Cross Cultural Management A study on Cadbury and Kraft Merger

In the current era of globalization with the advancement in the technology, communication and the channels to access the external business world; the process of business has changed drastically. Corporate personnel and industry professionals are making effective decisions and are developing efficient strategies to sustain their competitive advantage in the market. Many new management disciplines like IT management, corporate governance, mergers & acquisition, business continuity management and such new principles are becoming prominent. There are various reasons that are pointed out by the corporate firms which are behind these management concerns. They include cost cutting measures through economies of scale, global expansion, risk reduction, effective and efficient management practices and so on.

Merger & Acquisition is one of the effective ways to invest to gain market share and to expand the business. They help in global expansion, cutting costs, new knowledge and expertise acquisition, identification of niche areas across the global market, extension of customer base, accessing new technologies and many. Dealing with the integration of two similar or different companies, it also involves certain difficulties and issues to handle. Although companies are pursuing M&A aggressively, it is found that 60-80% of them are financial failures regarding their performance in the stock markets or obtaining high profits (Salame, 2006). Through this study, I tried to understand the various management issues and concerns involved in the merger & acquisition process with the help of Cadbury and Kraft merger.

Kraft-Cadbury Merger:

The Kraft takeover of Cadbury did not happen in a simple routine manner. It involved various management issues which had proved this event likely to shape future public policy towards acquisitions and corporate governance.

The initial steps towards this strategic decision of acquiring Cadbury started in the year 2007 on 3rd October when Cadbury’s Somerdale factory plans that announced its to shut down the factory with a loss of 500 jobs and to invest the production in the Bourneville Plant of Birmingham & to the new plant in Poland. In the year 2009 on September 7th, Irene Rosenfeld, Chairman and CEO of Kraft stated that Kraft would be in a position to continue the Somerdale factory’s operations without closing the plant and thus preserving United Kingdoms’ manufacturing jobs.

Read also  Change management in a police organisation

But this statement given by the Kraft was not taken as granted by the Cadbury workforce before the takeover. The National Officer of the Unite the Union, which is a representative body of Cadbury workforce, Jennie Formby compared Kraft statement with the line “there is no meat on the bones at all” saying that there is no real intention of Kraft to come and save the jobs.

Finally in the year 2010 on 19th of January, Cadbury announced the bid offer made by Kraft to its shareholders and the takeover is finally concluded on 2nd of February, 2010. But to the shock of the public and the stakeholders, Kraft, after a week of its confirmation of the takeover, announced that it would not be capable enough to maintain the Somerdale factory open and would like to approve the decision made by the Cadbury’s senior management to discontinue its operation. This decision made by Kraft immediately after the takeover led towards criticism. Marc Firestone, Executive President of Kraft Industries Inc. and Irene Rosenfield, CEO asserted their decision saying that before making a public statement Kraft was not aware of various factors like the internal structure of building, products of Cadbury in that facility, status of machinery and others (Mergers, acquisitions and takeovers, 2010 )

In this dramatic way, the whole process of acquisition of Cadbury by Kraft has been done making it an event that can shape the future endeavors of public towards takeovers, acquisitions and corporate governance.

Inside Story of Cadbury and Kraft before Takeover

Cadbury has faced many ups and downs throughout its journey especially under the visionary leadership of Todd Stitzer. Todd Stitzer working successfully for 20 years for Cadbury Schweppes has played a key role as a master mind behind the acquisitions of soft drinks industries made by Cadbury in US. He was later appointed as the chief strategy officer by John Sunderland to the confectionary side to achieve the similar success. The then competitors in the chocolates and sweets industry were the international companies Nestle, Mars, Kraft, Wrigley, Ferrero and Hershey. Stitzer said that acquisitions alone would not solve the problems of Cadbury. He said that the revenue growth model has to be revitalized to gain in the financial performance. Stitzer had developed many strategies, took some visionary steps and led Cadbury gain the business world with his strategic thinking. Stitzer and his management team aimed at the global domination in the Confectionary world, while the stakeholders were much worried about the financial performance. Overall with all his visionary leadership abilities and strategic decision making capabilities, Cadbury Schweppes split into pure confectionary leader Cadbury. Nelson Peltz, founder of the hedge fund Trian Fund Management also had his own role in the business of Cadbury.

Read also  Introduction And Background Of Employee Relations Management Essay

Irene Rosenfield, CEO, Kraft Food Industries Inc. had a keen interest in the confectionary business and proposed an offer to buy Cadbury to Carr, Chairman of Cadbury after Sunderland. Carr without consulting the stakeholders had refused the offer but Peltz who still owned the shares in the Cadbury with discussion and negotiation with Kraft finally made Cadbury lose its independence in January 2010.

Impact of the Merger

Cadbury-Kraft merger which involved a high dramatic and strategic process as discussed above has got its own pros and cons. Before analyzing the performance after a year later the takeover, there are certain agreements on which the takeover is being implemented. These include aspects like the brand name of Cadbury would be continued; previous commitments, pension arrangements would be honored and such, for at least two years.

Regarding the business performance, the combined business has achieved profitable results despite of the difficult economic climate outside. It had improved the sales by 13% compared to 2009 and also has sold 300 million bars more comparatively. They improved and modified the corporate structure so as to combine the Cadbury’s successful chocolate history with the Kraft’s brand heritage. The combined systematic approach would create value and would help in economic and internal growth (Kraft Foods completes Cadbury takeover, 2010 ). There is high capital investment, support and commitment seen in the Cadbury’s R&D sites so as to improve the combined business performance and the products.

As we know, every coin has two sides; every decision would have pros and cons. As discussed above, the withdrawal made by Irene Rosenfield regarding the Somerdale factory led to the criticism from the workforce. Similar reaction is seen even after the takeover with many employees departing from the Cadbury. Kraft is trying to improve the relationship with local authorities so as to increase the employment opportunities. Due to the change in the working culture, a feeling of fear is seen among the employees to express their views and opinions. Kraft says Cadbury being a firm of values and heritage; we try to combine our efforts in bringing job satisfaction to employees and to outperform the market as well. (Update on progress made since Kraft Foods acquired Cadbury, 2011)

Read also  Employee Engagement And Emotional Intelligence Management Essay

To conclude, Kraft taking over Cadbury is not just acquiring an excellent company but establishing a strong connection with the public; so it has to work hard to prove and show the combined benefits of Cadbury and Kraft Foods.

Order Now

Order Now

Type of Paper
Number of Pages
(275 words)