INTRO
On the 19th January 2010 at 13:00 GMT, the iconic and unique Cadbury business was bought for £11.5bn by the large American conglomerate, Krafts. To what extent will this hostile takeover affect stakeholders? And will the change in ownership benefit them or hinder them? The stakeholders I will be considering are employees, customers, shareholders and suppliers.
EMPLOYEES
In the UK, Cadburys employs 5600 people and 47,000 worldwide and the main interest of Cadbury's employees would be the security of their jobs. In the UK, many of them will have worked at the offices and factories for many years and will feel as though they have directly helped Cadburys achieve its iconic British image. All employees appear to be at risk of losing their jobs, those at the top of the business are no longer needed - why would Krafts continue to employ them when they can replace them with someone with knowledge and years of experience in being part of Krafts?
The change to an American ownership could be devasting to employee morale. If the HR approach changed, staff with valuable skills and knowledge could leave which would have a definate negative impact on Cadburys at this point in time. Cadburys have consistently implemented a soft HR approach where it's employees are generously rewarded. The question of Krafts adopting a hard HR approach is does have the potential to come true as Krafts have previously implemented this in the US and found it to be a success. As the company has borrowed a massive £7bn for the takeover, it's primary objective will be to pay off it's large debt (which now includes Cadbury's own debt). The fact that Krafts has borrowed the money does not improve the likelihood of Cadbury's employees losing their jobs as Krafts could close and sell factories and office and make employees redundant to cut costs to pay back some of it's debt.
When looking at Kraft's track record on buying and running British companies, it isn't positive. In 1993, Krafts bought Terrys and shortly closed the York factory and made those employees redundant and moved production abroad. If this is anything to go by, the outlook for Cadbury's employees keeping their jobs, is pretty negative.
It appears there is no reassurance to employees about their job security in the long term and whether they will have to look for a new job very soon in a time when unemployment is high and job openings are few.
However, one former Cadbury's employee stands to benefit greatly from the takeover. Todd Stitzer (former Cheif Executive) stands to walk away with £30million in a pension, shares, a years pay and other things.
CUSTOMERS
Questions are being raised about the damage the change in ownership could do to the brand image of Cadburys. Cadbury's mission statement is currently 'Cadburys means quality'. It may be simple but it reflects the thoughts and feelings in its British customers. The company has always prided itself being of a British heritage and having a positive global effect.
This brand image will unquestionably change. Decisions for the British business will now be made by an American company who is known for building it's company on the sale of cheese. Customers know this through the Media coverage on the takeover, will they still believe the brand to be one they trust?
If Kraft do not sustain the highly regarded brand then sales in the UK set to fall dramatically. Customers will become unloyal and buy other brands and Krafts stand to lose capital if this happened. This in itself could potentially cause job losses. If brand image becomes more negative and Krafts cannot make a sustained profit then they make the decision to move production to the US or further abroad which means they will close production here in the UK.
On the 19th January 2010 at 13:00 GMT, the iconic and unique Cadbury business was bought for £11.5bn by the large American conglomerate, Krafts. To what extent will this hostile takeover affect stakeholders? And will the change in ownership benefit them or hinder them? The stakeholders I will be considering are employees, customers, shareholders and suppliers.
EMPLOYEES
In the UK, Cadburys employs 5600 people and 47,000 worldwide and the main interest of Cadbury's employees would be the security of their jobs. In the UK, many of them will have worked at the offices and factories for many years and will feel as though they have directly helped Cadburys achieve its iconic British image. All employees appear to be at risk of losing their jobs, those at the top of the business are no longer needed - why would Krafts continue to employ them when they can replace them with someone with knowledge and years of experience in being part of Krafts?
The change to an American ownership could be devasting to employee morale. If the HR approach changed, staff with valuable skills and knowledge could leave which would have a definate negative impact on Cadburys at this point in time. Cadburys have consistently implemented a soft HR approach where it's employees are generously rewarded. The question of Krafts adopting a hard HR approach is does have the potential to come true as Krafts have previously implemented this in the US and found it to be a success. As the company has borrowed a massive £7bn for the takeover, it's primary objective will be to pay off it's large debt (which now includes Cadbury's own debt). The fact that Krafts has borrowed the money does not improve the likelihood of Cadbury's employees losing their jobs as Krafts could close and sell factories and office and make employees redundant to cut costs to pay back some of it's debt.
When looking at Kraft's track record on buying and running British companies, it isn't positive. In 1993, Krafts bought Terrys and shortly closed the York factory and made those employees redundant and moved production abroad. If this is anything to go by, the outlook for Cadbury's employees keeping their jobs, is pretty negative.
It appears there is no reassurance to employees about their job security in the long term and whether they will have to look for a new job very soon in a time when unemployment is high and job openings are few.
However, one former Cadbury's employee stands to benefit greatly from the takeover. Todd Stitzer (former Cheif Executive) stands to walk away with £30million in a pension, shares, a years pay and other things.
CUSTOMERS
Questions are being raised about the damage the change in ownership could do to the brand image of Cadburys. Cadbury's mission statement is currently 'Cadburys means quality'. It may be simple but it reflects the thoughts and feelings in its British customers. The company has always prided itself being of a British heritage and having a positive global effect.
This brand image will unquestionably change. Decisions for the British business will now be made by an American company who is known for building it's company on the sale of cheese. Customers know this through the Media coverage on the takeover, will they still believe the brand to be one they trust?
If Kraft do not sustain the highly regarded brand then sales in the UK set to fall dramatically. Customers will become unloyal and buy other brands and Krafts stand to lose capital if this happened. This in itself could potentially cause job losses. If brand image becomes more negative and Krafts cannot make a sustained profit then they make the decision to move production to the US or further abroad which means they will close production here in the UK.
SUPPLIERS
Suppliers for Cadburys face an uncertain time, the impact of the takeover could be especially devasting for some. Some suppliers will stand to lose their major purchaser if Kraft decide it would be cheaper to import supplies from abroad. (Which looks likely as Krafts will need to pay off their huge debt) If suppliers relied solely on Cadburys buying their stock then this could mean the end for their businesses.
Another concern is whether Cadburys will remain a Fair Trade company or not. Krafts does not pride itself on this so there is a chance they may no longer produce Cadburys products to Fair Trade standards. This could create a negative ripple effect through all those involved in the Fair Trade operations, the direct suppliers (those who supply the stock to the factories) right down the path the raw materials take to the farmers abroad who have benefitted from the move to Fair Trade.
This not only means suppliers will lose money and potentially struggle to survive but it could also have a negative effect on the brand image. If Cadburys was no longer Fair Trade, customers would lose faith and trust in the business.
SHAREHOLDERS
Finally the last stakeholder I will be looking at is shareholders. Krafts offered special dividends to shareholders if they passed the decision to takeover (which they did) and this raises the question of if they are only interested in a short term return and they passed the takeover for their own benefit. It could suggest they are not planning for long term returns and are not planning to own shares in Cadburys for much longer.
Although there are some uncertainties for shareholders in Cadburys because if Kraft fail to make any profit on Cadburys then shareholders stand to lose money if they sell their shares at a decreased price.
Also, Krafts are planning to introduce more shares, which means a lower dividend per share because there are more shareholders to pay. However, this is also a benefit for potential shareholders because it gives them an oppurtunity to purchase shares. This could mean more competition between shareholders when making business decisions which would act as a drawback for current large shareholders.
CONCLUSION
In conclusion, the outlook for Cadburys does not look good. Its long standing British heritage will change, which will inevitably damage the brand image in the UK. This could create a domino effect: if brand image falls, Krafts will make no profit, they could move production elsewhere, meaning redundancies and less business for suppliers. The only group of stakeholders that appear to make a definate profit from this new ownership are the shareholders, those who own shares in Krafts though, not in Cadburys.
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