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Best Practices and Recommendations: Kraft-Cadbury Merger

Integrate Corporate Culture

When conducting a merger, it is important that both the acquiring and acquired organization share a similar corporate culture. This is critical, as many mergers have failed to produce shareholder value as a result of clashes within the administration and operation of the company. Culture determines how members of the corporate community conduct themselves, and as such, is a highly influential aspect of organizational effectiveness. Culture clashes are fairly common when organizations are at different levels of growth or were developed within different frameworks. This can be commonly seen in startups or family owned businesses that were acquired by large-scale corporations, as the expectations in terms of performance and staff flexibility are significantly different.

Cultural differences were a significant worry when referring to the Kraft/Cadbury merger, as the cultures were radically different from one another. Kraft did not nurture its brands from development, but was a product of large-scale acquisitions of smaller firms under a conglomerate model. Cadbury, on the other hand, is a product of a long-term family organization that was independently owned from its inception. Although the company underwent mergers, the mergers were done in a way as to expand on its original confectionary market model and did not dramatically affect company operations. Furthermore, both originated from different nations, as such, maintained significantly different cultural values despite their English-speaking origin.

Kraft managed to resolve these issues by spending significant amounts in effectively unifying the organization and molding the corporate culture in such a way that benefits both parties. Cadbury remained a subsidiary rather than being fully absorbed into the Kraft corporate structure, meaning that there is little cultural interference in terms of day-to-day operations. The focus on Kraft in retaining talent and assuring trust in the merger was critical to creating a positive corporate culture and prevent major conflicts from occurring between the brands.

Seeking Strategic Partnerships

Mergers often fail, but the most successful mergers tend to have a single commonality among them: they expand or improve corporate operations within specific markets through complementary products or other services offered by the organization. Cadbury/Kraft is a perfect example of a strategic partnerships within mergers is key, as they improve the overall longevity and effectiveness of the merger on organizational operations. The more in common that the acquired company has with the main organization, the ‘smoother’ the transition becomes. This can be quantified in terms of either direct benefits to operations, increased efficiency or other potential factors.

For Kraft, the merger was particularly strategic as it significantly increased the distribution of Kraft products within key markets. This made Cadbury a vital part of the overall Kraft growth strategy, and as such, it mandated the use of Cadbury resources in order to expand the company as a whole. Frequently, companies are acquired large corporations due to the potential savings, but with little concrete plan on how products will be integrated into the larger offering or the direct benefits of such an acquisition. Due diligence is especially important, as it prevents such errors from occurring during the merging process. Although it is uncommon to see, some mergers are merely done based on the hype of a company and not its overall benefits to the acquiring firm.

Kraft acted as part of a long-term plan to boost its overall effectiveness in the market and to increase sales by establishing its presence within new regions and key geographic markets. Cadbury maintained a particularly complementary distribution range that significantly increased the presence of Kraft products and reduced the overall logistical costs of bringing a product to market. In this regard, Cadbury served as the cornerstone for Kraft revenue growth, as it enabled Kraft to better target its future growth potential more effectively.