This is detailed BCG matrix analysis of Cadbury company which is among the best strategic tools to check the current standing of your company products, services and segments.
Introduction
The BCG Matrix has been developed in 1970s by Boston Consultancy Group with the aim to help organizations to differentiate between profitable and non-profitable ventures. Knowledge about the market share and growth potential of a product helps the management to make investment decision and refrain from spending resources on products that are not likely to give favorable results. The analysis using BCG Matrix is based on a framework including four components, cash cows, stars, question marks and dogs. Cadbury is based in UK, operating in the confectionary industry supplying its products across the world. The company has been operating for more than 200 years and has become one of the renowned manufacturers of different confectionary items. The BCG Matrix analyzing the product portfolio of Cadbury is presented below:
Cash Cows
There are some products that tend to offer a great deal of financial strength to the company which are regarded as cash cows. These items have been high performing products in the past and have gained a massive market share over the years. The BCG Matrix further indicates that the cash cows have limited scope for further development of the market share as the industry segment has attained significant level of maturity. The cash cows are beneficial for an organization as they provide the firm with a continuous stream of sales and revenue. The dairy milk segment has been a cash cow for the company in the past decades as the consumers had a high demand for chocolate. In the recent times, this situation has shifted and dairy based confectionary items have lost their place as a cash cow. In the contemporary confectionary industry, Cadbury has experienced stable financial growth through Bournville brand which has created a better sales outlook for the company.
Stars
The products that are a part of the star category can be differentiated from the cash cows on the basis of the growth potential of the industry. Even though they have significant market share, the industry is still growing which shows the chances of further increase in sales and revenues from the star product. Consequently, the target of a higher market share can be obtained by focusing on continued production of these items, which is supported by the high demand from consumers. The star products can develop to such an extent that they become cash cows for an organization by gaining higher market share and the eventual maturation of the industry. Cadbury had been able to generate a great deal of financial income from its chocolate unit. Some of its high demand items are dairy milk brand. Therefore, it can be regarded as a star for the company. However, in recent years the sales of dairy based chocolate has declined while the non-dairy based confectionary demand has significantly increased (Wallop, 2016). The company will need to rethink its production and marketing strategy in order to make it cash cow. The higher production and increased supply of cocoa is a favorable change in the industry which could help the company to increase the production of its chocolate based confectionary items.
Question Mark
Apart from the high revenue generating products, there are some items that are not being a source of financial stability for a firm. It is uncertain whether these items would play a part in financial growth of the organization or not. Therefore, they are termed as question marks in the BCG Matrix. In case if these products have an improved financial performance, they can be classified as stars. Since the industry has high growth opportunity, these items have the chance of gaining financial improvement with the passage of time. On the other hand, the low financial output exposes these items to the risk of becoming a dog. Cadbury Crème Eggs have not been able to produce favorable result for the company in the recent time. The sales volume of this product has declined, pushing the company towards financial trouble. As observed by Lewis (2016), the manufacturing of Crème eggs was altered due to a change in the recipe, which has not been received well by the target market. The exclusion of dairy milk from the recipe has created a negative response among the consumers who have viewed this decision as a violation of these taste and preference. As a result, the projected demand of the eggs during the Easter has not been achieved, making it a question mark for Cadbury Company. Another question mark for Cadbury is the biscuits segment, in which its Oreo cookies have not been able to create a strong demand in the target market. As a result, the revenue from biscuits has not been a strong point for Cadbury and its income is primarily generated through the confectionary based items. Investing resources in this product can help the company to gain higher market share and revenue as the industry is growing and has the potential to further grow.
Dogs
The last category in BCG Matrix is dogs, which includes the products that are consuming organizational resources but are not able to produce the return on the investment. The low ROI makes these products a probable target for elimination from the product portfolio. One of the reasons why these products are not performing well is that the industry is indicating a slow pace of development, thus reducing the chances of securing a higher market share. One of the products manufactured by Cadbury Company is bubble gum. The product has been developed with the intention of expanding the portfolio of Cadbury, entering into other items besides chocolate based products. Trident gum managed by Cadbury has not been able to gain significant financial gains, making it a dog for the company. According to Manning (2009), the sales of gum has dropped up to 2% which shows changing consumption of bubble gum in the target market. Another area where Cadbury needs to bring improvement is the market share of its cold beverages, which have been underperforming products in terms of sales and revenue.
References
Lewis, K. (2016). Cadbury’s Creme Eggs sales and satisfaction falls after controversial recipe change. The Independent. Retrieved from http://www.independent.co.uk/news/uk/home-news/creme-egg-easter-cadbury-mondelez-recipe-sales-a6950221.html
Manning, C. (2009, May 1). Cadbury’s chewing gum sales fall. Mirror. http://www.mirror.co.uk/money/city-news/cadburys-chewing-gum-sales-fall-391460.amp
Wallop, H. (2016, March 21). The many ways Cadbury is losing its magic. The Telegraph. Retrieved from http://www.telegraph.co.uk/food-and-drink/features/the-many-ways-cadbury-is-losing-its-magic/