cadbury experience in israelscipeuro2010

8/7/2019 Cadbury Experience in IsraelSCIPeuro2010

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Avner Barnea

Graduate School of Business Administration,Ono Academic College,

Israel

[email protected]

19 January 2010 1


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The presentation is divided into 3 main parts:

` Cadbury experience in Israel- presentation of the case

study.` Analysis of the case study through the eyes of

Peripheral Vision Model.

` Questions and discussion.

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322 January 2011

New

Entrants

CompetitorsCompetitors

Suppliers)(Supplier Power

Buyers/

Clients)(Buyer Power

Substitutes

(Product and Technology Development)

Porter:

Competitive

Strategy

TheThe

CompetitiveCompetitive

ThreatThreat Macro

Environment

PESTERPESTER

Shaping the CompetitionShaping the Competition


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Senior

Management

The firm

Current

BusinessEnvironment

CI supports the strategic process by

acting as a sensor to brief the top

management whether the company is still

competitive

FutureBusiness

Environment


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Cadbury Israel (CIS) had an attempt to enter to the

Israeli chocolate market in December 2002. It was

blocked by Elite Ltd., the local market leader in mid2003 and CIS finally decided to withdraw. Since then,

Cadbury chocolates are not sold in Israeli market.

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` Cadbury, a global company with revenues of 6 billion

(2001) and no existence in Israel, set up a strategic

alliance with the Israeli company Carmit Ltd (CIS).

` According to the agreement, Cadbury will manufacturethe goods while CIS will be responsible for marketing

these products through its distribution channels in

Israel.

` Cadbury agreed to support CIS with its globalmarketing experience and also allocated 2 million for

promoting the entrance to the Israeli market.

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` The Israeli market was ready for quality chocolateproducts.

`

CIS had an extensive and prosperous experience in thelocal market and was proving financially strong.

` CIS designed a penetration strategy based on intensivestudy of the market and refraining to threaten Elite,the market leader.

` CISs strong confidence relied also on taste tests heldin Israel showing that the Israeli customers enjoyed itsproducts.

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` CIS was a medium size Israeli public company mainly in

sugar confectionary with a limited experience in

marketing chocolate and actually was never in direct

competition with the local leader Elite.

` CIS was very successful in its niche market and also hadstrong logistical capabilities.

` CIS had decided that to extend its revenues it had to

collaborate with a global company and to sell it goods in

the local market.` According to a market research presented to CIS, the

size of the local Chocolate market is approximately $350

million, while Elite held 70% of this market.

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` $270m annual revenues in the chocolate market inIsrael (70% market share). Also leading the localcoffee market. Officially monopoly since 1989.

`

One of the strongest brands in the market and veryliked by the customers. Operating in the market for70 years.

` Prior to the arrival of CIS, Elite announced that it willspend $2.Om to meet the incoming threat.

` Elite is recognized for its aggressive strategy whenfacing threats to its core business.

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` Agreement- signed between Cadbury and the local partner Carmit(CIS) 2002. It was published by the Tel Aviv Stock Exchangenewsletter.

` Strategy A local strategic consulting firm presented a proposal forintroducing CIS into the Israeli market. The outline of the plan was:

1. Target market share 15% in 3 years.2. To enter the large food chains simultaneously with many

products(18).

3. To sign agreements with independent food distributors and theleading food chains.

4. To favor a Loud Launch on a national scale.

5. To Expand and upgrade the management of CIS, marketing, sales andlogistics.

` The strategic plan was presented and approved by CIS board andCadbury.

` CIS had initiated the first order of goods, total value - $10m.

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` A few years ago Elite was successful in slowingdown the attempt by Nestle (through its localpartner )to establish itself in the Israeli chocolate

market.` Elite launched an attractive sales campaign

(blockade campaign/ preventive campaign) twomonths before CISs Launch.

`

Elite is noted in Israel for being aggressive towardscompetitors that are threatening its market lead bycarrying out a strategy of market share.

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` The aggressive campaign by Elite was expandingand it offered attractive deals to the customers.

` First complaints received from stores and

distributors about pressures by rival Elitethrough illegal means.` Sales of CIS were continuously declining.` Reports in the media about the behavior of Elite

sales representatives towards Cadbury.

` The Israeli Antitrust Authority received the firstcomplaints and announced publicly that itopened an investigation.

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` May 2003- CIS decided to stop selling Cadbury goods inIsrael. Its assessment were that the chances to succeed werelow and the spending was higher than expected.

`

The demand for CIS goods was lower than the expectations` Disappointed by the lack of intervention of the Antitrust

Authority.` The Chairman of CIS (July 2009): We were surprised by the

intensity of the reaction by Elite, especially in their pricesstrategy. The reduction of prices of their chocolates was

more than we expected.` Heavy losses to CIS that almost brought to its termination.

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Customer

Value

Competition

Service

Quality

Product

Quality

Price


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Pre -launchPre -launch

Threats

1. Highly strong

competitor.

2. Macro economicsanalysis unstable

economy- security

situation.

3. Conservative

market.

Opportunities

1.Analysis of the

Chocolate market

2. Competitors analysis3. CIS- Capabilities

distribution, financial

stability/resources

Scoping

Where tolook?

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Peripheral VisionPeripheral Vision --A portfolio of scanning methods to capture and amplifythe weak signals within targeted zones of the periphery: inside the firm,

customers and channels; the competitive space; technologies, political,

social and economic forces; and influencers and shapers.Day, G. and SchoemakerP., (2006). Peripheral Vision: Detecting the Weak Signals

That Will Make or Break Your Company, Harvard Business Press.


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ConclusionsConclusionsPost -launch

Scoping was

accomplished. It

focused more onCIS efforts than on

the external

environment

(competitors

capabilities &

intentions).

Threats

1.Information received

not as a result of

systematic gathering.

No KITs definitions.

2. Focused more on

regulation misdeeds

rather on the intentions

of the main competitor.

ScopingScoping

Where to

look?

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ConclusionsConclusionsPost-launchPre -launch

1. CIS missed critical

signals regarding

competitors early

preparations andintentions.

2. It refrained taking

proactive steps,

which may well

supply with important

information.

As a result of

the weak sales

results, focus on

competitorsinitiatives. Not

systematic. Too

late.

1. Did not define

information needs

(KITs), beyond the

initial analysis.2. No active interest

in competitors

response strategy

(wishful thinking?)

3. No early warning

definitions.

ScanningScanning

How tolook?

What is

needed to

know?

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1. Pre-launch- In

case of accurate

assessment of

competitorsintentions may cause

reconsider launch

strategy.

2. Post-launch- in

case of better

assessment- mayconsider changing

sales strategy.

3. Wrong estimations

that the regulation

will intervene quickly.

1. Immediate

information on

successful launch

was misleading.2. Did not

anticipate a

failure.

3. Possibly over

estimation to

competitors

activities andunder estimation

to customers

partial

dissatisfaction.

1. Skilled analysis

of industry

direction

2. Did notanticipate

competitors

reaction (15%

market share

realistic?).

InterpretationInterpretation

What is themeaning of

the

information

gathered?

What we have

learned?

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Did not develop

options- No process

of further search for

insights/ filing thegaps.

1. No

assessment of

gaps of

informationregarding the

market and the

main competitor.

2. No further

analysis of

competitor.3. Did not

identify the

blockade

strategy by the

competitor?

Did not plan for

further gathering

in case of failing

launch.

ProbingProbing

What further

information is

needed?

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1. No systematic

process of further

search for insights/

filling the gaps.2. Decision making

process with no

vision.

1. Decision to

stop temporarily.

2. Decision not

to order moregoods- death

penalty to the

introduction

campaign.

Possible

reconsider of

strategy not on

the agenda as noneeds for probing

arise.

ActingActing

What actions

have beentaken?

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Management

emphasize on saving

CIS from the

disastrous failureand its implications

(financial loss/

bankruptcy).

1. No further

monitoring as a

result of the

decision to quit.2.No drawing of

lessons

3. Over

expectations

from the

antitrustauthority.

Lack of proper

intelligence

awareness and

deployment.

OrganizingOrganizing

Taking actions

to detectfurther

information?

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Actually no leading

activities but control

the damages

1. Quit the new

activity and

taking care of

goods remainedunsold.

2. Management

restructuring to

save the firm.

LeadingLeading

Acting to

improveweaknesses?

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` CIS lacked a strategy ofPeripheral Vision i.e. lack ofintelligence management played a major role on thestrategic surprise (optimistic assumptions rather than onrealistic ones).

` Utilitization of Intelligence management could influenceon a different (better?) strategy.

` An example: outflanking strategy/ The strategy of indirectapproach- In strategy the longest way round is often the shortest way there; adirect approach to the object exhausts the attacker and hardens the resistance by

compression, whereas an indirect approach loosens the defender's hold by upsettinghis balance).

` CIS did not have a contingency plan (what ifs) in casethey face an intensive/ unpredicted reaction by Elite.

` The overall customer value of the CIS goods was low.

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` CIS was unsuccessful in building significant

demand for their products.

` The response by the Antitrust authority was lateand did not create deterrence for future attempts

against monopolist powers in Israel.

` And finally - CIS may made a mistake by

collaborating with a local partner which was notfitting for this challenge.

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` Was it strategically right to launch a direct

attack against such a strong rival?

` Could CIS be better prepared against theaggressive competition in the chocolate

market?

` How significant was the role played by the

Antitrust Authority in the failed attempt byCadbury?

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Avner Barnea

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cadbury experience in israelscipeuro2010

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