Cadbury Takeover by Kraft: Failure Analysis

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Table of Contents

Introduction
Employee Values
Change in Employment and Work Values
The Impact of Culture Change
Effect on Work Ethic and Character of Employees
Conclusion
References

Introduction

The purpose of this case study report is to analyse critically the hostile buyout of Cadbury by Kraft. The buyout was opposed because Kraft failed to keep the promises it made to Cadbury employees (Stiff 2012, p. 41). Furthermore, the two companies embraced different values, which strained the relationship between employees and the management team. Thus, the paper will discuss values associated with Cadbury and Kraft. It will also highlight the impact of culture change on employees and work ethic.

Employee Values

Before the acquisition, Cadbury employees were guided by values espoused by the Quakers who found the company (Cadbury 2010, pp. 15-300). Thus, Cadbury was associated with the following values. First, the company was associated with compassion. Cadbury owners and management showed compassion to their employees by providing good working conditions, leisure facilities, adequate remuneration, and job security. On the other hand, Kraft did not value compassion since it focused on improving profits rather than employees’ welfare (Stiff & Ralph 2011, p. 51).

Second, Cadbury valued justice and fairness. The company’s employees were treated equally and their concerns were always taken into account by the management (Cadbury 2010, pp. 15-300). Justice and fairness were however not important to Kraft’s management. For example, the company’s CEO repeatedly ignored the concerns of workers and union leaders during the takeover (Moeller 2012, p. 15).

Third, Cadbury embraced honesty and integrity by keeping its promises to employees, workers and suppliers. Employees focused on self-discipline and hard work to achieve their targets. Conversely, the integrity of Kraft’s managers was questionable (Leggett 2010, p. 10). For example, they closed a factory in Bristol, which led to the loss of 400 jobs despite having promised to keep the facility.

Finally, Cadbury’s employees believed in maintaining a strong sense of community by caring for one another and maintaining high ethical standards. However, ensuring ethical behaviour was not a priority at Kraft. The CEO, for instance, refused to discuss with MPs the impact of the takeover on employees since she believed it would be a waste of her time (Stiff & Ralph 2011, p. 51). Moreover, the company forced nearly 3,000 employees to opt out of their pension plan by threatening to withhold pay (Rigby & Cohen 2010, p. 1).

Change in Employment and Work Values

The takeover represents a significant change in employment and work values, as well as relationships between workers and employers in the following ways. First, Kraft’s managers were guided by the principles of modern capitalism rather than the values embraced by Quakers (Stern 2010, p. 2). As a result, Cadbury employees were expected to consider work as a means to an end rather than something that was good for the soul. This means that the employees had to work to increase profits and earn salaries instead of achieving personal satisfaction (Skapinker 2010, pp. 1-3).

Second, the takeover forced Cadbury employees to embrace competition, which was against their commitment to peace and cooperation. Specifically, Kraft’s performance-based reward system encouraged competition among employees, which in turn led to conflicts. For instance, the CEO of Kraft focused on job cuts to increase profits in order to earn a bonus of $26 million (Rigby & Jones 2010, p. 1). The job cuts, however, were the main cause of resistance and poor work relationship between employees and the management (Louise 2011, p. 1).

Finally, fairness and compassion were replaced with unequal distribution of power. Kraft’s top managers such as the CEO had immense power and full control over employees (Rigby & Brooke 2010, p. 2). For instance, they did not consult employees when making decisions concerning job cuts and the company’s business plan after the takeover. As a result, employees became dissatisfied and lost trust in the management (Eaglesham 2010, p. 2).

The Impact of Culture Change

The culture change affected Cadbury employees in the following ways. To begin with, the change led to dissatisfaction. According to The Independent (9 Feb. 2010, p. 1), employees were dissatisfied with how the acquisition and restructuring of the company was done. The dissatisfaction rose from the culture of dishonesty in the company after the buyout (The Independent 2010, p. 1).

Employees also experienced significant stress during and after the takeover. For instance, most employees believed that the takeover was as painful as bereavement since they expected to lose benefits such as attractive pension schemes and job security (The Independent 2011, p. 2). The stress resulted from the culture of poor communication and lack of staff involvement in decision-making processes. For instance, The Independent (2 Feb. 2010, p. 1) showed that employees who were retained were worried about their future since Kraft’s senior executives remained silent about the restructuring process. The increment in uncertainty caused stress among the employees.

Low morale among employees is another impact of the change in culture. In Kraft’s organisational culture, employees were viewed as assets that could be acquired and disposed rather than partners who made important contributions to the company. Moreover, The Independent (1 Feb. 2010, p. 3) showed that Kraft did not care about the history of Cadbury since it ignored its traditions and values. Thus, Cadbury employees felt that the new management did not appreciate their efforts (Thompson & Prosser 2010, p. 1). This led to low morale in the company.

Effect on Work Ethic and Character of Employees

The change is likely to have affected employees’ character and work ethic in the following ways. Employees’ integrity was mostly likely to worsen since the new management encouraged dishonesty (Rigby 2010, p. 1). In this respect, employees were likely to engage in dishonest dealings to achieve the company’s objectives rather than establishing trust and strong relationships with the management and clients.

Employees were most likely to have lost their sense of responsibility due to low morale. Undoubtedly, employees with low morale lack commitment in their work (Sennett 1999, pp. 25-160). They are therefore not likely to demonstrate a strong sense of responsibility by achieving their targets. Moreover, teamwork was likely to be affected negatively since the new management did not value a sense of community that encouraged employees to work together as a family (Roberts 2010, p. 2).

Conclusion

The acquisition of Cadbury by Kraft was resisted because of the latter’s failure to keep its promises to employees. In addition, Cadbury employees were worried about losing their jobs after the takeover. The acquisition also led to a significant culture change since Cadbury’s values were extremely different from those of Kraft. Thus, the change of ownership resulted into low morale, stress and dissatisfaction among employees. Moreover, the takeover could have led to adverse effects on teamwork among employees.

References

Cadbury, D 2010, Chocolate wars: from Cadbury to Kraft: 200 years of sweet success and bitter rivalry, HarperCollins Publishers, London.

Eaglesham, J 2010, ‘Mandelson attacks Kraft on jobs’, Financial Times.

Leggett, J 2010, ‘From Quakers to suited psychopaths’, Financial Times.

Louise, L 2011, ‘Kraft to cut one in seven UK jobs’, Financial Times.

Moeller, S 2012, ‘Kraft’s takeover of Cadbury’, Financial Times.

Rigby, E 2010, ‘Bigger Kraft faces tough task ahead’, Financial Times.

Rigby, E & Brooke, M 2010, ‘Kraft censured in UK over Cadbury deal’, Financial Times.

Rigby, E & Cohen, N 2010, ‘Cadbury staff issued with pension ultimatum’, Financial Times.

Rigby, E & Jones, A 2010, ‘Kraft gives MPs pledge on factory closures’, Financial Times.

Roberts, D 2010, ‘Cadbury’s board agrees 12 billion pounds sale to Kraft’, The Independent.

Sennett, R 1999, The corrosion of character: the personal consequences of work in the new capitalism, Norton, New York.

Skapinker, M 2010, ‘Why do business titans need to give back’, Financial Times.

Stern, S 2010, ‘A history lesson for Kraft’s leaders’, Financial Times.

Stiff, P 2012, ‘I’m watching you: MP warns Kraft over treatment of Cadbury workers; unions point to broken promises by US giant’, The Times.

Stiff, P & Ralph, A 2011, ‘Kraft prepares to cut 200 Cadbury jobs as promise passes its sell-by date’, The Times.

The Independent 2010, ‘Cadbury workers to lobby government for support’, p. 3, 2015, via Factiva database.

The Independent 2010, ‘Cadbury workers attack government amid demo over takeover’.

The Independent 2010, ‘Kraft finally acquires Cadbury after vote in favor of 11.4 pounds billion deal’.

The Independent 2011, ‘200 jobs to be axed at Kraft’.

Thompson, J & Prosser, D 2010, ‘Mandelson warning as Kraft bids for Cadbury’, The Independent.

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