Avner Barnea

Graduate School of Business Administration,

,Ono Academic College
Israel

avner.bar@ono.ac.il

January 2010 19 1
:The presentation is divided into 3 main parts
 Cadbury experience in Israel- presentation of the case

study.
 Analysis of the case study through the eyes of

‘Peripheral Vision’ Model.

 Questions and discussion.

December 8, 2021 2
 CI supports the strategic process by
acting as a ‘sensor’ to brief the top
management whether the company is still
Senior competitive
Management
Future
CI Business
Environment

Current
Business
The firm Environment

December 8, 2021 4
Cadbury Israel (CIS) had an attempt to enter to the
Israeli chocolate market in December 2002. It was
blocked by Elite Ltd., the local market leader in mid
2003 and CIS finally decided to withdraw. Since then,
Cadbury chocolates are not sold in Israeli market.

December 8, 2021 5
 Cadbury, a global company with revenues of £6 billion
(2001) and no existence in Israel, set up a strategic
alliance with the Israeli company Carmit Ltd (CIS).
 According to the agreement, Cadbury will manufacture

the goods while CIS will be responsible for marketing

these products through its distribution channels in
Israel.
 Cadbury agreed to support CIS with its global

marketing experience and also allocated £2 million for

promoting the entrance to the Israeli market.

December 8, 2021 6
 The Israeli market was ready for quality chocolate
products.
 CIS had an extensive and prosperous experience in the
local market and was proving financially strong.
 CIS designed a penetration strategy based on
intensive study of the market and refraining to
threaten Elite, the market leader.
 CIS’s strong confidence relied also on taste tests held
in Israel showing that the Israeli customers enjoyed its
products.

December 8, 2021 7
 CIS was a medium size Israeli public company mainly in
sugar confectionary with a limited experience in
marketing chocolate and actually was never in direct
competition with the local leader Elite.
 CIS was very successful in its niche market and also had
strong logistical capabilities.
 CIS had decided that to extend its revenues it had to
collaborate with a global company and to sell it goods
in the local market.
 According to a market research presented to CIS, the
size of the local Chocolate market is approximately
$350 million, while Elite held 70% of this market.

December 8, 2021 8
 $270m annual revenues in the chocolate market in
Israel (70% market share). Also leading the local
coffee market. Officially monopoly since 1989.
 One of the strongest brands in the market and very
liked by the customers. Operating in the market for
70 years.
 Prior to the arrival of CIS, Elite announced that it will
spend $2.Om to meet the ‘incoming threat’.
 Elite is recognized for its aggressive strategy when
facing threats to its core business.

December 8, 2021 9
 Agreement- signed between Cadbury and the local partner Carmit
(CIS) – 2002. It was published by the Tel Aviv Stock Exchange
newsletter.
 Strategy – A local strategic consulting firm presented a proposal for
introducing CIS into the Israeli market. The outline of the plan was:
1. Target market share – 15% in 3 years.
2. To enter the large food chains simultaneously with many
products(18).
3. To sign agreements with independent food distributors and the
leading food chains.
4. To favor a “Loud Launch” on a national scale.
5. To Expand and upgrade the management of CIS, marketing, sales and
logistics.

 The strategic plan was presented and approved by CIS board and
Cadbury.
 CIS had initiated the first order of goods, total value - $10m.

December 8, 2021 10
 A few years ago Elite was successful in slowing
down the attempt by Nestle (through its local
partner )to establish itself in the Israeli chocolate
market.
 Elite launched an attractive sales campaign
(blockade campaign/ preventive campaign) two
months before CIS’s Launch.
 Elite is noted in Israel for being aggressive towards
competitors that are threatening its market lead
by carrying out a strategy of market share.

December 8, 2021 11
 The launch of CIS was postponed from
October to December 2002 as the products
arrived late.
 The products were delivered to the food
chains and other stores as planned.
 The marketing campaign was launched
simultaneously to the entering to the shops.
 The sales results in the first week were
promising.
 Later reports showed fast slowing in demand.

December 8, 2021 12
 The aggressive campaign by Elite was expanding
and it offered attractive deals to the customers.
 First complaints received from stores and
distributors about pressures by rival Elite
through illegal means.
 Sales of CIS were continuously declining.
 Reports in the media about the behavior of Elite
sales representatives towards Cadbury.
 The Israeli Antitrust Authority received the first
complaints and announced publicly that it
opened an investigation.

December 8, 2021 13
 May 2003- CIS decided to stop selling Cadbury goods in
Israel. Its assessment were that the chances to succeed were
low and the spending was higher than expected.
 The demand for CIS goods was lower than the expectations
 Disappointed by the lack of intervention of the Antitrust
Authority.
 The Chairman of CIS (July 2009): “We were surprised by the
intensity of the reaction by Elite, especially in their prices
strategy. The reduction of prices of their chocolates was
more than we expected”.
 Heavy losses to CIS that almost brought to its termination.

December 8, 2021 14
 CIS complained that “Elite used its monopolistic power against the interests
of the customers by pressuring on various elements in the local market and
succeeded in causing Cadbury to withdraw the market”(the Chairman of CIS).
 The Israel Antitrust Authority finished its investigation and announced (2003)
that “the alleged offenses committed by Elite, looked to be severe and the
potential convictions can be rejections to supply its goods and abuse of its
monopolist power”. The Authority was referring also to “alleged restrictive
arrangements between Elite and retailers by giving special discounts and
benefits in order to stop Cadbury in Israel”.
 2006 – The Antitrust Authority announced that it had reached to an
agreement that Elite will pay a penalty of $1.25k and pledged not stop any
competition by illegal means in the future. Elite did not admit any wrong
doing.
 Objection by CIS was turned down.
 2007 – the Antitrust Tribunal approved the agreement.

December 8, 2021 15
 Competition

Customer
Value

Price

Product Service
Quality Quality

December 8, 2021 16
 Pre -launch Pre -launch

Threats
1. Highly strong
Opportunities Scoping
1.Analysis of the
competitor. Chocolate market
2. Macro economics
analysis – unstable
2. Competitors Where to
economy- security analysis look?
situation. 3. CIS- Capabilities –
3. Conservative distribution, financial
market. stability/resources

‘Peripheral Vision’ - A portfolio of scanning methods to capture and amplify

the weak signals within targeted zones of the periphery: inside the firm,
customers and channels; the competitive space; technologies, political, social
and economic forces; and influencers and shapers“.
Day, G. and Schoemaker P., (2006). Peripheral Vision: Detecting the Weak Signals
That Will Make or Break Your Company, Harvard Business Press.
December 8, 2021 17
Conclusions Post -launch

Scoping was Threats

Scoping
accomplished. It 1.Information
focused more on received not as a
CIS efforts than result of systematic Where to
on the external gathering. No KIT’s look?
environment definitions.
(competitors’ 2. Focused more on
capabilities & regulation misdeeds
intentions). rather on the
intentions of the
main competitor.

December 8, 2021 18
 Conclusions Post-launch Pre -launch

1. CIS missed As a result of 1. Did not define Scanning

critical signals the weak sales information needs
regarding results, focus (KIT’s), beyond the
competitor’s early on initial analysis. How to
preparations and competitor’s 2. No active look?
intentions. initiatives. Not interest in
2. It refrained systematic. competitor’s What is
taking proactive Too late. response strategy needed to
steps, which may (wishful thinking?) know?
well supply with 3. No early
important warning
information. definitions.

December 8, 2021 19
 Conclusions Post-launch Pre -launch

1. Pre-launch- In 1. Immediate 1. Skilled Interpretation

case of accurate information on analysis of
assessment of successful industry
competitor’s
launch was
direction
What is the
intentions may
misleading.
2. Did not meaning of
2. Did not
cause reconsider anticipate a anticipate the
launch strategy. failure. competitor’s information
2. Post-launch- in 3. Possibly over reaction (15% gathered?
case of better estimation to market share What we have
assessment- may competitor’s realistic?).
activities and
learned?
consider changing
under estimation
sales strategy.
to customers’
3. Wrong partial
estimations that dissatisfaction.
the regulation will
intervene quickly.
December 8, 2021 20
 Conclusions Post-launch Pre -launch

Did not develop 1. No Did not plan for Probing

options- No assessment of further
process of further gaps of gathering in
What further
search for information case of failing
insights/ filing the regarding the launch.
information is
gaps. market and needed?
the main
competitor.
2. No further
analysis of
competitor.
3. Did not
identify the
blockade
strategy by the
competitor?
December 8, 2021 21
 Conclusions Post-launch Pre -launch

1. No systematic 1. Decision to Possible Acting

process of further stop reconsider of
search for temporarily. strategy not on What actions
insights/ filling the 2. Decision not the agenda as have been
gaps. to order more no needs for taken?
2. Decision making goods- death probing arise.
process with no penalty to the
vision. introduction
campaign.

December 8, 2021 22
 Conclusions Post-launch Pre -launch

Management 1. No further Lack of proper Organizing

emphasize on monitoring as intelligence
saving CIS from a result of the awareness and Taking
the disastrous decision to deployment. actions to
failure and its quit. detect further
implications 2.No drawing
information?
(financial loss/ of lessons
bankruptcy). 3. Over
expectations
from the
antitrust
authority.

December 8, 2021 23
 Conclusions Post-launch Pre -launch

Actually no leading Quit the new .1 Leading

activities but activity and
control the taking care of Acting to
damages goods improve
remained weaknesses?
.unsold
Management .2
restructuring
to save the
.firm

December 8, 2021 24
 CIS lacked a strategy of Peripheral Vision i.e. lack of
intelligence management played a major role on the
strategic surprise (optimistic assumptions rather than on
realistic ones).
 Utilitization of Intelligence management could influence
on a different (better?) strategy.
 An example: outflanking strategy/ The strategy of indirect
approach- In strategy the longest way round is often the shortest way
there; a direct approach to the object exhausts the attacker and hardens the
resistance by compression, whereas an indirect approach loosens the
defender's hold by upsetting his balance).
 CIS did not have a contingency plan (“what if’s”) in case
they face an intensive/ unpredicted reaction by Elite.
 The overall customer value of the CIS goods was low.
December 8, 2021 25
 Was it strategically right to launch a direct
attack against such a strong rival?
 Could CIS be better prepared against the

aggressive competition in the chocolate

market?
 How significant was the role played by the

Antitrust Authority in the failed attempt by

Cadbury?

December 8, 2021 27
Avner Barnea

December 8, 2021 28