Analysis of Cadbury Brother Limited

Cadbury Brother Limited is a prototype of personal capitalism which was run by their owners. In the 1960s, Cadbury became a public limited company that shares are traded on the London Stock Exchange. Also, they became a true multiple divisional company. Therefore, they merged with Schwepps and formed Cadbury Schweppes which is a diversification strategy. Cadbury transformed to operate as managerial capitalism (Rowlinson,1995). In the 1970s, economist started concern about the managerial behaviour, agency costs and ownership structure (Jensen, 1988). Although, shareholders can choose the management teams who represent their interest, the executives only concern about their own interest such as bonus, extra dividends. It causes the divorce of ownership. In 2010, Cadbury Schweppes was hostile tookover by a US food manufacturer Kraft. They transformed to run by financial capitalism. Shareholder would get some objectives to the management team. It known as Shareholder Value which based on revenue, operating margin, enhance capital expenditure, cost of capital,etc. It is the sum of all strategic decisions which leads to the company's performance and increment the firm's profit or rise the market value of its shares which causes an enhancement in the amount and frequency in dividend.

Due to the technological improvement, the exploitation of computers and databases has increased the productivity and reduce the conflict of communication between the workers during the production processes. Especially, increases information available to shareholders.

Kraft took over Cadbury is called horizontal acquisition. If merge within an industry can create greater gains the cross industry acquisition(Jensen, 1988). It tends to increase their value. ...

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...ers during the negotiation. However, having an excessive severance compensation to executive managers will tend to encourage them to sell the company at too low price. It causes a negative impact to the shareholders and reduce the productive efficiency. In the long term, when the manager realise the prospect of the firm is depericating, it interprets the contract will destroy the possibility such as cooperative arrangement. It leads to the effectiveness of the revenue and dividends to shareholders. Since their managerial myopia that afraid of takeover, manager will sacrifice long term benefit and increase short term profit. Moreover, they may reduce expenditure on technology or research and development. It currently leads an negative impact on stock prices. However, there is no evidence support that takeover will reduce the expenditure of research and development.