Value Creation for Business

ABSTRACT

The importance of organizational process management and corporate culture is best understood in volatile business environments where some companies strive to maintain a level of competitiveness and ensure its survival—notwithstanding the legality of their approaches. To maintain competitive advantage in the fiercely contested confectionary and food beverages manufacturing sector, there is need for managers to adopt change and innovation strategies—as explained in the SWOT analysis, PESTEL analysis, Porter’s 5 Forces model, McKinsey’s 7-S Framework etc—to attract investors, create value for stakeholders, motivate employees and spur them to their best performance possible in different variables associated with the business. Adom et al (2016) categorized these high-impact variables under (a) employees and suppliers (b) information and knowledge (c) inputs and materials (d)machines and equipment (e) rules/procedures and (f) policy. This implies that top executives in every organization need to possess credibility and good analytic, inter-personal, leadership and language skills, considering that managerial competence, especially in controlling and maximizing these variables, is a determinant factor in the success or failure of companies. Identifying the ideal methodology that best coordinates these factors, however, has been a lingering problem in business management. Findings from this study show that organizational process management is either integrated or hierarchical. Cadbury Nigeria Plc adopted the hierarchical structure which is considered traditional and widely used by most companies because it creates room for fragmented workflow and leader-subordinate relations. But despite the competitiveness of the hierarchical system, proponents of the integrated style management cite its cost-effective benefit and significant impact of overall productivity. This study is conducted from the point view of a CEO to identify how Cadbury has utilized its chosen management approach as well as to suggest best assessment tools that are necessary for identifying major obstacles to the company’s growth.

Cadbury 1

  1. INTRODUCTION

Business administration holds a central position in the transformation of global economies but only few organizations/managers understand and utilize factors in the internal and external environments to create value for stakeholders, improve customer satisfaction, and achieve sustainability. To attain efficiency in organizational strategy, there is need for analysts to use workable management tools such as the Balanced Scorecard, SWOT analysis, PESTEL analysis, Value Chain analysis, McKinsey’s 7-S model etc. These organizational tools are quite effective in policy-making and implementation—in compliance with the culture, objectives and targets (Akyeampong., 2016). This study examines some assessment tools and how they are applied in business management to achieve sustainable growth.

Established in 1965, Cadbury Nigeria Plc (formerly Cadbury Schweppes) has become a major contender in global confectionary and food beverages business. The manufacturing company is headquartered in Ikeja, Nigeria and has over 200 branches around the world—with nearly 2,500 employees within the country. Cadbury produces mainly sugar confectionary, food drinks and gum. Some products in the Cadbury brands include some highly nutritious malt/chocolate drinks, Tom Tom, Buttermilk, Clorets, Bournvita etc. The Cadbury Group founded Stanmark Cocoa Processing company in the 1950s to source cocoa beans from local farmers at cheaper rates.

Mr. Muhammad Amir Shamsi holds position as CEO, Cadbury Nigeria Plc.

Figure 1: Cadbury’s Organizational Chart

Source: Cadbury (2019)

  1. BACKGROUND

Cadbury’s vision to become the world’s best and largest confectionary company was undermined by “sharp practices.” The 2006 financial scandal started with findings from the Security and Exchange Commission (SEC) which show that Cadbury’s publicized annual report for fiscal year 2005 was falsified. By 2008, the company’s top executives were charged for corruption, specifically in the areas:

  1. Obtaining loans to pay shareholders’ dividends against financial regulations stipulated by SEC.
  2. Disclosing incomplete information on business performance.
  • Ignoring the Corporate Governance Code in its business activities.

Eventually, Cadbury dissolved its top management due to poor leadership performance and SEC fined it ₦1 million. The total amount was calculated at ₦5,000 per day between June 30, 2002 to December 14, 2006.

Cadbury’s earnings have fluctuated since 2006, and in 2016 a significant poor financial performance led to a change of leadership. This paper contains an analysis of different assessment tools from a potential CEO’s point of view for the purpose of proffering a realistic roadmap to achieving increased productivity, profitability and sustainable growth.

  1. BUSINESS ANALYSIS

3a. The 7-S Framework

This assessment tool aids identification of the high-impact factors which are necessary for clearer understanding of an organization’s market position and successfully implementation of business strategies. According to McKinsey & Company (2016), every organization must integrate elements from the 7-S model to achieve competitiveness and sustainability. The analytic model comprises of:

  • Hard elements: – Strategy, Structure and Systems.
  • Soft Elements: – Shared Values, Skills, Style and Staff.

Figure 2: The 7-S Concept

McKinsey & Company (2016)

A brief look at the elements shows that:

Strategy refers to Cadbury’s strategic roadmap to achieving competitive advantage in the fiercely-contested confectionary and food beverages sector. The company’s business strategy “Vision into Action (VIA)” revolves around “growth” and was formulated with the slogan “Fewer, Faster, Bigger and Better” to improve financial performance since 2008. This mantra has been prioritized in both local and international markets. The VIA strategy also presents a yardstick for performance assessment. Other initiatives are: to creation of linkages with customers to cater for their confectionary needs; to maximize benefits from product differentiation; and invest in mergers/acquisitions (Sirat., 2009).

Structure of the organization is hierarchical. Cadbury adopts downward flow of communication from the Managing Director to Clerical Support assistants—a chain of commands which functions with decisions taken at the top and passed down to subordinates who perform clearly-defined roles.

Systems at Cadbury are decentralized, less formal and not complex. In addition, Cadbury staff—notwithstanding the department or roles—work together as an integrated and well-coordinated structure achieve desirable organizational goals (Abraham., 2006).

Shared Values, in this context, refer to Cadbury’s corporate culture and generally accepted performance standards (work ethics). The company operates with profit-centric motives which buoy its “fast growth” ambition. For example, Cadbury’s “efficiency target” is a shared value and strategy intended to widen customer investment opportunities, reduce costs incurred within the supply, and increase operating profit margins by 10 percent between 2007 to 2011 (Bensoussan., 2015). Another shared value is “more investment in human capital development.”

Staff members at Cadbury receive regular training on shared values, ethics, organizational objectives and individual responsibilities, to increase their performance level and enhance opportunities for career growth (Baum and Korn., 1996).

Style of leadership is pivotal in any organization’s success or failure. Business activities at Cadbury are guided by the principles of democratic management i.e. an all-inclusive consultation process where every stakeholder contributes ideas that are thoroughly weighted for inclusion in the policymaking process (Adom et al., 2016).

Skills, in this context, refer to actual competencies possessed by individual staff members. Skill requirements for each job position are scrutinized by the HR team, with induction and on-the-job training offered to adequately prepare new employees for specific tasks.

Advantages and disadvantages of using McKinsey’s 7-S model

This analytic tool is tested and proven in global business circles for its reliability in linking managerial practice and academic research. It focuses on how organizational strategies are formulated and implemented as well as encourages managers’ combination of strategy and structure to achieve organizational effectiveness. McKinsey’s 7-S model is also comprehensive because it examines the seven elements to identify their correlation (Fleisher & Bensoussan., 2007).

On the other hand, this assessment framework is static and tends to overlook the likelihood of encountering challenges between the time of strategy conception and implementation (Fleisher & Bensoussan., 2003). Other limitations include: minimal empirical support to avoid erroneous outcomes; difficulty in measuring the extent of flaws in the research; and difficulty for users to explain activities to be performed with the model (Capps & Glissmeyer., 2012).

3b. The Balanced Scorecard

The balanced scorecard (interchangeably used as BSC) is a strategic management and planning tool used by organizations to:

  • Explain business objectives/goals
  • Connect daily business activities and individual roles to organizational strategy
  • Identify and arrange products, services and tasks, in a preferential order.
  • Assess performance in line with strategic objectives for proper adjustments (Nerreklit., 2000).

BSC is most suitable for comparing strategy elements from the big picture (mission, vision, core values and strategic focus areas) such as purpose, aspirations, beliefs, themes, goals or results, including some operational factors (Key Performance Indicators) and continuous improvement activities as well as the desired performance level and projects that are necessary for managers to achieve their targets (Kaplan & Norton., 1992).

Figure 3: The BSC Concept

Source: The Author (2019)

BSC is a common assessment tool used by governments, non-profit organizations, industries and businesses around the world. Findings from a recent Harvard Business Review show that BSC has been one of the most effective and influential idea used in management since nearly 80 years (Jiang & Liu., 2014). The four perspectives are:

Financial or Stewardship which focuses on the effective use of available resources and financial performance.

Customer and Stakeholder which explain the relevance of customer value and need for customer satisfaction, including their influence on competitiveness, organizational profits and customer retention.

Internal Process concentrates on improving product or service quality to achieve efficiency.

Organizational Capacity or Learning and Growth delves into how organizations can maximize investments in human capital development, infrastructure, technology and corporate culture.

Figure 4: BSC terminologies among the four perspectives

Source: Adapted to the original concept from Dr. Robert Kaplan of Harvard University and Dr. David Norton (1992)

Advantages of using the BSC

  • The BSC is very useful in streamlining activities to meet organizational goals.
  • As a management system, BSC integrates various corporate projects.
  • It optimizes strategic operations by linking them to KPIs and targets.
  • It simplifies corporate-level assessments for managers and employees to “perfectly” understand their responsibilities and obligations toward achieving organizational goals (Ittner & Larcker., 2013).

Disadvantages of using the BSC model

Despite the huge benefits from using BSC, the assessment tool has been criticized for its inappropriateness when there are many performance indicators. It is also difficult to create a balance between four perspectives and top management may focus more on financial performance—a situation which undermines the positive contributions from other factors. Again, the BSC is cumbersome to use because it requires regular assessments and updates to stay relevant (Ivo & Antonio., 2016).

  1. SWOT ANALYSIS

SWOT (an acronym for Strengths, Weaknesses, Opportunities and Threats) is an assessment tool used by business and management analysts to understand an organization’s market environment. The model aids identification of both positive and negative elements in the system which serve as basis for policy making and implementation (Porter., 1998).

Figure 5: The SWOT Analysis Concept

Source: Adapted from Porter (1998)

 

  1. PESTEL ANALYSIS

PESTEL refers to high-impact factors in the political, economic, social, technological, environmental and legal environments that influence daily business activities and are beyond the organization’s control. Entrepreneurs maximize these elements for competitive advantage and sustainable profits (Middleton., 2003).

Figure 6: PEST Analysis of Cadbury

Source: The Author (2019)

 

  1. THE META MODEL ANALYSIS

According to Beinhocker (2016), the major challenges to organizational growth are three-fold vis-à-vis: bureaucratic bottlenecks, incompetent and static leadership as well as poor utilization of human capital and material resources. Worrell (1998) identified this assessment model as one of the best in management studies.

  1. PORTER’S 5 FORCES ANALYSIS

Porter’s 5 forces refer to factors in a simple analytic tool developed in 1979 by Michael E. Porter (2004). It is mostly used in assessing an organization’s competitiveness, market position and potentials. The theory is based on five concepts which, according to the Harvard Business School professor, weighs the attractiveness of a business environment. They are as follows:

(a) supplier power

(b) buyer power

(c) competitive rivalry

(d) threat of new entry

(e) threat of substitution

  1. SUMMARY AND RECOMMENDATION FOR CHANGE

Corruption and “sharp practices” have been a bane of economic growth in Nigeria (Okwuagbala., 2019) and a reason for Cadbury’s market position against Nestle Plc. Thus, Cadbury must elect or appoint innovative and reliable leaders who can manage its business with profit motives, consumer satisfaction, stakeholder value, probity and accountability as the watchwords.

There researcher therefore suggests that Cadbury should:

  • Improve its public image and enhance market visibility by investing more in advertising (print and media) and branding.
  • Maximize opportunities from the 4Ps of marketing—price, product, place and promotion—taking cognizance of value-based strategies adopted by its major competitor Nestle Plc.
  • Constantly review its business strategies for proper adjustments. The innovative business approaches adopted since 2008 should be monitored for actions—where necessary.
  • Employ experienced staff in its supply and distribution chain for efficiency, wider market reach and increased profits.
  • Constantly update its website and use same as a marketing, information dissemination and opinion-gathering outlet.

Having weighed findings from this study, the researcher therefore suggests a combination of the PESTEL and SWOT as the most suitable assessment tools for Cadbury and similar companies in the confectionary and food beverage sector because of their comprehensiveness and easy-to-use results.

 

APPENDIX

Figure 7: Organizational Chart with suggested changes

 

REFERENCES

Abraham S. C., 2006, “Strategic planning: a practical guide for competitive success,” Mason Ohio: Thompson.

Adom Y. A., Nyarko I. K. & Som G. N. K., 2016, “Competitor Analysis in Strategic Management: Is it a Worthwhile Managerial Practice in Contemporary Times?” Journal of Business Development and Management, Vol. 24.

Akyeampong E. O., 2016, “Ethical and Principled Leadership (2nd eds.),” Fasteens Publishers.

Baum J. A. C. & Korn H. J., 1996, “Competitive dynamics of interfirm rivalry,” Academy of Management Journal, Vol. 39 (2), pp. 255-291.

Beinhocker E., 2006, The Adaptable Corporation Article at a Glance, Vol. 1, pp. 77-87.

Benson E.A., 2019, “Who is the CEO of Cadbury Nigeria Plc?” Nairametrics, [Accessed Online: https://nairametrics.com/2019/01/29/meet-muhammad-amir-shamsi-the-ceo-of-cadbury-nigeria-plc/]

Capps III C. J. & Glissmeyer M. D., 2012, “Extending the competitive profile matrix using internal factor evaluation and external factor evaluation matrix concepts,” Journal of Applied Business Research, Vol. 28(5), pp.1059-1062

Fleisher C. & Bensoussan B., 2003, “Strategic and competitive analysis: Methods and techniques for analyzing business competition,” Prentice Hall.

Fleisher C. & Bensoussan B., 2007, “Business and competitive analysis: Effective application of new and classic methods,” FT Press.

Fleisher C. & Bensoussan B., 2015, “Business and Competitive Analysis: Effective Application of New and Classic Methods (2nd Eds),” International Institute for Analytics, Pearson FT Press.

Ittner, C.D. and Larcker, D.F. (2003) Coming Up Short on Non-financial Performance Measurement. Harvard Business Review, 81(11), 88-95.

Ivo H. & Antonio C., 2016, “The Limits of the Balanced Scorecard,” Open Journal of Social Sciences, Vol. 4 (11).

Jiang, D. & Liu Z., 2014, “Research on Application of Balanced Scorecard in the Government Performance Appraisal,” Open Journal of Social Sciences, Vol. 2, pp. 91-96.

Kaplan R. & Norton D., 1992, “The Balanced Scorecard—Measures That Drive Performance,” Harvard Business Review, Vol. 79.

Middleton J., 2003, “The ultimate strategy library: the 50 most influential strategic ideas of all time,” Oxford: Capstone.

Mind Tools, 2016, “McKinsey 7-S Framework: Making Every Part of Your Organization Work in Harmony,” [Accessed Online: https://www.mindtools.com/pages/article/newSTR_91.htm]

Nerreklit, H. (2000) The Balance on the Balanced Scorecard: A Critical Analysis of Some of Its Assumptions. Management Accounting Research, 11, 65-88

Porter M. E., 1998, “Competitive advantage: creating and sustaining superior performance,” New York; London: Free Press.

Porter M. E., 2004, “Competitive strategy: techniques for analyzing industries and competitors,” New York; London: Free Press.

Sirat H., 2009, “Corporate governance practice, share ownership Structure and size in earning management,” Journal of Economics, Business & Accounting Venture, Vol. 15, pp. 145-156

Worrell L., 1998, “Strategic analysis: a scientific art,” Wolverhampton: Wolverhampton Business School.