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Enterprise Marketing — Entrepreneurship STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEntrepreneurshipEnterprise Marketing3 Marks
Question
CRM is essential for a business, why?
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Answer

CRM is essential as it is a business strategy, which enables a business to:
  1. Understand the customer.
  2. Retain customers through better customer experience.
  3. Attract new customers.
  4. Win new clients and contracts.
  5. Increase profitability.
  6. Decrease customer management costs.

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Kraft's Takeover of Cadbury-By Scott Moeller,
The Story In 2009, the US food company Kraft Foods launched a hostile bid for Cadbury, the UK-listed chocolate maker. It became clear almost exactly two years later in August 2011, Cadbury was the final acquisition necessary to allow Kraft to be restructured and indeed split into two companies by the end of 2012: a grocery business worth approximately, $16bn and a $32bn; global snacks business. Kraft needed Cadbury to provide scale for the snacks business, especially in emerging markets such as India. The challenge for Kraft was how to buy Cadbury when it was not for sale.
The History,
Kraft itself was the product of acquisitions that started in 1916 with the purchase of a Canadian cheese company. By the time of the offer for Cadbury, it was the world's second largest food conglomerate, with seven brands that each generated annual revenues of more than $lbn. Cadbury, founded by John Cadbury in 1824 in Birmingham, England had also grown through mergers and demurrers. It too had recently embarked on a strategy that was just beginning to show results. Ownership of the company was 49% from the US, despite its UK listing and headquarters. Only 5% of its shares were owned by short-term traders at the time of the Kraft's bid.
The Challenge,
Not only was Cadbury not for sale, but it actively resisted the Kraft's takeover.
Sir Roger Carr, the Chairman of Cadbury was experienced in takeover defences and immediately put together a strong defensive advisory team. Its first act was to brand the 745 pence per share offer 'unattractive', saying that it 'fundamentally undervalued the company'.
The team made clear that even if the company had to succumb to an unwanted takeover, almost any other confectionery company (Nestle, Ferrero and Hershey were all mentioned) would be preferred as the buyer. In addition, Lord Mandelson, then the UK's business secretary, publicly declared that the government would oppose any buyer who failed to 'respect the historic confectioner.
The Response,
Cadbury's own defence documents stated that shareholders should reject Kraft's offer because the chocolate company would be 'absorbed into Kraft's low growth conglomerate business model-an unappealing prospect that sharply contrasts with the Cadbury strategy of a pure play confectionery company'.
Little did Cadbury's management know that Kraft's plan was to split it into two to eliminate its conglomerate nature and become two more focused businesses, thereby creating more value for its shareholders.
The Result,
The Cadbury team determined that a majority of shareholders would sell at a price of roughly 830 pence a share. A deal was struck between the two Chairmen on 18th January, 2010 at 840 pence per share plus a special 10 pence per share dividend. This was approved by 72% of Cadbury shareholders, two weeks later.
The Key Lessons: In any takeover, especially a cross-border deal in which the acquired company is as well known as Cadbury was in the UK, the transaction will be front-page news. In this case, it was the lead business story for at least four months. Fortunately, this deal had no monopoly or competition issues, otherwise those regulators could also have been involved.
But aside from any regulators, most other commentators will largely be distractions. It is important for the acquiring company's management and advisers to stay focused on the deal itself and the real decision-makers - the shareholders of the target company.
As this deal demonstrates, these shareholders may not (and often will not) be the long-term traditional owners of the target company stock, but rather very rational hedge funds and other arbitragers (in Cadbury's case, owning 31% of the shares at the end), who are swayed only by the offer price and how quickly the deal can be completed.
Other stakeholders may have legitimate concerns that need to be addressed but this can usually be done after the deal is completed, as Kraft did.
  1. Which form of acquisition is discussed above? Quote the lines indicating the form.
  2. What was Kraft's motive behind acquisition of Cadbury?
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Prerna is a sole proprietor. Over the past decade, her business has grown from operating a neighbourhood corner shop, selling accessories such as artificial jewellery, bags, hair clips and nail art to a retail chain with three branches in the city. Although she looks after the varied functions in all the branches, for better management of the business she is thinking to convert her sole proprietorship into some other form of business. She also has plans to open branches countrywide. However, she is afraid of the fact that in case the business incurs losses, her personal property may be called upon to pay the business debts. She is also feeling that she may not be able to effectively manage a large business because of her deteriorating health.
  1. Identify and explain the features of sole proprietor business highlighted in the above case.
  2. Also suggest to her the form of business organisation which will help her in continuing her business, stating reason in support of your answer.
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