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)

Answer:
The BCG matrix is a portfolio management tool used in product life cycle. BCG matrix is often used to
highlight the products which get more funding and attention within the company. During a product’s life
cycle, it is categorised into one of four types for the purpose of funding decisions. Figure below depicts the
BCG matrix.

Figure: BCG Growth Share Matrix

Question 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 shares to become a market leader,
which is categorised under Stars, the organzation takes money 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 cycle and they are in a
growing market. When their market rate grows, they become Cash Cows.

Cash Cows (low growth, high market share) are typically products that bring in far more money than is
needed to maintain their market share. In this declining stage of their life cycle, 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 not have the potential
to bring in much cash. According to BCG matrix, Dogs have to be sold off 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 market share tend to have a
cost leadership position based on economies of scale among other things. If a company is able to apply the
experience curve to its advantage, it should able to produce and sell new products at low price, enough to
garner early market share leadership.

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 share business can also be
profitable.
— Product lines or business are considered only in relation to one competitor: the market leader. 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 position

Igor Ansoff growth matrix

The Ansoff Growth matrix is a tool that helps organzations to decide about their product and market growth
strategy. Growth matrix suggests that an organzation’s attempts to grow 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 depicts Ansoff growth matrix.

Figure: Ansoff Growth Matrix

Market penetration – Market penetration is a strategy where the business focuses on selling existing
products into existing markets. This increases the revenue of the organzation.

Market development – Market development is a growth strategy where the business seeks to sell its existing
products into new markets. This means that the product is the same, but it is marketed to a new audience.

Product development – Product development is a growth strategy where a business aims to introduce new
products into existing markets. This strategy may need the development of new competencies and requires
the business to revise products to appeal to existing markets.

Diversification – Diversification is the growth strategy where a business markets new products in new
markets. This is an intrinsically riskier strategy because the business is moving 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 it expects to gain
from the strategy and an honest assessment of the risks.
McKinsey/GE growth pyramid
The McKinsey/GE matrix is a tool that performs a business portfolio analysis on the Strategic Business
units in an organzation. It is more sophisticated than BCG matrix in the following three aspects:
— Industry (market) attractiveness – Industry attractiveness replaces market growth. It includes market
growth, industry profitability, size and pricing practices, among other possible opportunities and threats.
— Competitive strength – Competitive strength replaces market share. It includes market share as well as
technological positions, profitability, size, among other possible strengths and weaknesses.
— McKinsey/GE growth pyramid matrix works with 3*3 grids while BCG matrix is 2*2 matrixes.

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
— Access to financial and other investment resources

Figure: McKinsey/GE Growth Pyramid

Q.2 Discuss the investment strategies applicable for businesses and methods to rectify faulty
investment strategies. (10 marks)

Answer:

An investment strategy is a key component of every conceivable business type, and it's critical to ensuring
the success of the business. Entire college programs have been designed specifically to teach business
investment strategies, but a few key tips can help lay groundwork for effective investing.
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 business's 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

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 understanding of the investment strategies and a
thorough analysis of the options helps an investor to create 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 to protect your
portfolio. The following are the two ways to incorporate the above principle in 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 a thorough
understanding of the customers, products/services etc.
— Make assumptions – Make assumptions about your future performance by recognising your own
limitations. Never purchase the stock until you understand the industrial economy and able to forecast the
future of the company with certainty.
— Measure your success – Evaluate your performance by the underlying measures in business.
— Have a clear disposition towards price – The more you pay for an asset in relation to its 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 which has been opted as
the best among several mutually exclusive choices.

Internal methods to rectify faulty investment strategies

In this section we will explain the methods to rectify faulty investment strategies. Some of the methods are
as follows:
— Internal transformation
— Corporate restructuring and reorganzation
— Financial restructuring
— Divestment strategy
— Expansion strategy
— Diversification strategy
— Vertical and horizontal integration strategy
— Building core competencies and critical success factors
Frequent assessment report assists in detecting the problems associated with faulty investment strategies in
an organization.

Internal transformation
Internal transformation takes place in an organzation to sustain constant growth, survival and maintain
profitability. It includes corporate restructuring, downsizing of employees etc. 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 instability

The main objective of a company which adopts internal transformation is to increase efficiency by reaching
the standards in the global market. This is achieved by holding high 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
° Employees flourish as they openly express their passion, commitment and creativity towards work.
° Growth and development occurs both personally and professionally
— Shared future
° The entire organzation unites to accomplish the future and live consistently with core values

We will now discuss the two internal transformation processes in the following section.
— Corporate restructuring and re-organzation
— Layoffs and employee termination
Q.3. a. Distinguish policy, procedure and programmes with examples. (5 marks)
b. Give a short note on synergy. (5 marks)

Answer:
Differences between policy, procedure, process and programmes
In 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 the other.

1. Policy is general Procedure identifies the Process is a set of Programme is a

in nature and specific actions and activities conducted by concrete scheme of
identifies the explains when an action people to achieve activities designed
company rules. needs to be taken. organizational goals. to accomplish a
2. Policy explains It describes emergency Process defines the specific objective.
the reason for procedures which method in which the work It provides step by
existence of an include warnings and is done. step approach to the
organzation. cautions. It is a long term rule that activities taken to
3. Policy shows It is systematic way of drives an organization. achieve the goals.
how rules are handling routine actions. Programming helps
enforced and Procedure defines the in developing an
describes its means to achieve the economical way of
consequences. goals. doing things in a
4. It defines an Procedures are written in systematic manner.
outcome or a an outline format.
goal. It is generally detailed
5. They are and rigid. It is a part of
described by tactical tools.
using simple
sentences.
6. Policies are
guidelines for
managerial
actions.
7. It is a planned
way to handle
certain issues in
the organization.
8. It is framed by
the top level
management.
9. Policies are a part
of the strategies
of the
organization.

Answer: (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 multiple products, business
lines, or markets. One way to achieve positive synergy is by acquiring related products, so that sales
representatives can sell numerous products during one sales call. 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 positive synergy. The 2004
acquisition of AT&T Wireless by Cingular was an effort to create customer benefits and growth prospects
that neither company could have achieved on its own—offering better coverage, improved quality and
reliability, and a wide array of innovative services for consumers.

Negative synergy is also possible at the corporate level. Downsizing and the divestiture of businesses is in
part the result of negative synergy. For instance, Kimberly-Clark Corporation set out to sharpen its
emphasis on consumer and health care products by divesting its tiny interests in business paper and pulp
production. According to the company, the removal of the pulp mill will enhance operational flexibility and
eliminate distraction 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 that combining
employees into teams or broadening the firm's product or market mix will result in a higher level of
performance. However, the mere combination of people or business elements does not necessarily lead to
better outcomes, and the resulting lack of harmony or coordination can lead to negative synergy.
Q.4. Select any established Indian company and analyse the different types of strategies taken up by
the company over the last few years. (10 marks)

Answer:

Cadbury plc, formerly known as Cadbury-Schweppes plc, before it demerged from its Americas Beverages
manufacturing business in 2008 (Peston, 2008), is the world’s leading confectionery manufacturer and
distributor. Cadbury plc “operates in over 60 countries, works with over 35,000 direct and indirect
suppliers and employs around 50,000 people” (Cadbury India Ltd., 2008).

Cadbury stresses the importance that it places on quality. Apart from its mission statement, it also
references the slogan, “Cadbury means quality” as an integral part of its business’s activities (Superbrands,
2008).

Lastly, Cadbury also aims to put “A Cadbury in every pocket” (Karvy Research, n.d.) by targeting current
consumers and encouraging them to make impulse purchases and by maintaining a superior marketing mix
(Karvy Research, n.d.).

Cadbury India Ltd, as the Indian subsidiary of this confectionery giant, also utilizes the same mission and
vision statements of its parent firm when operating in the Indian market, albeit with different business
strategies and approaches. Since Cadbury’s activities vary from country to country, this report will simply
examine the activities of Cadbury India Ltd in the Indian market, one of the fastest growing confectioneries
markets 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 product line is split up into the chocolate
confectionery, milk food drinks, candy and gums categories (Cadbury India Ltd., 2008).

This report will examine two different products offered to the Indian market by Cadbury India: Cadbury
Dairy Milk (chocolate category) and Cadbury Bournvita (milk drinks category).

(a) Cadbury Dairy Milk

(i) Pricing
Cadbury India enjoys controlling 70% of the confectionery market in India, of which 30% is directly due to
the success of its Dairy Milk product, which averages sales of around 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 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 (it was first sold in
1948, one year after the country was made independent from the British Empire) (Cadbury Dairy Milk,
2008) but also in the fact that it is priced relatively cheaply (Chatterjee, 2006) and is relatively affordable
by the Indian masses. Even its smallest 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 for those 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 chocolate bars, has made the Cadbury dairy Milk bar
synonymous with high quality, affordable pure milk chocolate for many Indian customers (Cadbury Dairy
Milk, 2008).

(ii) Consumer segments served and advertising/promotional strategies used

Cadbury 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”, in an 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, further marketing 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 from Bollywood and using extensive advertising in
newspapers, television, magazines and massive billboards across the country, Cadbury managed to capture
the attention of the nation 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 generation Internet users by
offering contests and hosting competitions online, the most notable being its “Pappu Pass Ho Gaya” (Pappu
Passed!) joint venture operation with Reliance India Mobile, a branch of India’s largest network service
provider, which allowed students across the country to check their examination grades online and celebrate
with Cadbury’s Dairy Milk if they did well (Cadbury Dairy Milk, 2008).

Furthermore, Cadbury India continuously develops new versions of its Dairy Milk brand in order to keep
its adult and children consumers satisfied and interested. Variations include 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, “to cater to the urge for ‘something sweet’ after meals” (Cadbury Dairy
Milk, 2008). The Cadbury 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 dark chocolate but also
its health benefits (Financial Express, 2008). Lastly, Cadbury Dairy Milk Wowie, with Disney characters
embossed on each chocolate square (Cadbury Dairy Milk, 2008) clearly targets the child segment of its
market. Cadbury’s market segmentation is quite effective because it allows them to target all three major
market segments: children, adults and technologically-savvy consumers, but it does not serve those
segments of the market that have been divided by income levels. Although Dairy Milk 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. Cadbury will need to address the needs of this market segment in order to boost its sales of
Dairy Milk.

Indian consumers seem to be satisfied with Cadbury Dairy Milk as its marketing promotes it as an
occasional indulgence, despite popular opinion that it is a relatively expensive luxury product (Cadbury
India Ltd. Analysts Meet, 1999). This restrained marketing has allowed the chocolate to slowly become a
measure of quality for many Indians, as Cadbury Dairy Milk is their “Gold Standard” for chocolate, where
the “pure taste 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’s most trusted brands in a poll
conducted in 2005 (Cadbury Dairy Milk, 2008).

(iii) Product Positioning

Cadbury India Ltd’s main sources of competition come from Amul, India’s own dairy company and Nestle
India, Nestle’s subsidiary in India. As seen in Appendix B, Cadbury India controls around 70% (Cadbury
India Ltd., 2008) of the chocolate market, whereas Amul 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 Dairy Milk products
“through altering the theme and functionality of the product as the time demands” (Cadbury India Ltd
Analysts Meet, 1999). Although this has allowed it to control more of the market than its closest
competitors, the reasons for its success may also lie in the fact that many Indians still view its chocolates as
luxury products (Cadbury India Ltd Analysts Meet, 1999) and not as household goods. This contradicts
Cadbury’s assertion that its leadership is maintained by a “superior marketing mix” (Karvy Research, n.d.).
Cadbury India may have misinterpreted the popularity of Dairy Milk as a sign that the Indian public has
accepted it as a household product. In fact, the booming economy and the increasing affluence of the
burgeoning middle class (Basu, 2004) has promoted the use of status symbols, where the regular
consumption of so-called luxury chocolates 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 not
luxurious, justifying a lower price tag (Chansarkar et al., 2006). Cadbury India must maintain its current
marketing strategy but slowly start to promote Dairy Milk as a household good so that consumers spend
their rising disposable incomes on it and boost its sales (Rai, 2006).

Amul’s origins as a community welfare program in Gujarat, one of India’s most industrialized states, to
becoming a national enterprise (Amul, 2008) spanned the decades during which newly-independent India
forged its identity, thus becoming an integral part of India’s identity and giving its marketing strategy a
new source of authority. Cadbury simply cannot match this kind of national endorsement, so by at least
promoting the fact that 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 is famous for gives it a
brand awareness boost.

Moreover, Amul’s reputation for credibility, safety and consumer satisfaction was only reinforced when
Cadbury India’s Chinese-made products were found to be contaminated with worms and melamine (Sinn
and Karimi, 2008). The “Gold Standard” (Cadbury Dairy Milk, 2008) was no longer gold, nor was it a
standard anymore, as people’s confidence in its safety was shattered. In order to position its products as
safe and affordable treats once again, Cadbury India should make attempts to be even more sensitive to
consumer demands. Customer satisfaction must be given the utmost importance, even if the company has to
run at a loss for a few months, as this will eventually allow it to negate some of the extensive damage that
this negative publicity has to the firm’s reputation. The new extra-layer packaging of chocolate that is now
being used in the manufacture of Dairy Milk is a good first step to take in reclaiming some of the public’s
trust (Vivek, 2004).

Lastly, Amul’s innovative ideas will be the bane of Cadbury. Their release of diabetic friendly chocolate
and chocolates catering to different ethnic flavours (Janve and Dogra, 2007) as well as chocolates for
festive seasons allow them to rapidly sway consumers over 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 a competitive edge.
Cadbury has more of a brand recognition power than Nestle has, and it uses this extensively to promote
Cadbury Dairy Milk all over the country. Nestle still has to break into the Indian market; one way to do this
would be to follow Amul’s lead and develop and market products that meet specific ethnic needs, such as
chocolates for Diwali and Rakshabandan (two different Indian festivals) (Kochhar, 2007) , concepts that
Cadbury India has yet to explore.

Cadbury India must counter this threat that Nestle and Amul pose, namely, the production of chocolates
specifically for the festive seasons of India. By doing so, Cadbury will be able to position its chocolates as
chocolate specifically designed for India, endearing it to the consumers and boosting its sales.

(a) Cadbury Bournvita

(i) Pricing
Cadbury Bournvita was first sold on the Indian markets in 1948, soon after Cadbury India Ltd (then known
as Cadbury-Fry) was incorporated (Cadbury Bournvita, 2008). As a result of being one of the first products
offered on the Indian market by Cadbury, combined with successful marketing strategies and promotional
offers, Cadbury Bournvita enjoys a 17% market share of the malt-based food drink market (Cadbury
Bournvita, 2008). India alone accounts for 22% of the world’s malt-food milk drink retail sales
(BeverageDaily, 2004), but unlike Cadbury Dairy Milk, Cadbury Bournvita does not 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 piece despite 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 of nourishment by Indian mothers for their children,
Bournvita’s still remains popular (Hawa, 2002).
(ii) Consumer segments served and advertising/promotional strategies used
Cadbury markets its Bournvita product in diverse market segments. Bournvita has been marketed mainly
towards children, but also finds followers amongst elderly people, pregnant women and athletes (Hawa,
2002; Cadbury Bournvita, 2008). Continuous brand re-invention, a “rich brand heritage” and complete
overhauls in packaging, product design, 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 (Cadbury
Bournvita, 2008; BeverageDaily, 2004).

Over the years, Cadbury has marketed Bournvita in order to appeal to the change in perceptions and tastes
of its consumers. It focused on the “Good Upbringing, Goodness that grows with you” campaign to
promote Bournvita as an essential health drink for children (Cadbury Bournvita, 2008). This campaign was
conducted mainly on the radio, the primary medium of communication for many Indians at the time
(Ranjan, 2007). This campaign was followed by the massively successful “Brought up right, Bournvita
bright” television, newspaper and magazine campaign (Cadbury Bournvita, 2008) to reach out to more
children and promote the link between intelligence and Bournvita, a concept that appealed to many
children. In order to cement their consumer base and ensure brand loyalty, in the 1990s, Bournvita
challenged the public by promising complete physical and mental development for its consumers (Cadbury
Bournvita, 2008), where the subsequent television marketing campaign secured Cadbury Bournvita’s place
in the Indian market. The most recent marketing campaign undertaken by Cadbury Bournvita is the one
specially designed to harness consumers’ uncertainty about the challenges of the new millennium. The
“Real Achievers who have grown up on Bournvita” campaign focused on preparing consumers with the
health, vitality and nutrition necessary for facing the challenges of the new millennium (Cadbury
Bournvita, 2008) and allowed Cadbury Bournvita to keep “pace with the evolving mindsets of the new age
consumers” (Cadbury Bournvita, 2008). This marketing campaign was broadcast on television and
published in newspapers in an effort to recruit contestants (Kapoor, 2007).

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 consumer interest. The new product is being aimed at the segment of
children who want nutrition but also taste (Cadbury Bournvita, 2008).

By also sponsoring the Indian Olympic team to the Moscow Olympics of 1980 (Cadbury Bournvita, 2008),
Cadbury Bournvita has managed to appeal to an athletic market segment as well. Recently, by supporting
sports competitions and sponsoring athletes across the country, Cadbury Bournvita has managed to
promote itself as a sports drink for athletes (Kapoor, 2007).

Furthermore, one of the most famous Indian examples of Cadbury Bournvita’s ingenious marketing is its
sponsorship of the Bournvita Quiz Contest. The Bournvita Quiz Contest is the longest running quiz show in
India, having first been aired in 1972. The Contest spans 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), as well as one of Cadbury’s most successful marketing ventures till date.

However, despite Cadbury Bournvita’s history of serving consumers in the Indian market, 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 that other brands, such as Horlicks do (refer to Appendix C) and
thus the market is slowly switching over to white malt-based food drinks such as Horlicks (Karvy
Research, n.d.; Cadbury India Ltd Analysts Meet, 1999).

(iii) Product Positioning

The malt-based food drinks market in India is divided into brown drinks and white drinks categories
(Cadbury India Ltd Analysts Meet, 1999; Karvy Research, n.d.), with white drinks being popular in the
southern and eastern parts of the country, and the brown drinks 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’s Horlicks and Heinz
Food’s Complan. As seen in Appendix C, Horlicks is the market leader with a 44% market share
(Chatterjee, 2006), followed by Cadbury Bournvita with its 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 drinks categories. The
white drinks category is mainly led by Horlicks whereas the brown drinks category is led by Bournvita
(Karvy Research, n.d.). Lately, more consumers have started switching over to consuming white drinks
than brown drinks, thereby giving Horlicks a larger market share than Bournvita (Karvy Research, n.d.).

When competing with Horlicks, Cadbury Bournvita’s current marketing strategy is simply not enough.
Given than Horlicks has been operating in the Indian market for longer than Cadbury (Horlicks, 2008), this
larger market share may be explained by more consumer familiarity with Horlicks than with Bournvita,
however, Horlicks’ extensive marketing campaigns may also have played a part.

Horlicks has always marketed itself as a “Great Family Nourisher” with products such as Mother’s
Horlicks designed for different members of the family (Horlicks, 2008), which makes it more appealing to
a wider section of the market, with products designed for different members of the family, such as Mother’s
Horlicks (Horlicks, 2008), than Bournvita’s mainly child-oriented approach. Thus, even elderly and
convalescent consumers can consume the product without feeling conscious of consuming a child-only
product. Even the Bournvita Quiz Contest, effectively Bournvita’s longest running marketing campaign,
mainly attracts more child consumers to its product (Radakrishnan, 2002), and thus cannot compete with
Horlicks’ wider appeal. Thus, the solution lies in Cadbury India marketing Bournvita as an adult drink as
well. Only then will it be able to compete 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 for children, which is Bournvita’s approach. Since the words
‘nutritional supplement’ connote a need for extra nourishment, this may possibly work against Complan as
many families 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 must continue to market itself as a
child-friendly drink, and not as a nutritional supplement, in order to maintain its superiority.

Delivering Cadbury products to customers

India’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 are on the rise and the economy is
growing at a rate of 8% annually (Rai, 2006), selling treats such as Cadbury Dairy Milk bars and Cadbury
Bournvita powder will generate massive returns. However, in order to be able to sell these products to
customers, proper distribution 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 malls and shopping
complexes.

Therefore, Cadbury India Ltd. produces its products in factories spread geographically across India, but
also sells its products through a chain of over 300,000 retailers spread across India (Cadbury India Ltd
Analysts Meet, 1999). The efforts of these retailers are augmented by the support of 1900 distributor
locations and 27 depots (Cadbury India Ltd Analysts Meet, 1999). Furthermore, of a total of 3600 locations
that sell Cadbury products, almost 3100 locations are directly supplied by Cadbury India Ltd distributors at
least thrice a month (Cadbury India Ltd Analysts Meet, 1999).

These distribution networks give Cadbury India its competitive edge in India’s massive consumer 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 household good and its Bournvita as a family-
friendly drink. Until then, its Cadbury Dairy Milk success will only be short-term in nature and Bournvita
will not be able to reverse the trend 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 be
marketed extensively enough to break the ‘luxury’ perception that consumers have of it currently (Cadbury
India Ltd Analysts Meet, 1999), it can benefit from inelastic demand as a household product, thus
generating a constant stream of revenue and cementing the Dairy Milk brand as a cash cow product. This
objective can be accomplished by simply building on the good reputation and trust that it has earned, and
by listening to the needs of its consumers. Bournvita meanwhile needs to be extensively marketed in order
to reduce the damaging effect that Horlicks’ family-friendly marketing mix is having on its market share.
Furthermore, the key threat that can affect Cadbury India Ltd’s success in India is Amul’s innovative
marketing strategy. As a result of its witty marketing strategies, length of time serving India and its ability
to develop and market products specifically tailored for Indian consumers, Amul’s yearly growth rate of
18% may slowly start to eat away at Cadbury’s success (Indian Express, 1999).

Conclusion
Cadbury India Ltd’s position in India is relatively strong. In order to maintain its lead in such a large
market, it must learn to address the specific needs of its consumers and continue to maintain their goodwill,
while also analyzing its competitors’ marketing strategies. By doing so, it will be able to isolate the benefits
and drawbacks of its competitors’ marketing mix and use those to its own advantage.
Cadbury must also appreciate the advantages of a positive reputation and always stress consumer
satisfaction. One key aspect of this lies in maintaining the safety of its products so 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 once consumer confidence in its brand name is shattered, Cadbury
India’s brand recognition aspect will immediately work against it by highlighting the link between its name
and contaminated food products. This will cripple sales and reverse the fruits of 70 years of hard work in
the country, leaving the path open for more efficient local companies like Amul to learn from Cadbury
India’s mistakes and take over its market share.

Future Strategy
In the branded impulse market, the share of chocolate in 6.6% and Cadbury’s share in the impulse segment
is 4.8% factor like changing attitude, higher disposable income, a large youth population, and low
penetration of chocolate (22% of urban population) point towards a big opportunity of increasing the share
of chocolate in the branded impulse among the costly alternative in the branded impulse market.
It appears that company is likely to play the value game to expand the market encouraged 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 the future.

New channel of marketing such as gifting and child connectivity and low end value for money product for
expanding the consumer base have been identified.

In terms of manufacturing management focus is on optimizing manufacturing efficiencies and creating a

world class manufacturing location for CDM and Éclairs. The company is today the second best
manufacturing location of Cadbury’s Schweppes in the world.

Efficient sourcing of key raw material i.e. coca through forward purchase of imports, higher local
consumption by entering long term contract with farmer and undertaking efforts in expanding local coca
area development. The initiatives in the terms of development a long term domestic coca a sourcing base
would field maximum 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 consumer in the current year and how
has consumer base of 60 million although the growth in absolute numbers is lower than targeted, the
company has been able to increase the width of its consumer base through launch of low priced products.
• Improving distribution quality by addressing issues of product stability by installation of visi coolers at
several outlets. This would be really effective in maintaining consumption in summer, when sales usually
dip due to the fact that the heat effects product quality and thereby consumption.
• The above are some steps being taken internally to improve future operation and profitability. At the same
time the management is also aware of external changes taking place in the competitive environment and is
taking steps to remain competitive in the future environment of free imports, lower barrier to trade and the
advent of all global players in to the country. The management is not unduly concerned about the huge
deluge of imported chocolate brands in the market place.

It is of the view that size of this imported premium market is small to threaten its own volumes or sales in
fact, the company looks at the tree important as an opportunity, where it could optimally use the global
Cadbury Schweppes portfolio. The company would be able to not only provide greater variety, but it would
also be more cost effective to test market new product as well as improve speed of response to change in
consumer preference through imports. The only concerns that the company has in this regard is the current
high level of duties, which limit the opportunity to launch value for money products.
Q. 5 Why do you think it is necessary for organzations to have vision and mission statements and also
core competencies? Support your answer with relevant examples. (10 marks)

Ans. Vision and Mission statements

A well-articulated strategic intent guides the development of goals and helps in inspiring the employees to
achieve targets. It also facilitates in utilizing the intent to allocate resources and in encouraging team
participation. It comprises of the vision and mission statements.

Vision statement
A vision statement defines the purpose and principles of an organzation in terms of the values of the
organzation. It is a concise and motivating statement that guides the employees to select the procedures to
attain the goals. Vision statement is the framework of strategic planning. A vision statement describes the
future ambition of an organzation. A vision is the ability to view what the organzation wants to be in future.
It is prepared for the organzation and its employees. It should be implanted in the organzation being
collectively shared by everyone in the organzation. It conveys an effective business plan. It integrates an
understanding about the nature and aspirations of the organzation and develops this conception to lead the
organzation towards a better objective. It must synchronise with the organzation’s principles. The ambition
should be rational and achievable.

Example - Wal-Mart’s vision is to become worldwide leader in retailing.

Vision statement of L&T

L&T employees shall be innovative and the empowered team will constantly create values and attain global
benchmarks.
L&T shall promote a culture of trust and continuous learning. It shall meet the expectations of employees,
stakeholders and society.
(i) Cadbury’s Vision Statement
Our objective is to deliver superior shareholder returns by realizing our vision to the be
the world’s biggest and best confectionery company. We are currently the biggest, and
we have an enduring commitment to become the undisputed best. At the heart of our plan
is our performance scorecard, delivered through our priorities, sustainability commitments and culture

Cadbury plans to “deliver superior shareholder returns” (Cadbury plc, 2008) by measuring its financial
progress in the areas of growth, efficiency, capabilities and sustainability from 2008 to 2011 (Cadbury plc,
2008).

Mission statement
A mission statement is the extensive definition of the mission of an organzation. It is a concise description
of the existence and fundamental purpose of an organzation. It describes the present potentials and
activities of the organzation. It conveys the purpose of the organzation to its employees and the public. It is
vital for the development and growth of the organzation.

Mission statement is the responsibility by which an organzation aims to serve its stakeholders. It gives a
framework on the operations of the organzation within which the strategies are devised. It describes the
present capabilities, the stakeholders and the reason for existence of an organzation. The statement
distinguishes an organzation from its other competitors by explaining its scope of activities, technologies,
its products and services used to achieve the goals and objectives. It should be practical and achievable. It
should be clear and precise so that the actions can be taken based on it. It should be unique and different to
leave an impact on everyone. It should be credible so that the stakeholders accept it.

Example -Wal-Mart’s mission is to provide ordinary customers the chance to buy the same thing as rich
people.
Mission statement of IBM
“At IBM, we strive to be the forerunner in inventing, developing and manufacturing most advanced
information technologies, including computer systems, software, storage systems and microelectronics.”
The distinction between mission statement and vision statement is that the mission statement focuses on the
present position of the organzation and the vision statement focuses on the future of the organzation.

(ii) Cadbury’s Mission Statement

Cadbury’s mission statement outlines its overall business objective and its commitment to its customers.

Our core purpose “Working together to create brands people love” captures the spirit of what we are trying
to achieve as a business. We collaborate and work as teams to convert products into brands.

Core competencies are those skills that are critical for a business to achieve competitive advantage. These
skills enable a business to deliver essential customer benefit like the selection of a product or service by a
customer. Core competency is the key strength of business because it comprises the essential skills. These
are the central areas of expertise of 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 the organzation progresses
and adapts to the new environment, the core competencies also adjust to the change. They are not rigid but
flexible to advancing time. The organzation makes the maximum utilization of the competencies and
correlates them to new opportunities in the market. Resources and capabilities are the building blocks on
which an organzation builds and executes a value-added strategy. The strategy is devised in a manner that
an organzation can receive reasonable profit and attain strategic competitiveness.

Core Competencies are not fixed. They change in response to the transformation in the environment of the
company. They are adaptable and advance over time. As an organzation progresses and adapts to new
circumstances, the core competencies also adapt to the transformation.
Q. 6. What is SBU? Explain its features, functions and roles. Mention some of the successful SBU of
MNC’s. (10 marks)

Answer:

Strategic Business Unit or SBU is understood as a business unit within the overall corporate identity
which is distinguishable from other business because it serves a defined external market where
management can conduct strategic planning in relation to products and markets. The unique small business
unit benefits that a firm aggressively promotes in a consistent manner. When companies become really
large, they are best thought of as being composed of a number of businesses (or SBUs).Strategic Business
Unit (SBU) is necessary when corporation starts to provide different products and hence, need to follow
different strategies. SBUs are also known as strategy centers, Independent Business Unit or even Strategic
Planning Centers.

Strategic Business Unit (SBUs) is necessary when corporation starts to provide different products and
hence, need to follow different strategies. To ease its operation, corporate set different groups of
product/product line regarding the strategy to follow (in terms of competition, prices, substitutability, style/
quality, and impact of product withdrawal). These strategic groups are called Strategic Business 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.