Present a thorough analysis and explanation of one recent example of foreign direct investment in a UK region of your choosing
Word count: 1993 By Alessio Migali Francis Gray 20014642
Foreign direct investment 3
Kraft & Cadbury 3
Role of Cadbury UK 5
Entry Mode 6
The Eclectic Paradigm 8
Foreign direct investment
Foreign direct investment can be defined as; ‘investment that adds to, deducts from or acquires a lasting interest in an enterprise operating in an economy arising from outside the country, in order to have an effective voice in the management of the enterprise’ (Jones, 2006). Companies undertake foreign direct investment depending on the service or product they provide and what they want to achieve from the investment, making the process unique to every individual firm. In order to explain and analyse a company’s reason for undertaking foreign direct investment a deeper analysis of the motives, the role of the new affiliate or subsidiary, the method of entry, and the relevant factors to why that location was chosen must all be examined before coming to a valid evaluation. To achieve this I am going to analyse, explain and evaluate the takeover of Cadbury by Kraft Foods Inc. To see an overview of the chocolate and confectionery market see appendix 1. Kraft & Cadbury
Kraft Foods was founded in the United Sates as a cheese wholesaler in 1903 and has since gone on to create a leading confectionery, food and beverage multinational. It currently has around ‘98,000 employees and 168 manufacturing and processing facilities worldwide’ (BBC, 2010), including brands such as Ritz, Kenco and Oreo. Cadbury was founded in the United Kingdom in 1824 as a beverage producer and has become one of the globally leading confectionery producers. Cadbury currently has around 45,000 employees across 60 countries, with around 5,700 working in eight manufacturing facilities in the United Kingdom and includes brands such as Dairy Milk, Jelly Babies and Trident. On January 19th 2010 it was confirmed Kraft’s offer of ‘£11.9 billion’ (Economist, 2010) had been accepted by Cadbury’s shareholders.
In order to explain and analyse Kraft’s foreign direct investment into the United Kingdom, motives behind the investment require thorough investigation. The primary motives for Kraft’s takeover of Cadbury were to ‘transform the portfolio, accelerate long-term growth and deliver highly attractive returns’ (New York Times, 2010). Transforming the portfolio consisted of using the Cadbury brand to give Kraft a strong...