BAM50, UOL, UOLMBA University of London Exam Paper

1. GLOBAL MBA
Strategic Management Exam Paper
INSTRUCTOR NOTES
CASE STUDY: Mondelēz International: ‘Are you going to stick around, Irene?’ Acquisition, de-
merger, divestment and governance in the growth strategy of Mondelēz International
Author: Eric Cassells
Source Johnson et al., Exploring Strategy Text and Cases, 11e, Instructor’s Manual
105 © Pearson Education Limited 2017
Students should answer THREE questions. Each Question carries a weight of 33.3%
each. Students shall refer to the clean copy of the case study that will be distributed.
At the end of the examination students must hand in the copy of the case study with
their scripts.
1. Introduction
This case relates key M&A events in the recent history of Kraft/Mondelēz International. These are the
hostile (and controversial) takeover of Cadbury PLC by the Kraft group in 2009/2010, followed by
the subsequent demerger in 2012 of Kraft’s business between it’s low-growth North American
grocery products business (‘Kraft’, thereafter), and a separate global confectionery and snacks
business (‘Mondelēz’ thereafter). Finally, Mondelēz’s business was further refined by the divestment
in 2015 of its substantial coffee business into an equity joint venture (‘Jacob Douwe Egbert’ – JDE)
with JAB Holdings. The case goes beyond a simple focus of studying M&A as an event, to look at
M&A events within the context of a long-term corporate strategy of creating a substantial global
confectionery business, exploiting ‘power brands’, and positioning Mondelēz to best exploit the
growth of fast-growing emerging markets. Finally, Mondelēz senior management are seen responding
to the emergent pressures arising from the unexpected slow-down of those emerging markets,
resulting increased pressure to increase operating margins over the shorter-term, and the allied
pressure from strong activist shareholders seeking improved shareholder value. The figure of Irene
Rosenfeld, CEO of first Kraft and then of Mondelēz, rests at the centre of the story, and the case
provides opportunities to reflect on her challenges and choices.
2. Position of the case
The case study focuses primarily on issues of corporate-level strategy, and in particular Mergers,
Acquisitions and Alliances. This includes the use of acquisitions, demergers, divestments and equity
alliances as tools for growth and the development of corporate strategies. Mondelēz’s corporate
strategies also allow a consideration of the product/market/channels, and diversification choices
facing growing companies seeking to expand globally and take advantage of the opportunities from

2. emerging markets. There are, however, other clear issues and areas for exploration relating to
corporate strategy, including that of parenting advantage and complex issues of corporate governance,
the political and regulatory environment in M&A, and social responsibility.
3. Learning objectives of the Case study
• Understand the differences between acquisition, organic growth, divestment, and demerger as tools
in the development of corporate strategy.
• Analyse the motives and drivers that underpin acquisitions and related events.
• Review the principal case acquisition events to explore M&A processes: the fit of the target choice,
hostile acquisition as a ‘negotiation’ process, and the integration requirements to secure target value.
• Explore the drivers that justify the use of corporate downsizing tools, such as demergers and
divestments, in the pursuit of long-term corporate growth and value.
• Evaluate corporate management’s actions in balancing the long-term and the short-term: growth
through international expansion, and delivering shareholder value through costcutting initiatives.
• Build a viewpoint on the role of the most senior management in managing and balancing the often
conflicting interests government, regulators, different shareholder groupings and the wider
stakeholder population.
4. Sources given to students
The case touches on a wide range of related concepts and practice of corporate strategy in the
growth/acquisition/diversification/internationalisation area. In addition, there is an unusually rich
seam of material on government policy and governance issues, and this – together with some of the
in-bid behaviours – can lead to an interesting applied discussion of the role of personal and societal
values in business. The central focus of the case, nevertheless, remains the practice of hostile
acquisition (and other related M&A events) as a tool for corporate expansion and strategy.
The following short YouTube videos were given to students at the end of unit 9:
• IR interview 2012 with CNN Money on day after demerger of Kraft, as role of strategic and
financial value drivers in decision. https://youtu.be/N1kPpOfXqFQ
• Economist interview with Irene Rosenfeld discussing global innovation in confectionery brand
business March 2016. https://youtu.be/oItY_7MhPFs
• Fortune interview with Irene, including discussion of activist shareholders (including Nelson Peltz
and Bill Ackman) October 2015. https://youtu.be/CxdDi_uJv0k
• CNN interview with Irene Rosenfeld Oct 2015 – some discussion of cost-cutting and balancing
growth, social responsibility. https://youtu.be/Lo--USeFhCE
• An interview (published February 2014, but looks a couple of years older perhaps?) of IR with
Michael Silverstein of BCG, which provides interesting context on the early period of this case,
examining Kraft up to the post-acquisition of Cadbury. The relationship between the international
strategy and the role of acquisition as a tool within the strategy is clear, and Rosenfeld is clearly very
animated talking about growth. https://youtu.be/RMwv6sthZ6k Other useful sources:
• Background – Mondelēz International ‘Our Brands’ Montage (June 2015).
https://youtu.be/X1lmojTdwso

3. • What is an activist investor, exactly (March 2015). https://youtu.be/Aah-skVohBM • Activist
Ackman Invests in Mondelēz (February 2016). https://youtu.be/KZ9IOUOUhgQ • Cadbury takeover
leaves bitter taste for UK Lawmakers (March, 2012). https://youtu.be/KZ9IOUOUhgQ
• Kraft execs grilled by UK MPS (March, 2011). https://youtu.be/ZxkEaw_mVDw
Students were also encouraged to browse for additional sources about Mondelēz International.
5. Exam questions
1. What motives (strategic, financial, and managerial) of corporate strategy can be
identified in: a. the three principal M&A events identified in the case – the acquisition
of Cadbury PLC, the demerger of Kraft and Mondelēz, and the divestment of the
Mondelēz coffee business into the equity alliance of JDE; b. the organic development
strategies for improving Mondelēz’s operating margins between 2012 and 2015.
This question deliberately extends these M&A motives to the organic cost-cutting and
overhead management strategies to encourage students to see all these tools of corporate
strategy as alternatives. Possible answers might cover:
• Strategic motives: Classic product/market/geography extension strategies can be seen in the
Cadbury acquisition, and in the JDE coffee joint venture. It can equally be argued that the
JDE alliance is about consolidation to create scale and scope that can compete with Nescafē’s
global dominance. Considering channels to market as key capabilities is also relevant to both
these events. Finally, the organic period of increasing operating margins can also be
understood as an attempt to copy and internalise key capabilities of overhead and cost
management, as pioneered by 3G Capital, and seen as crucial by key shareholders.
• Financial efficiency: Seen as the key motive perhaps of the organic improvement to
operating margins, it would also be expected to be a key motive for the Kraft/Mondelēz
demerger (unbundling benefits and focus of investment capital). Equally, the elimination of
duplicate corporate overheads would likely have been a motivation in the Cadbury acquisition
and the JDE alliance, whilst it is clear that risk management was a driver also of the coffee
divestment.
• Managerial motives: Irene Rosenfeld is clearly a prominent figure in US investment circles,
but evidence of a pattern of serial acquisition (and, therefore, hubris) seems less clear. Some
have argued that her personal experience of running Frito-Lay at PepsiCo (a global snacks
business) may have been the key driver in Kraft’s corporate decisions to build a global
confectionery business in the first place, and it is notable that Ms Rosenfeld chose to lead
Mondelēz after the demerger with Kraft.
2. Why did Kraft choose the acquisition of Cadbury as a route to global expansion of its
confectionery business, rather than expanding through growing organically or through
alliancing? What would you have done differently for a successful strategy
implementation if you were the chief executive office (CEO) of Kraft?
The motives of Kraft in making the acquisition might be reconsidered as a prelude to
evaluating acquisition as the route for execution:
Motives for M&A – Extension, Consolidation, Acquisition of Capabilities, Financial,
Managerial motives.

4. • Kraft saw the deal as complementary in the way it extended its brands, (Cadbury had a
much stronger presence in confectionery, and greater presence in impulse snack purchases),
channels to market and presence in complementary emerging markets.
• Cadbury equally had the capabilities to support this presence, witnessed by the subsequent
concentration of global confectionery R&D at Bourneville, UK.
• Although consolidation might not have been the principle motive, benefits would accrue in
increased market power, scale economies and rationalisation through sharing corporate
services and overhead between the two companies.
Usually M&A is a more attractive option than organic growth where time is a key problem
(‘urgency’ again), and availability of necessary assets is constrained (brands, channels to
market and complementary market presence). The development of brands and market
presence in completely new markets is obviously time-consuming. Equally, M&A as a
solution necessarily depends on the availability and attainability of an appropriate mix of
assets. At this scale of enterprise there are often only a few appropriate targets available, and
the simple question in targeting Cadbury was how likely a better mix of assets could be
obtained through an alternative deal. Students should provide critical arguments when
presenting their views about successful strategy implementation in case they were the CEO
of Kraft. Answers may also include arguments about organizational structure, systems and
processes, people and rewards. Implementation levers that are critical for corporate strategy
vary from firm to firm, but some of the more important levers include knowledge-transfer
mechanisms, coordination mechanisms, rewards, and corporate oversight.
3. What were the key opportunities and threats of Mondelēz’s international growth
strategy on demerger in 2012? What corporate development tools (organic growth,
M&A, alliances) would have been best placed to respond to these opportunities and
threats?
This question can be used to explore the detail of the international growth strategy in the
confectionery business that arises from the acquisition of Cadbury and the subsequent
demerger, prior to the slowdown of growth in the emerging markets. It invites students to
draw on the material and figures on product and market positioning in the case. White space
strategies, developing greater strength in ‘snacks’ and savories, the use of the complementary
geographic channels to market, etc. can all be mentioned. Equally, the very focus created by
the focus on a stand-alone confectionery business, deprived of the lowmargin, but less risky
cash flows of Kraft’s North American grocery business, can be seen as increasing risk and
exposure to slowdown in the emerging markets. Mention can obviously be made of the
acquisition of the Vietnamese confectionery business in 2015, but any consideration of further
global extension would have to consider the importance of ‘power brands’. The words
‘opportunities and threats’ are often taken by students as an invitation to produce an external
analysis such as ‘SWOT’ analysis or ‘TOWS’ analysis.
4. What were the strategic drivers that led to the divestment of Mondelēz’s coffee business
into the JDE equity alliance?
There are effectively two effects in this deal that should be explicitly considered. The deal
was a divestment of a consolidated coffee business into an equity-based alliance (or joint
venture). The assumption must be the Mondelēz’s senior management believed there was a
clearer ‘parenting advantage’ for the coffee business from placing the brands in an equity
alliance with significantly greater scale and scope benefits from the complementarity of

5. brands and market presence in that sector. The belief should, therefore, be that JDE can add
more value to the assets than Mondelēz itself. As to the deal itself it should be worth noting
that Mondelēz is the minority partner in the venture with 44%, which would arguably place
an ongoing question over Mondelēz’s intention to remain in the coffee sector. This is not
clear from public sources, although the original design was for a 50/50% venture with JAB
Holdings, until complications over a few of Mondelēz’s Korean coffee assets, led to a re-
design of the deal, and the release of $5 billion in cash to Mondelēz. The study of divestment
events often provides clearer insight into rational motives for M&A related decisions, and
students should not miss the pointers, however, to the benefits of the divestment of the
consolidated business. In particular, eliminating the higher risk profile of the coffee business
(particularly from volatile coffee bean prices) from the core confectionery business would
benefit shareholder value. At the same time, the case indicates that eliminating the coffee
business created greater focus on the core confectionery business, and eliminated
organisational complexity in, for example, channels to market.
5. Do you consider the senior management of Kraft/Mondelēz to be ‘responsible’ corporate
managers? Whose interests should they have prioritised in (a) the Cadbury acquisition
and (b) later, between 2012–2016, in responding to the slow-down of growth and value-
creation from emerging markets? What other strategic actions, if any, would you have
followed if you were the chief executive officer (CEO) of Mondelēz International in
order to achieve competitive advantage?
This question is included for a potentially open discussion of corporate responsibility and
values in a very applied context. There are two very strong distinctive features in the case
relating to these topics, which ideally can be used as triggers for students to develop
supported viewpoints. The Cadbury acquisition raised issues of a cross-border acquisition,
and what governments should or should not do in regulating this activity. Legally, the UK and
US systems still enshrine the duty of management to maximise the benefit of their
shareholders, and Irene Rosenfeld’s explanation of non-attendance at UK parliamentary
committee could arguably reflect this (it could equally reflect a decision not to expose herself
to a more damaging televised exposure in the crucible of a parliamentary committee). In
addition, there were clearly diverse stakeholder interests involved, and the case has the
unusual feature of involving a company (Cadbury) whose heritage was deeply entwined with
historical concepts of responsible management.
There is a prima facie case that Kraft breached norms of procedural and informational justice
during the hostile takeover. The acrimony that might be expected in a large, hostile cross-
border acquisition such as this, was amplified, ritualised and institutionalised by the events at
the post-acquisition parliamentary committees, and – in particular – the non-appearance of Ms
Rosenfeld at both of these events. Such events are, of course, highly politicised, and Ms
Rosenfeld might well have been wise to avoid interacting directly with these particular
stakeholders, but the damage to Kraft’s reputation was inevitable.
Students could offer viewpoints about the role of activist shareholders ,Irene Rosenfeld’s
reaction to the various activists, and the equity of her focusing disproportionate attention on
the interests of these few shareholders, and, in the background, the pressures of pursuing a
long term global growth strategy reliant on short term western market capital.
Students should provide reasonable arguments when presenting their views about strategic
actions and behaviours they have taken in case they were the CEO of Mondelēz International.

6. Competitive advantage at the corporate level is a function of the fit among arenas, resources,
and organizational systems, structures, and processes. When these are connected in a coherent
fashion, the corporation is more likely to achieve its long-term objectives. When resources are
specialized, the firm will likely find greater value creation opportunities in a narrow scope of
business arenas. Conversely, general resources can be applied across a greater spectrum of
businesses. Firms with a broad scope of business activities have different demands for
organization structure, systems, and processes than firms that are narrowly focused on a
specific set of business arenas.
Assessment Criteria
A* (High Distinction)
Excellent showing extensive knowledge and understanding of strategic management frameworks,
and an outstanding ability to analyse, synthesise and evaluate.
An excellent, thorough, sophisticated, critical, insightful and even original discussion that covers
alternative positions and goes well beyond mere repetition of facts, offering relevant, concrete
examples and a clear, well-justified conclusion that may depend on stated factors, rather than
being absolute and non-contingent.
Evidence of very extensive, if not exhaustive reading and study beyond the course content. An
accurate answer presented in an excellent-organised manner. Presentation is flawless-
professionally written and devoid of grammatical or typographic errors.
A (Distinction)
Excellent in most respects showing evidence of extensive knowledge and understanding of
strategic management frameworks and high-level cognitive skills. A well-reasoned and even
original discussion that covers alternative positions and goes beyond mere repetition of facts,
offering relevant, concrete examples and a clear, well-justified conclusion.
Evidence of substantial reading and study beyond the course content. Accurate, well organised,
sharply focused and balanced. A very logical structure, strong flow and coherence of argument
with a clear synthesis of content, not just a set of disconnected propositions. Very competent use
of English with very few problems.
B (Merit)
Factually sound showing sound knowledge and understanding of strategic management
frameworks and regular use of effective logical thinking, critical analysis and judgment.
A quite thorough and thoughtful exploration of the issues with a moderately sophisticated
presentation of arguments and examples. The conclusion will be clear, logical and convincing.
Based predominantly on the course content but with clear evidence of outside reading and study.
A logical structure, good flow and coherence of argument aiming to synthesise content.
Competent use of English with only isolated problems of grammar or vocabulary.
C (Pass)
A competent answer showing reasonable knowledge and understanding of strategic management
frameworks and some use of effective logical thinking, critical analysis and judgment. The answer
will recognise, review and discuss relevant issues with some degree of critical thought, and
sufficient facts, examples and arguments leading to a fairly convincing conclusion.

7. Less evidence of outside reading or study beyond core texts. May contain errors as well as
omissions. Includes about half of the salient points; alternatively, may contain more of the salient
points but with greater flaws or less depth. A reasonably logical structure, with a coherent flow of
facts and arguments, albeit possibly lacking a degree of synthesis. Fair use of English with few
problems of grammar or vocabulary.
D (Marginal Fail)
A deficient answer showing limited knowledge and understanding of course content and strategic
management frameworks. Entirely descriptive in approach. Important points are missing. Less
than half of the material presented may be of direct relevance to the question. The discussion
may not recognise the nature of the issues, but in any event will not explore them very thoroughly
or show evidence of critical thinking. It will probably reach no conclusion, or present one based
on erroneous or otherwise inadequate arguments that lack conviction.
No evidence of outside reading or study beyond core texts. May be unfocused, poorly expressed,
short or incomplete. Shortcomings in structure, flow or coherence with no evidence of synthesis.
Obvious shortcomings in use of English and/or handwriting, on occasion severe enough to obscure
meaning.
F (Fail)
A very poor answer in which the questions are seriously misinterpreted or avoided. Limited critical
insight into the subject; critique limited to relatively simple “right or wrong” arguments; most facts
taken at face value. The discussion will be either non-existent, or largely or wholly miss the point
of the invited discussion or will have little or nothing of worth to say in response to the invitation.
No evidence of outside reading or study beyond core texts. Inadequate structure, flow or
coherence with no evidence of synthesis. Obvious shortcomings in use of English or handwriting,
that often obscure meanings for the reader. Possibly using excessive amounts of quotations.