:The combination of Kraft and Cadbury will create a powerful kingdom in the field of global snacks, candy and convenient food.Anyway, the advantages far outweigh the disadvantages. So it is a sweet upgrade for both of them. There exists a complementationbetween these two companies.Although horizontal mergers can bring benefits to the enterprise, there are also potential risk factors that can not be ignored.If the merger is foreconomies of scale,The level of demand that the market can accommodate must be considered.Ignoring the market demand ,simply pursuit of scale economywill lead to counterproductive results.Consequently,Enterprise merger requires careful consideration.

Recommendation

However, the title of the article still has defects. Because this mergeis not only a sweet upgrade, but having some potential risk for this two enterprises. Moreover, Craft took over Cadburyis a threat to small businesses.Therefore, the title can be “Kraft took over Cadbury—a Sweet sorrow”, which cansummarize the pros and cons. It also can be “The advantages and disadvantages of enterprises, taking ‘Craft took over Cadbury’ for example”.

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