What would be the opportunities and challenges facing Cadbury’s (Mondelez International) when considering entering the Chinese m

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What would be the opportunities and challenges facing Cadbury’s (Mondelez International) when considering entering the Chinese mar-ket?

                Assignment Question

What would be the opportunities and challenges facing Cadbury’s (Mondelez International) when considering entering the Chinese market?

The report will analyse and evaluate the challenges and opportunities Cadbury(Mondelez International) face in expanding to and operating in emerging markets (china).

Your report should:

• Outline the theory and nature of international business and the key factors supporting the increasing internationalisation of businesses.
• Analyse and evaluate the challenges and opportunities the company was faced with by expanding its operations to emerging markets using a variety of different indicators and trends from a range of sources supported by theory.
• Evaluate the strategy for entering and maintaining operations in a new market and discuss how globalised companies can respond to the issues arising from changing ethical expectations in foreign markets.

Case Study information – Cadbury – China: a developing market

Cadbury is a British firm that is the second largest confectionery company in the world after Mars. The business was established in Birmingham in 1824 by John Cadbury. A chocolate-making factory was built at Bournville in 1879 and the Cadbury World visitor attraction opened alongside it in 1988, followed by a chocolate research centre in 2012. Cadbury’s UK operation is based at Bournville in Birmingham, while the company’s head office is in Uxbridge, London.

The company has been owned by Mondelez International (previously known as Kraft Foods) since 2010.

In 2010, Kraft Foods announced,

Kraft Foods is looking to double the number of Chinese cities in which it sells Cadbury chocolate within the next two years. The number of cities in China in which Cadbury products are sold would rise to about 40 thanks to the US food group`s distribution network, said Lorna Davis, president and chairman of Kraft`s China operations (Evening Standard, 2010)

Competitor, Nestlé, stated in its 2011 Annual Report,

“The emerging markets are populated by billions of people …We want not just to exploit our own capabilities to share in the development of these countries, but also become a truly local player … and participating in local culinary and nutritional traditions’ (Nestle, 2011). 

Some useful reading:

Covering the acquisition by KFI (Kraft Foods inc) of Cadbury plc and Kraft’s strategy the journal article explores the move into the Indian market where Cadbury Dairy Milk had been the market leader in the chocolate category with a market share of 30 percent.

Kraft Foods, Inc. in India – The Cadbury Acquisition. Asian Case Research Journal, Vol 18, Issue 2, 371-399 (2014).

• Ø Identify their product range
• Ø When did they first start trading with China.
  • Brief background to the organisation including products, Countries/Continent they operate in.
  • Explore trading with china (historically and today). Economic/Political factors involved? Nature of FDI in China.
  • Importance of contemporary issues such as ethical practice
  • Free trade area- No Internal Tariffs
  • Customs Union- No internal tariffs plus common external tariff.
  • Common Market-Customs union plus factor mobility.
  • Effect: Trade creation economics of scales increased competition.

                Consequences of Globalisation:

• Less job security
• Widening pay differentials
• More Job flexibility 
• Changing Job Structures
• Higher unemployment in flexible labour market

                Sustainability

Sustainable development is development that meets the need of the present, without compromising the ability of the future generation to meet their own needs

Gain competitive edge

Sustainable business practice-Human Right, Environmental Management

Stake holder engagement Disclosure.

CSR:

• Charitable contribution
• Employee volunteer programmes
• Corporate involvement in community, Education, Employment and homelessness programmes.
• Product safety and Quality.

                Ethics/Ethical Practices:

Sustainability

Green Policies

Disclosure(transparency)

                Discuss Foreign Trade Theories;

Porter’s Diamond

• Nations create advantage (Technology, Skilled Labour, Culture, government support)
• National Comparative Advantage.

Gravity Model:

• Based on distance between and economic size of Countries.

Mercantilism

• 16th Century- maximise export and minimise import- Favourable(positive) balance of trade-protectionist policy.

Absolute advantage:

• Ability to produce a commodity more cheaply than another.
• Natural advantage (Climate, raw materials)
• Adam Smith 1723-1790

Comparative Advantage

• Country will concentrate where it has maximum advantage (minimal disadvantage)
• David Ricardo 1772-1823.

Heckscher-Ohilin

• Builds on Ricardo’s theory
• Factors of production(recourses) affected by their abundancy or scarcity