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  • 1. Master of Business Administration-MBA Semester 4 MB0052 – Strategic Management and Business Policy - 4 Credits Assignment Set- 1 (60 Marks) Note: Each question carries 10 Marks. Answer all the questions. Q.1 What similarities and differences do you find in BCG business portfolio matrix, Ansoff growth matrix and GE growth pyramid. (10 marks) Ans. The BCG matrix is a portfolio management tool used in product lifecycle. BCG matrix is often used to highlight the products which get more fundingand attention within the company. During a product’s life cycle, it is categorisedinto one of four types for the purpose of funding decisions. Figure 3.5 belowdepicts the BCG matrix.Figure 3.5 BCG Growth Share MatrixQuestion Marks (high growth, low market share) are new products with potential success,but they need a lot of cash for development. If such a product gains enough market sharesto become a market leader, which is categorised under Stars, the organisation takesmoney from more mature products and spends it on Question Marks.Stars (high growth, high market share) are products at the peak of their product life cycleand they are in a growing market. When their market rate grows, they become CashCows.
  • 2. Cash Cows (low growth, high market share) are typically products that bring in far moremoney than is needed to maintain their market share. In this declining stage of their lifecycle, these products are milked for cash that can be invested in new Question Marks.Dogs (low growth, low market share) are products that have low market share and do nothave the potential to bring in much cash. According to BCG matrix, Dogs have to be soldoff or be managed carefully for the small amount of cash they guarantee.The key to success is assumed to be the market share. Firms with the highest marketshare tend to have a cost leadership position based on economies of scale among otherthings. If a company is able to apply the experience curve to its advantage, it should ableto produce and sell new products at low price, enough to garner early market shareleadership.Limitations of BCG matrix:— The use of highs and lows to form four categories is too simple— The correlation between market share and profitability is questionable. Low sharebusiness can also be profitable.— Product lines or business are considered only in relation to one competitor: the marketleader. Small competitors with fast growing shares are ignored.— Growth rate is the only aspect of industry attractiveness— Market share is the only aspect of overall competitive position3.4.2 Igor Ansoff growth matrixThe Ansoff Growth matrix is a tool that helps organisations to decide about their productand market growth strategy. Growth matrix suggests that an organisation’s attempts togrow depend on whether it markets new or existing products in new or existing markets.Ansoff’s matrix suggests strategic choices to achieve the objectives. Figure 3.6 depictsAnsoff growth matrix.
  • 3. Figure 3.6 Ansoff Growth MatrixMarket penetration – Market penetration is a strategy where the business focuses onselling existing products into existing markets. This increases the revenue of theorganisation.Market development – Market development is a growth strategy where the business seeksto sell its existing products into new markets. This means that the product is the same, butit is marketed to a new audience.Product development – Product development is a growth strategy where a business aimsto introduce new products into existing markets. This strategy may need the developmentof new competencies and requires the business to revise products to appeal to existingmarkets.Diversification – Diversification is the growth strategy where a business markets newproducts in new markets. This is an intrinsically riskier strategy because the business ismoving into markets in which it has little or no experience.For a business to adopt a diversification strategy, it should have a clear idea about what itexpects to gain from the strategy and an honest assessment of the risks.3.4.3 McKinsey/GE growth pyramidThe McKinsey/GE matrix is a tool that performs a business portfolio analysis on theStrategic Business units in an organisation. It is more sophisticated than BCG matrix inthe following three aspects:
  • 4. — Industry (market) attractiveness – Industry attractiveness replaces market growth. Itincludes market growth, industry profitability, size and pricing practices, among otherpossible opportunities and threats.— Competitive strength – Competitive strength replaces market share. It includes marketshare as well as technological positions, profitability, size, among other possible strengthsand weaknesses.— McKinsey/GE growth pyramid matrix works with 3*3 grids while BCG matrix is 2*2matrixes.External factors that determine market attractiveness are the following:— Market size— Market growth— Market profitability— Pricing trends— Competitive intensity/rivalry— Overall risk of returns in the industry— Opportunity to differentiate products and services— Segmentation— Distribution structure (e.g., retail, direct, wholesale)Internal factors that affect competitive strength are the following:— Strength of assets and competencies— Relative brand strength— Market share— Customer loyalty— Relative cost position (cost structure compared to competitors)— Distribution strength— Record of technological or other innovation
  • 5. — Access to financial and other investment resources Figure 3.7 McKinsey/GE Growth Pyramid
  • 6. Q.2 Discuss the investment strategies applicable for businesses and methods torectify faulty investment strategies. (10 marks)Ans. An investment strategy is a key component of every conceivable business type, andits critical to ensuring the success of the business. Entire college programs have beendesigned specifically to teach business investment strategies, but a few key tips can helplay groundwork for effective investing. 1. Use Income to Eliminate Debt o While the pay-down of outstanding debt may not seem like business investment on the surface, debt elimination can equate to a financial return that outpaces even the best investments. If a business has outstanding debt financed at a given interest rate, paying off that debt guarantees an instant return of that percentage. Because business debt often reaches into double digit interest rates, paying off this debt can provide an instant, guaranteed return that is significantly higher than usual returns on other investments. Reinvest Funds to Nurture the Business o Perhaps one of the most common ways businesses invest their funds involves purchasing additional equipment, remodeling customer-facing environments or opening additional locations. By reinvesting profits back into the business for expansion or improvement, the business stands to gain additional profits as a result of the expansion. As an added bonus, a guaranteed return on the investment will come in the form of tax not assessed on the reinvested funds. Invest in Other Businesses o Some businesses find success in investing their profits in other noncompeting businesses. These investments may be made as traditional cash investments, as loans or by purchasing securities issued to business start-ups. Investing in other businesses can be an especially wise move for companies in shaky industries, as spreading investments into other types of operations can help diversify a businesss holdings and reduce the risk of a complete business loss. Or— Use of income to eliminate debt— Reinvestment of funds to nurture the business— Investment in other businesses
  • 7. Investment is defined as the commitment of money or capital (e.g. purchasing assets,keeping funds in a bank account etc) to generate future returns. A proper understandingof the investment strategies and a thorough analysis of the options helps an investor tocreate a portfolio that maximises returns and minimises exposure to risks.Following are the ways to invest successfully:— Leave a margin of safety – Always leave a margin of safety in your investments toprotect your portfolio. The following are the two ways to incorporate the above principlein your investment selection process.° Be conservative in your valuation assumptions° Only buy assets dealing at substantial discounts to your conservative estimate.— Invest in business which you understand – Invest in a business in which you have athorough understanding of the customers, products/services etc.— Make assumptions – Make assumptions about your future performance by recognisingyour own limitations. Never purchase the stock until you understand the industrialeconomy and able to forecast the future of the company with certainty.— Measure your success – Evaluate your performance by the underlying measures inbusiness.— Have a clear disposition towards price – The more you pay for an asset in relation toits earnings, the lesser is your return value. So have a clear outlook towards the price.— Allocate capital by opportunity cost – Allocate investments/assets to the choice whichhas been opted as the best among several mutually exclusive choices.Internal methods to rectify faulty investment strategiesIn this section we will explain the methods to rectify faulty investment strategies. Someof the methods are as follows:— Internal transformation— Corporate restructuring and reorganisation— Financial restructuring— Divestment strategy
  • 8. — Expansion strategy— Diversification strategy— Vertical and horizontal integration strategy— Building core competencies and critical success factorsFrequent assessment report assists in detecting the problems associated with faultyinvestment strategies in an organisation.Internal transformationInternal transformation takes place in an organisation to sustain constant growth, survivaland maintain profitability. It includes corporate restructuring, downsizing of employeesetc. The following are the reasons for internal transformation of a company:— Pressure on owner to decrease costs— Overstaffing— Large and complicated company structure— Low flexibility of staff— Financial instabilityThe main objective of a company which adopts internal transformation is to increaseefficiency by reaching the standards in the global market. This is achieved by holdinghigh quality level of productivity.The essential components of a successful business transformation are as follows:— Achievement° A new level of sustainably high performance emerges° Extraordinary and unexpected results appear throughout— Improved synergy° Collaboration naturally occurs across all levels° Creativity and innovation flourishes— Aliveness
  • 9. ° Employees flourish as they openly express their passion, commitment and creativitytowards work.° Growth and development occurs both personally and professionally— Shared future° The entire organisation unites to accomplish the future and live consistently with corevaluesWe will now discuss the two internal transformation processes in the following section.— Corporate restructuring and re-organisation— Layoffs and employee termination
  • 10. Q.3. a. Distinguish policy, procedure and programmes with examples. (5 marks)b. Give a short note on synergy. (5 marks)Differences between policy, procedure, process and programmesIn the previous topic we discussed the definition and meaning of policy, procedure,process and programmes. Now we will analyze how each concept is different from theother. 1. Policy is Procedure identifies Process is a set of Programme is a general in the specific actions activities conducted concrete scheme nature and and explains when by people to achieve of activities identifies the an action needs to be organizational goals. designed to company taken. accomplish a rules. Process defines the specific 2. Policy It describes method in which the objective. explains the emergency work is done. reason for procedures which It provides step existence of an include warnings It is a long term rule by step organisation. and cautions. that drives an approach to the 3. Policy shows organization. activities taken how rules are It is systematic way to achieve the enforced and of handling routine goals. describes its actions. consequences. Programming 4. It defines an Procedure defines helps in outcome or a the means to achieve developing an goal. the goals. economical way 5. They are of doing things described by Procedures are in a systematic using simple written in an outline manner. sentences. format. 6. Policies are guidelines for It is generally managerial detailed and rigid. It actions. is a part of tactical 7. It is a planned tools. way to handle certain issues in the organization. 8. It is framed by the top level
  • 11. management. 9. Policies are a part of the strategies of the organization. Ans. b. Synergy is the energy or force created by the working together of various parts or processes. Synergy in business is the benefit derived from combining two or more elements (or businesses) so that the performance of the combination is higher than that of the sum of the individual elements (or businesses).Organizations strive to achieve positive synergy or strategic fit by combining multipleproducts, business lines, or markets. One way to achieve positive synergy is by acquiringrelated products, so that sales representatives can sell numerous products during one salescall. Rather than having two representatives make two sales calls to a potential customer,one sales representative can offer the broader mix of products.Mergers and acquisitions are corporate-level strategies designed to achieve positivesynergy. The 2004 acquisition of AT&T Wireless by Cingular was an effort to createcustomer benefits and growth prospects that neither company could have achieved on itsown—offering better coverage, improved quality and reliability, and a wide array ofinnovative services for consumers.Negative synergy is also possible at the corporate level. Downsizing and the divestitureof businesses is in part the result of negative synergy. For instance, Kimberly-ClarkCorporation set out to sharpen its emphasis on consumer and health care products bydivesting its tiny interests in business paper and pulp production. According to thecompany, the removal of the pulp mill will enhance operational flexibility and eliminatedistraction on periphery units, thus allowing the corporation to concentrate on a single,core business activity.The intended result of many business decisions is positive synergy. Managers expect thatcombining employees into teams or broadening the firms product or market mix willresult in a higher level of performance. However, the mere combination of people orbusiness elements does not necessarily lead to better outcomes, and the resulting lack ofharmony or coordination can lead to negative synergy.
  • 12. Q.4. Select any established Indian company and analyse the different types ofstrategies taken up by the company over the last few years. (10 marks)Cadbury plc, formerly known as Cadbury-Schweppes plc, before it demerged from itsAmericas Beverages manufacturing business in 2008 (Peston, 2008), is the world’sleading confectionery manufacturer and distributor. Cadbury plc “operates in over 60countries, works with over 35,000 direct and indirect suppliers and employs around50,000 people” (Cadbury India Ltd., 2008).Cadbury stresses the importance that it places on quality. Apart from its missionstatement, it also references the slogan, “Cadbury means quality” as an integral part of itsbusiness’s activities (Superbrands, 2008).Lastly, Cadbury also aims to put “A Cadbury in every pocket” (Karvy Research, n.d.) bytargeting current consumers and encouraging them to make impulse purchases and bymaintaining a superior marketing mix (Karvy Research, n.d.).Cadbury India Ltd, as the Indian subsidiary of this confectionery giant, also utilizes thesame mission and vision statements of its parent firm when operating in the Indianmarket, albeit with different business strategies and approaches. Since Cadbury’sactivities vary from country to country, this report will simply examine the activities ofCadbury India Ltd in the Indian market, one of the fastest growing confectioneriesmarkets in the world (Financial Express, 2008).Products offered by Cadbury India Ltd.Cadbury plc manufactures and sells three different kinds of confectionery: chocolate,candy and chewing gum (Cadbury India Ltd., 2008), but in the Indian market, its productline is split up into the chocolate confectionery, milk food drinks, candy and gumscategories (Cadbury India Ltd., 2008).This report will examine two different products offered to the Indian market by CadburyIndia: Cadbury Dairy Milk (chocolate category) and Cadbury Bournvita (milk drinkscategory).(a) Cadbury Dairy Milk(i) PricingCadbury India enjoys controlling 70% of the confectionery market in India, of which30% is directly due to the success of its Dairy Milk product, which averages sales ofaround 1 million bars per day (Cadbury Dairy Milk, 2008; Marketing Communications,2008). Cadbury Dairy Milk bars are Cadbury India’s cash cow in the country’s 4000
  • 13. tonne, Rs. 6.50 billion (around 1.6 billion CAD) chocolate market (Gupta, 2003), as such,has been designated its flagship brand (Cadbury India Ltd., 2008; Chatterjee, 2000).Part of Cadbury Dairy Milk’s success lies in its shared history with India’s identity (itwas first sold in 1948, one year after the country was made independent from the BritishEmpire) (Cadbury Dairy Milk, 2008) but also in the fact that it is priced relativelycheaply (Chatterjee, 2006) and is relatively affordable by the Indian masses. Even itssmallest Dairy Milk bar, the 13 gram version, is priced at Rs. 5 (about 0.13 CAD),affordable by many middle-class Indians as an occasional treat, but not affordable forthose who buy from the less-then-3-rupee (Rs. 3) segment of the market (Chatterjee,2006). Its history of operating in the country and its average level pricing of chocolatebars, has made the Cadbury dairy Milk bar synonymous with high quality, affordablepure milk chocolate for many Indian customers (Cadbury Dairy Milk, 2008).(ii) Consumer segments served and advertising/promotional strategies usedCadbury India Ltd continuously markets Dairy Milk as a relatively inexpensive treat,towards market segments divided by age, income, technological knowledge and health-consciousness.In the 1990’s, the company stated promoting the chocolate for “the kid in everyone”, inan attempt to appeal to adults as well as children (Cadbury Dairy Milk, 2008).In order to appeal to potential lower-income customers in the villages of India, furthermarketing in the form of the “Real taste of life” campaign (Cadbury Dairy Milk, 2008)attempted to absorb these customers into its market share. By using opinion leaders fromBollywood and using extensive advertising in newspapers, television, magazines andmassive billboards across the country, Cadbury managed to capture the attention of thenation and cement its market share superiority in India (Cadbury Dairy Milk, 2008;Marketing Communications, 2008).Nowadays, Cadbury’s is trying to tap into the potential market of younger generationInternet users by offering contests and hosting competitions online, the most notablebeing its “Pappu Pass Ho Gaya” (Pappu Passed!) joint venture operation with RelianceIndia Mobile, a branch of India’s largest network service provider, which allowedstudents across the country to check their examination grades online and celebrate withCadbury’s Dairy Milk if they did well (Cadbury Dairy Milk, 2008).Furthermore, Cadbury India continuously develops new versions of its Dairy Milk brandin order to keep its adult and children consumers satisfied and interested. Variationsinclude the Fruit & Nut and Crackle & Roast Almond variations (Cadbury Dairy Milk,2008) which are meant for snacking, as well as the Cadbury Dairy Milk Desserts, “tocater to the urge for ‘something sweet’ after meals” (Cadbury Dairy Milk, 2008). TheCadbury Bournville Dark Chocolate bar, similar to the Dairy Milk bar, targets the health-conscious market segment of the chocolate market, who wish to enjoy the taste of darkchocolate but also its health benefits (Financial Express, 2008). Lastly, Cadbury Dairy
  • 14. Milk Wowie, with Disney characters embossed on each chocolate square (Cadbury DairyMilk, 2008) clearly targets the child segment of its market. Cadbury’s marketsegmentation is quite effective because it allows them to target all three major marketsegments: children, adults and technologically-savvy consumers, but it does not servethose segments of the market that have been divided by income levels. Although DairyMilk is affordable to the upper and middle-income consumers who view it as a mid-priced item (Kochhar, 2007), lower income consumers who buy from the less-than-3-rupee range of chocolate cannot afford to buy Cadbury Dairy Milk regularly. Cadburywill need to address the needs of this market segment in order to boost its sales of DairyMilk.Indian consumers seem to be satisfied with Cadbury Dairy Milk as its marketingpromotes it as an occasional indulgence, despite popular opinion that it is a relativelyexpensive luxury product (Cadbury India Ltd. Analysts Meet, 1999). This restrainedmarketing has allowed the chocolate to slowly become a measure of quality for manyIndians, as Cadbury Dairy Milk is their “Gold Standard” for chocolate, where the “puretaste of Cadbury Dairy Milk defines the chocolate taste for the Indian consumer”(Cadbury India Ltd., 2008). In fact, Cadbury Dairy Milk was voted one of the India’smost trusted brands in a poll conducted in 2005 (Cadbury Dairy Milk, 2008).(iii) Product PositioningCadbury India Ltd’s main sources of competition come from Amul, India’s own dairycompany and Nestle India, Nestle’s subsidiary in India. As seen in Appendix B, CadburyIndia controls around 70% (Cadbury India Ltd., 2008) of the chocolate market, whereasAmul controls around 2% (Dobhal, n.d.) and Nestle India around 27% (Nestle to expand,2008).As mentioned earlier, Cadbury’s main strength comes from it ability to market DairyMilk products “through altering the theme and functionality of the product as the timedemands” (Cadbury India Ltd Analysts Meet, 1999). Although this has allowed it tocontrol more of the market than its closest competitors, the reasons for its success mayalso lie in the fact that many Indians still view its chocolates as luxury products (CadburyIndia Ltd Analysts Meet, 1999) and not as household goods. This contradicts Cadbury’sassertion that its leadership is maintained by a “superior marketing mix” (KarvyResearch, n.d.). Cadbury India may have misinterpreted the popularity of Dairy Milk as asign that the Indian public has accepted it as a household product. In fact, the boomingeconomy and the increasing affluence of the burgeoning middle class (Basu, 2004) haspromoted the use of status symbols, where the regular consumption of so-called luxurychocolates such as Cadbury Dairy Milk is viewed as fashionable (Kochhar, 2007).Despite Amul’s longer history in India, its chocolates are viewed as being local and notluxurious, justifying a lower price tag (Chansarkar et al., 2006). Cadbury India mustmaintain its current marketing strategy but slowly start to promote Dairy Milk as ahousehold good so that consumers spend their rising disposable incomes on it and boostits sales (Rai, 2006).
  • 15. Amul’s origins as a community welfare program in Gujarat, one of India’s mostindustrialized states, to becoming a national enterprise (Amul, 2008) spanned the decadesduring which newly-independent India forged its identity, thus becoming an integral partof India’s identity and giving its marketing strategy a new source of authority. Cadburysimply cannot match this kind of national endorsement, so by at least promoting the factthat it has been operating in India for almost as long as Amul, it can try to be “Indian”too. This, in combination with the longest running advertising campaign that Amul isfamous for gives it a brand awareness boost.Moreover, Amul’s reputation for credibility, safety and consumer satisfaction was onlyreinforced when Cadbury India’s Chinese-made products were found to be contaminatedwith worms and melamine (Sinn and Karimi, 2008). The “Gold Standard” (CadburyDairy Milk, 2008) was no longer gold, nor was it a standard anymore, as people’sconfidence in its safety was shattered. In order to position its products as safe andaffordable treats once again, Cadbury India should make attempts to be even moresensitive to consumer demands. Customer satisfaction must be given the utmostimportance, even if the company has to run at a loss for a few months, as this willeventually allow it to negate some of the extensive damage that this negative publicityhas to the firm’s reputation. The new extra-layer packaging of chocolate that is nowbeing used in the manufacture of Dairy Milk is a good first step to take in reclaimingsome of the public’s trust (Vivek, 2004).Lastly, Amul’s innovative ideas will be the bane of Cadbury. Their release of diabeticfriendly chocolate and chocolates catering to different ethnic flavours (Janve and Dogra,2007) as well as chocolates for festive seasons allow them to rapidly sway consumersover to their products. This accounts for their soaring annual market growth rates of 18%annually (Indian Express, 1999).In comparison to Nestle India however, Cadbury India’s longer track history gives it acompetitive edge. Cadbury has more of a brand recognition power than Nestle has, and ituses this extensively to promote Cadbury Dairy Milk all over the country. Nestle still hasto break into the Indian market; one way to do this would be to follow Amul’s lead anddevelop and market products that meet specific ethnic needs, such as chocolates forDiwali and Rakshabandan (two different Indian festivals) (Kochhar, 2007) , concepts thatCadbury India has yet to explore.Cadbury India must counter this threat that Nestle and Amul pose, namely, theproduction of chocolates specifically for the festive seasons of India. By doing so,Cadbury will be able to position its chocolates as chocolate specifically designed forIndia, endearing it to the consumers and boosting its sales.(a) Cadbury Bournvita(i) Pricing
  • 16. Cadbury Bournvita was first sold on the Indian markets in 1948, soon after Cadbury IndiaLtd (then known as Cadbury-Fry) was incorporated (Cadbury Bournvita, 2008). As aresult of being one of the first products offered on the Indian market by Cadbury,combined with successful marketing strategies and promotional offers, CadburyBournvita enjoys a 17% market share of the malt-based food drink market (CadburyBournvita, 2008). India alone accounts for 22% of the world’s malt-food milk drink retailsales (BeverageDaily, 2004), but unlike Cadbury Dairy Milk, Cadbury Bournvita doesnot control a large share of India’s malt-based food drinks market.Bournvita is largely sold in 500 gram bottles for around Rs. 95 (2.35 CAD) a piecedespite other sizes being available, and is perceived to be quite expensive (Hawa, 2002).However, due to its long history with India, and the fact that it is used a staple source ofnourishment by Indian mothers for their children, Bournvita’s still remains popular(Hawa, 2002).(ii) Consumer segments served and advertising/promotional strategies usedCadbury markets its Bournvita product in diverse market segments. Bournvita has beenmarketed mainly towards children, but also finds followers amongst elderly people,pregnant women and athletes (Hawa, 2002; Cadbury Bournvita, 2008). Continuous brandre-invention, a “rich brand heritage” and complete overhauls in packaging, productdesign, promotion and distribution have allowed Cadbury Bournvita to maintain its 17%market share over the years in India’s 220,000 tonne malt-food market (CadburyBournvita, 2008; BeverageDaily, 2004).Over the years, Cadbury has marketed Bournvita in order to appeal to the change inperceptions and tastes of its consumers. It focused on the “Good Upbringing, Goodnessthat grows with you” campaign to promote Bournvita as an essential health drink forchildren (Cadbury Bournvita, 2008). This campaign was conducted mainly on the radio,the primary medium of communication for many Indians at the time (Ranjan, 2007). Thiscampaign was followed by the massively successful “Brought up right, Bournvita bright”television, newspaper and magazine campaign (Cadbury Bournvita, 2008) to reach out tomore children and promote the link between intelligence and Bournvita, a concept thatappealed to many children. In order to cement their consumer base and ensure brandloyalty, in the 1990s, Bournvita challenged the public by promising complete physicaland mental development for its consumers (Cadbury Bournvita, 2008), where thesubsequent television marketing campaign secured Cadbury Bournvita’s place in theIndian market. The most recent marketing campaign undertaken by Cadbury Bournvita isthe one specially designed to harness consumers’ uncertainty about the challenges of thenew millennium. The “Real Achievers who have grown up on Bournvita” campaignfocused on preparing consumers with the health, vitality and nutrition necessary forfacing the challenges of the new millennium (Cadbury Bournvita, 2008) and allowedCadbury Bournvita to keep “pace with the evolving mindsets of the new age consumers”(Cadbury Bournvita, 2008). This marketing campaign was broadcast on television andpublished in newspapers in an effort to recruit contestants (Kapoor, 2007).
  • 17. The release of new versions of the original Bournvita such as Bournvita 5-Star,combining the flavour of the original chocolate Bournvita with the flavor of Cadbury 5-Star (Cadbury Bournvita, 2008), one of its caramel chocolates helps maintain consumerinterest. The new product is being aimed at the segment of children who want nutritionbut also taste (Cadbury Bournvita, 2008).By also sponsoring the Indian Olympic team to the Moscow Olympics of 1980 (CadburyBournvita, 2008), Cadbury Bournvita has managed to appeal to an athletic marketsegment as well. Recently, by supporting sports competitions and sponsoring athletesacross the country, Cadbury Bournvita has managed to promote itself as a sports drink forathletes (Kapoor, 2007).Furthermore, one of the most famous Indian examples of Cadbury Bournvita’s ingeniousmarketing is its sponsorship of the Bournvita Quiz Contest. The Bournvita Quiz Contestis the longest running quiz show in India, having first been aired in 1972. The Contestspans 7 countries, has involved more than 4000 schools and more than 1 million students,making it one of the most popular high school contests (Cadbury Bournvita, 2008), aswell as one of Cadbury’s most successful marketing ventures till date.However, despite Cadbury Bournvita’s history of serving consumers in the Indianmarket, and amidst allegations of declining quality and taste of the Bournvita brand(Hawa, 2002), many customers still feel that Bournvita does not have the appeal thatother brands, such as Horlicks do (refer to Appendix C) and thus the market is slowlyswitiching over to white malt-based food drinks such as Horlicks (Karvy Research, n.d.;Cadbury India Ltd Analysts Meet, 1999).(iii) Product PositioningThe malt-based food drinks market in India is divided into brown drinks and white drinkscategories (Cadbury India Ltd Analysts Meet, 1999; Karvy Research, n.d.), with whitedrinks being popular in the southern and eastern parts of the country, and the browndrinks being popular in the northern and western parts of the country (Karvy Research,n.d.).Cadbury Bournvita’s major source of competition comes from GlaxoSmithKline’sHorlicks and Heinz Food’s Complan. As seen in Appendix C, Horlicks is the marketleader with a 44% market share (Chatterjee, 2006), followed by Cadbury Bournvita withits 17% market share (Chatterjee, 2006) and then Complan with its 13% market share(Samajdar, 2006).As mentioned earlier, the malt-drinks market is split up into the white and brown drinkscategories. The white drinks category is mainly led by Horlicks whereas the brown drinkscategory is led by Bournvita (Karvy Research, n.d.). Lately, more consumers have startedswitching over to consuming white drinks than brown drinks, thereby giving Horlicks alarger market share than Bournvita (Karvy Research, n.d.).
  • 18. When competing with Horlicks, Cadbury Bournvita’s current marketing strategy issimply not enough. Given than Horlicks has been operating in the Indian market forlonger than Cadbury (Horlicks, 2008), this larger market share may be explained by moreconsumer familiarity with Horlicks than with Bournvita, however, Horlicks’ extensivemarketing campaigns may also have played a part.Horlicks has always marketed itself as a “Great Family Nourisher” with products such asMother’s Horlicks designed for different members of the family (Horlicks, 2008), whichmakes it more appealing to a wider section of the market, with products designed fordifferent members of the family, such as Mother’s Horlicks (Horlicks, 2008), thanBournvita’s mainly child-oriented approach. Thus, even elderly and convalescentconsumers can consume the product without feeling conscious of consuming a child-onlyproduct. Even the Bournvita Quiz Contest, effectively Bournvita’s longest runningmarketing campaign, mainly attracts more child consumers to its product (Radakrishnan,2002), and thus cannot compete with Horlicks’ wider appeal. Thus, the solution lies inCadbury India marketing Bournvita as an adult drink as well. Only then will it be able tocompete effectively with Horlicks.Meanwhile, Complan’s market share of 13% (Samajdar, 2006), is less than Bournvita’s.Although both products are targeted at children, Complan has marketed itself as a“perfect nutritional supplement” (Complan, n.d.) rather than as a healthy drink forchildren, which is Bournvita’s approach. Since the words ‘nutritional supplement’connote a need for extra nourishment, this may possibly work against Complan as manyfamilies may feel that their child receives enough nourishment and does not require more.Although Cadbury Bournvita currently has a larger market share of the two, it mustcontinue to market itself as a child-friendly drink, and not as a nutritional supplement, inorder to maintain its superiority.Delivering Cadbury products to customersIndia’s 300 billion USD retail market is growing at a rate of 30% per annum (Rai, 2006).In a country where half a billion people are under the age of 25, disposable incomes areon the rise and the economy is growing at a rate of 8% annually (Rai, 2006), selling treatssuch as Cadbury Dairy Milk bars and Cadbury Bournvita powder will generate massivereturns. However, in order to be able to sell these products to customers, properdistribution channels must be identified. The Indian retail sector is composed of 97%“family-run, street corner stores” (Rai, 2006) and the remaining 3% consisting of mallsand shopping complexes.Therefore, Cadbury India Ltd. produces its products in factories spread geographicallyacross India, but also sells its products through a chain of over 300,000 retailers spreadacross India (Cadbury India Ltd Analysts Meet, 1999). The efforts of these retailers areaugmented by the support of 1900 distributor locations and 27 depots (Cadbury India LtdAnalysts Meet, 1999). Furthermore, of a total of 3600 locations that sell Cadburyproducts, almost 3100 locations are directly supplied by Cadbury India Ltd distributors atleast thrice a month (Cadbury India Ltd Analysts Meet, 1999).
  • 19. These distribution networks give Cadbury India its competitive edge in India’s massiveconsumer market.SWOT Analysis of Cadbury India Ltd.Cadbury India Ltd’s objective of putting a “Cadbury in every pocket” (Karvy Research,n.d.) can only be done if the company markets its Cadbury Dairy Milk as a householdgood and its Bournvita as a family-friendly drink. Until then, its Cadbury Dairy Milksuccess will only be short-term in nature and Bournvita will not be able to reverse thetrend towards the consumption of white malted drinks (Cadbury India Ltd Analysts Meet,1999) and compete with Horlicks. As seen in Appendix D, if Cadbury Dairy Milk can bemarketed extensively enough to break the ‘luxury’ perception that consumers have of itcurrently (Cadbury India Ltd Analysts Meet, 1999), it can benefit from inelastic demandas a household product, thus generating a constant stream of revenue and cementing theDairy Milk brand as a cash cow product. This objective can be accomplished by simplybuilding on the good reputation and trust that it has earned, and by listening to the needsof its consumers. Bournvita meanwhile needs to be extensively marketed in order toreduce the damaging effect that Horlicks’ family-friendly marketing mix is having on itsmarket share. Furthermore, the key threat that can affect Cadbury India Ltd’s success inIndia is Amul’s innovative marketing strategy. As a result of its witty marketingstrategies, length of time serving India and its ability to develop and market productsspecifically tailored for Indian consumers, Amul’s yearly growth rate of 18% may slowlystart to eat away at Cadbury’s success (Indian Express, 1999).ConclusionCadbury India Ltd’s position in India is relatively strong. In order to maintain its lead insuch a large market, it must learn to address the specific needs of its consumers andcontinue to maintain their goodwill, while also analyzing its competitors’ marketingstrategies. By doing so, it will be able to isolate the benefits and drawbacks of itscompetitors’ marketing mix and use those to its own advantage.Cadbury must also appreciate the advantages of a positive reputation and always stressconsumer satisfaction. One key aspect of this lies in maintaining the safety of its productsso that the name of Cadbury is always synonymous with high quality safe products.Repeats of the recent melamine and worms issues cannot be allowed to happen as onceconsumer confidence in its brand name is shattered, Cadbury India’s brand recognitionaspect will immediately work against it by highlighting the link between its name andcontaminated food products. This will cripple sales and reverse the fruits of 70 years ofhard work in the country, leaving the path open for more efficient local companies likeAmul to learn from Cadbury India’s mistakes and take over its market share.Future StrategyIn the branded impulse market, the share of chocolate in 6.6% and Cadbury’s
  • 20. share in the impulse segment is 4.8% factor like changing attitude, higherdisposable income, a large youth population, and low penetration of chocolate(22% of urban population) point towards a big opportunity of increasing the shareof chocolate in the branded impulse among the costly alternative in the brandedimpulse market.It appears that company is likely to play the value game to expand the marketencouraged by the recent success of its low priced ‘value for many packs’.Various measures are undertaken in all areas of operation to create value for thefuture.New channel of marketing such as gifting and child connectivity and low endvalue for money product for expanding the consumer base have been identified.In terms of manufacturing management focus is on optimizing manufacturingefficiencies and creating a world class manufacturing location for CDM andÉclairs. The company is today the second best manufacturing location ofCadbury’s Schweppes in the world.Efficient sourcing of key raw material i.e. coca through forward purchase ofimports, higher local consumption by entering long term contract with farmer andundertaking efforts in expanding local coca area development. The initiatives inthe terms of development a long term domestic coca a sourcing base would fieldmaximum gains when commodity prices start moving up.• Use of it to improve logistic and distribution competitiveness• Utilizing mass media to create and maintain brands.• Expand the consumer base. The company has added 8 million new consumerin the current year and how has consumer base of 60 million although the growthin absolute numbers is lower than targeted, the company has been able toincrease the width of its consumer base through launch of low priced products.• Improving distribution quality by addressing issues of product stability byinstallation of visi coolers at several outlets. This would be really effective inmaintaining consumption in summer, when sales usually dip due to the fact thatthe heat effects product quality and thereby consumption.• The above are some steps being taken internally to improve future operationand profitability. At the same time the management is also aware of externalchanges taking place in the competitive environment and is taking steps toremain competitive in the future environment of free imports, lower barrier totrade and the advent of all global players in to the country. The management isnot unduly concerned about the huge deluge of imported chocolate brands in themarket place.It is of the view that size of this imported premium market is small to threaten itsown volumes or sales in fact, the company looks at the tree important as anopportunity, where it could optimally use the global Cadbury Schweppesportfolio. The company would be able to not only provide greater variety, but itwould also be more cost effective to test market new product as well as improvespeed of response to change in consumer preference through imports. The onlyconcerns that the company has in this regard is the current high level of duties,which limit the opportunity to launch value for money products.
  • 21. Q. 5 Why do you think it is necessary for organisations to have vision and missionstatements and also core competencies? Support your answer with relevantexamples. (10 marks)Ans. Vision and Mission statementsA well-articulated strategic intent guides the development of goals and helps in inspiringthe employees to achieve targets. It also facilitates in utilising the intent to allocateresources and in encouraging team participation. It comprises of the vision and missionstatements.Vision statementA vision statement defines the purpose and principles of an organisation in terms of thevalues of the organisation. It is a concise and motivating statement that guides theemployees to select the procedures to attain the goals. Vision statement is the frameworkof strategic planning. A vision statement describes the future ambition of an organisation.A vision is the ability to view what the organisation wants to be in future. It is preparedfor the organisation and its employees. It should be implanted in the organisation beingcollectively shared by everyone in the organisation. It conveys an effective business plan.It integrates an understanding about the nature and aspirations of the organisation anddevelops this conception to lead the organisation towards a better objective. It mustsynchronise with the organisation’s principles. The ambition should be rational andachievable.Example - Wal-Mart’s vision is to become worldwide leader in retailing.Vision statement of L&TL&T employees shall be innovative and the empowered team will constantly createvalues and attain global benchmarks.L&T shall promote a culture of trust and continuous learning. It shall meet theexpectations of employees, stakeholders and society.
  • 22. (i) Cadbury’s Vision StatementOur objective is to deliver superior shareholder returns by realizing our vision to the bethe world’s biggest and best confectionery company. We are currently the biggest, andwe have an enduring commitment to become the undisputed best. At the heart of our planis our performance scorecard, delivered through our priorities, sustainabilitycommitments and cultureCadbury plans to “deliver superior shareholder returns” (Cadbury plc, 2008) bymeasuring its financial progress in the areas of growth, efficiency, capabilities andsustainability from 2008 to 2011 (Cadbury plc, 2008).Mission statementA mission statement is the extensive definition of the mission of an organisation. It is aconcise description of the existence and fundamental purpose of an organisation. Itdescribes the present potentials and activities of the organisation. It conveys the purposeof the organisation to its employees and the public. It is vital for the development andgrowth of the organisation.Mission statement is the responsibility by which an organisation aims to serve itsstakeholders. It gives a framework on the operations of the organisation within which thestrategies are devised. It describes the present capabilities, the stakeholders and thereason for existence of an organisation. The statement distinguishes an organisation fromits other competitors by explaining its scope of activities, technologies, its products andservices used to achieve the goals and objectives. It should be practical and achievable. Itshould be clear and precise so that the actions can be taken based on it. It should beunique and different to leave an impact on everyone. It should be credible so that thestakeholders accept it.Example -Wal-Mart’s mission is to provide ordinary customers the chance to buy thesame thing as rich people.Mission statement of IBM“At IBM, we strive to be the forerunner in inventing, developing and manufacturing mostadvanced information technologies, including computer systems, software, storagesystems and microelectronics.”
  • 23. The distinction between mission statement and vision statement is that the missionstatement focuses on the present position of the organisation and the vision statementfocuses on the future of the organisation.(ii) Cadbury’s Mission StatementCadbury’s mission statement outlines its overall business objective and its commitmentto its customers.Our core purpose “Working together to create brands people love” captures the spirit ofwhat we are trying to achieve as a business. We collaborate and work as teams to convertproducts into brands.Core competencies are those skills that are critical for a business to achieve competitiveadvantage. These skills enable a business to deliver essential customer benefit like theselection of a product or service by a customer. Core competency is the key strength ofbusiness because it comprises the essential skills. These are the central areas of expertiseof the company where maximum value is added to its services or products. Example –Infosys has a core competency in information technology.It is a unique skill or technology that establishes a distinct customer value. As theorganisation progresses and adapts to the new environment, the core competencies alsoadjust to the change. They are not rigid but flexible to advancing time. The organisationmakes the maximum utilisation of the competencies and correlates them to newopportunities in the market. Resources and capabilities are the building blocks on whichan organisation builds and executes a value-added strategy. The strategy is devised in amanner that an organisation can receive reasonable profit and attain strategiccompetitiveness.Core Competencies are not fixed. They change in response to the transformation in theenvironment of the company. They are adaptable and advance over time. As anorganisation progresses and adapts to new circumstances, the core competencies alsoadapt to the transformation.
  • 24. Q. 6. What is SBU? Explain its features, functions and roles. Mention some of thesuccessful SBU of MNC’s. (10 marks)IncompeleteAns. Strategic Business Unit or SBU is understood as a business unit withinthe overall corporate identity which is distinguishable from other businessbecause it serves a defined external market where management can conductstrategic planning in relation to products and markets. The unique small businessunit benefits that a firm aggressively promotes in a consistent manner. Whencompanies become really large, they are best thought of as being composed of anumber of businesses (or SBUs).Strategic Business Unit (SBU) is necessarywhen corporation starts to provide different products and hence, need to followdifferent strategies.SBUs are also known as strategy centers, IndependentBusiness Unit or even Strategic Planning Centers.Strategic Business Unit (SBUs) is necessary when corporation starts to providedifferent products and hence, need to follow different strategies. To ease itsoperation, corporate set different groups of product/product line regarding thestrategy to follow (in terms of competition, prices, substitutability, style/ quality,and impact of product withdrawal). These strategic groups are called StrategicBusiness Units (SBUs).Each Business Unit must meet the following criteria: 1. Have a unique business mission, independent from other SBUs. 2. Have clearly definable set of competitors. 3. Is able to carry out integrative planning relatively independently of other SBUs.Should have a Manager authorized and responsible for its operation.