Kraft’s Acquisition of Cadbury Essay

The kraft paper Foods Group Inc. (kraft paper) operates in the food and boozing industry. Kraft is the U.S.s 1 food company and 2 in the world (after Nestl) in gross revenue according to Hoovers 2009. Their competitive advantages are global scale distribution around 150 countries, (LexisNexis, 2012) young technology, equipment and R&D (Kraft deploys SAP Tech. platform, 2008) their partnerships with companies like AOL TWX, rain forest Alliance, etc. (Kraft Foods partners with Rainforest Alliance on sustainable coffee initiative, 2009) and their supply chain (www.pincsolutions.com/kraft-foods, 2012). These advantages can attribute Krafts Net Profit Margin of 10.08%, compared to the industrys average of 5.37% (Hoovers, 2012).On the other hand, Cadbury is a confectionery and is the industrys second-largest globally after Mars (Gray, 2009) and the company operates in approx. 50 countries worldwide. Their capabilities, send popularity and innovation represent their main competitive adv antages (Using Open Innovation to Ensure Competitive usefulness, 2010).With the eruditeness, Cadbury will gain from Krafts scale (Birchall & Wiggins, 2009), their distribution in emerging markets (Elms, Kraft and Cadbury) and their market muscle (English, 2009), which will result in a faster growth for Cadbury. Kraft will benefit by diversifying even more on colligate business (they already own Toblerone, Nutter Butter, etc,) and alike from Cadburys capabilities (brand, innovation, know-how, etc.) that will likely represent as an additional source of value creation for Kraft. together the companies will surely impair the competition for example the termination of Hersheys license to make and trade in the Cadbury brands in the U.S. (30% of total sales, Hoovers, 2008).Currently Kraft if facing two major issues, and they are The acquisition only makes sense if Kraft can obtain a return on investment jacket crown bigger than the cost of capital within a reasonable timeframe. T he competition with Nestle, Hershey and Mars.The recommendations are the followingKraft should boost the growth and profitability of Cadbury by exploiting their scale, marketing potential, placing in emerging markets and partnerships, as they did with Post cereals in 2008 (Hoovers, 2009). Additionally on the functional level, Cadburys legal department should terminate Hersheys license to portion out and distribute their products in the U.S. and transfer this licenses to Kraft.Kraft should also take advantage of the Cadbury acquisition (diversifying on related business) and this should result in the creation of additional value for Kraft, resulting in a competitive advantage vs. competitors (Nestl, Mars, etc.).A tapered integration of Cadbury is reasonable selling the distribution rights to competitors in the markets where Kraft is not present (43 countries) at the same time Kraft should exploit the exclusive distribution and fabrication rights for Cadburys products where they are p resent.