Growing the value of a business for shareholders
A Cadbury Schweppes case study

Page 1: Introduction

The owners of a company are called shareholders, because they each own parts - or shares - of an organisation, which provide them with a right to a portion of the profits. Shareholders are both private individuals and institutional investors who may buy shares through the stock market, as well as people who have a direct connection with the company such as employees and founding members. In...
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Page 2: The interests of shareholders

Having made an investment in a business, shareholders are concerned with assessing the profitability of their investment. The decisions made by managers determine what they can expect both in terms of dividends, or profits, and capital growth, both of which are reflected through the share price. Therefore, when shareholders look at the Annual Report of a company in which they have invested...
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Page 3: Managing for Value (MFV)

MFV places the focus of management attention firmly on the creation of value and provides businesses with a consistent framework and set of principles for making and evaluating strategic decisions. A value-based approach such as MFV is used by a number of successful companies, such as Coca-Cola and Boots. Many companies that manage for value focus most of their attention on strategy and...
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Page 4: Background to MFV

Since the mid-eighties, Cadbury Schweppes has focused on growing its two core businesses, beverages and confectionery, through acquisition, capital investment and joint partnerships. This focus had strengthened the company's competitive position globally but had not maximised returns for its shareholders. MFV was adopted in 1997, when executive members of the board of Cadbury Schweppes and...
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Page 5: The Mfv umbrella

In Cadbury Schweppes, MFV has five elements. The individual parts are closely related and at times overlap. 1. Raising financial performance In order for Cadbury Schweppes to stretch itself to meet its objective of delivering superior returns and to help measure its progress towards MFV, it has set three demanding financial targets. These are: to increase earnings per share by at least...
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Page 6: Examples of MFV in action

MFV is producing a deeper understanding of the relative profitability of brands and market sectors as business units implement a VBM approach to developing business strategies and identifying opportunities to create value. A number of business units have identified opportunities to increase value by launching new products, re-branding and re-packaging existing products and switching marketing...
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Page 7: Conclusion

Managing for Value has realigned Cadbury Schweppes' focus with the interests of its shareholders. Though radical, rigorous and sometimes demanding change that is difficult and uncomfortable for people, it is helping to ensure that Cadbury Schweppes maximises the value to be gained from the scale developed by its management over the previous ten years. The new business process is helping build...
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