Poland - a developing market A Cadbury Schweppes case study

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Page 1: Poland a developing market

Why did Cadbury Schweppes choose Poland as its point of entry into the Central and Eastern European confectionery markets? Because there was a number of significant developments taking place there.

The Central and Eastern European countries can be divided into two groups: those which fell originally within the Soviet Union, and others.The key difference is that the countries within the latter group only had communist regimes for 45 years and free enterprise still existed to some degree.

The four most advanced countries within this group were Poland, Hungary, the Czech Republic and Slovakia, of which Poland had the largest population and percentage of private sector business, as well as a strong consumer market. It also had good prospects for investment, offered a skilled labour force and faced neither ethnic strife nor border disputes.

Having developed a stable parliamentary democracy and signed an association agreement with the European Union, Poland recognised that to shed its former communist image and face market forces with a proactive, commercial approach would require major changes in its culture and attitude. One way in which it could do this was to encourage development in Poland by its European partners, and Poland already had a good relationship with the UK, which has a Polish community of some 150,000.

These rapidly changing political, economic and social factors were key influences in Cadbury Schweppes'decision to enter Poland's developing market. Another strong factor was that, despite Poland having, at that time, one of the largest confectionery markets in Central and Eastern Europe, none of Cadbury Schweppes' major international confectionery competitors had established strong businesses there.

Although the Company could have taken a 'wait and see' approach (running the risk of missing a vital opportunity to develop an early market lead), it decided that there were sufficient indicators to justify an investment in Poland.

Page 2: Market entry

Cadbury Schweppes had three 'route to market' options to consider in order to respond to Poland's market needs. The options were:

  • export from other Cadbury Schweppes companies
  • acquire or form a joint venture with a local Polish company
  • establish its own factory locally.

When Poland first left the communist regime the government pursued a policy of open trade which resulted in a flood of imports. To protect local industry the Polish government established import duties which were particularly high on goods such as confectionery.

Under these conditions, exporting to Poland was not an economically viable option to Cadbury Schweppes. Cadbury Schweppes evaluated the leading Polish confectionery companies to assess their suitability for acquisition or joint venture. However, several problems, such as over-staffing or lack of investment, were found to be common across all of them.

So, having rejected the first two options, Cadbury Schweppes decided to explore local manufacture as the most appropriate route into the Polish market.

Page 3: Market strategy

Although the confectionery market in Poland was known to be large, market research was conducted to determine whether that market would be suitable for Cadbury Schweppes' products.

Tastes in confectionery vary the world over and Cadbury chose to manufacture products from its existing range which would particularly suit the Polish taste. It also decided to manufacture a range of budget-priced products under the name of Piasten, Cadbury Schweppes' brand in Germany.

Having identified the product range and its acceptability to Polish consumers it was then possible for Cadbury Schweppes to forecast the potential sales which could be achieved in Poland.

This information, together with estimates of the costs involved in setting up and running the manufacturing operation, enabled the Company to determine that the project was financially viable. In 1993 Cadbury Schweppes took the decision to invest more than £20m in building a factory and developing a new confectionery business on a greenfield site in Poland.

Page 4: Identifying the site

Cadbury Schweppes began by visiting Poland to evaluate sites in several locations to improve its understanding of the Polish infrastructure and administration procedures, and to assess the general employment situation and skills availability.

The decision to develop a greenfield site at Kobierzyce, near Wroclaw in south west Poland, was based on a number of criteria:

  • overall cost
  • geographical location
  • climatic conditions
  • availability of mains services
  • access to highways and trunk roads
  • distance from competitors
  • large regional population.

A further factor was people. Cadbury Schweppes would be joining a local community and would work closely with the local mayor and his staff at Kobierzyce, who welcomed the new investment.

Page 5: Construction and engineering process

It is not an easy task to build a factory in a foreign country. It requires careful co-ordination and considerable expertise.

Cadbury Schweppes appointed a team of engineering consultants to oversee all stages of the project, from selection of the contractors via a process of tendering, through to the completion of the factory construction.

The construction process was extremely challenging as the factory and offices, covering 9000 square metres, had to be completed, and production ready to start, within one year in order to meet the confectionery selling season of autumn to spring.

Time was not the only challenge. Temperature within a chocolate manufacturing plant is a major consideration in a country such as Poland, where the weather varies from -15 degrees C in winter to 33 degrees C in summer. The air conditioning, refrigeration and heating of the plant were key issues, all of which had to comply with local quality, hygiene, safety and environmental standards. The local community also had to construct water pipes, electrical power lines and telephone lines to the factory, and all were completed on time.

Building a factory is only one step in the implementation of a production facility. It is important to consider how it will operate, what production techniques it will use and what products it will manufacture.

Cadbury Schweppes formed a technical team to design, engineer and procure all of the process plant and machinery required for the manufacture of the chosen product range.

Also required is a team of company experts who specialise in the business of making chocolate and who understand the technical complexities of making quality products.

Page 6: Identifying and recruiting for the key management roles

Just as there are challenges in building a factory in an unfamiliar country, so there are challenges in filling all of the jobs necessary to run that factory.

A recruitment strategy had to be designed to meet those challenges: Should Cadbury Schweppes transfer expatriates to Poland? If so, how would they cope with the language barrier and the fact that there were no local English-speaking schools for expatriates' children to attend? Could quality local candidates be found? If not, would potential managers relocate to Wroclaw from Warsaw and other major cities? How important was experience within Cadbury Schweppes versus knowledge of the Polish market?

Cadbury Schweppes' human resource management strategy for the Polish project was to identify local candidates wherever possible. This would give Polish individuals a sense of freedom to manage their business within a familiar environment and according to local needs, supported by resources and experience from other parts of the Cadbury Schweppes global company.

However, there was a known shortage of experience locally, particularly in the finance and marketing functions, so the company anticipated that it would need to have a fair amount of expatriate involvement, particularly in the early stages of getting the Polish business operational.

A multi-disciplinary team was formed to:

  • identify the key management roles to be filled within the Polish operation
  • devise a recruitment plan to attract the best quality candidates
  • prepare an induction and training process for new employees.

A structure for the top management team was devised. Job descriptions were then written for the key management roles. To do this, decisions about the degree of functional expertise required had to be traded off against knowledge of Cadbury Schweppes and its operations, local Polish experience and general 'know-how'.

A recruitment consultancy was then chosen to identify a shortlist of candidates for the key positions. The consultancy used a combination of headhunting (where candidates are approached on a company's behalf) and job advertisements in Poland and the UK.  Bearing in mind that Cadbury Schweppes was new to Central and Eastern Europe, this was very much a learning process for the team members concerned, as they knew little about Polish recruitment practice or what to expect in terms of quality and experience of candidates.

Some interviews were conducted via an interpreter, which added another level of complexity to assessing candidates. And, before making offers of employment, research was carried out to determine the salary and benefit levels which would attract the best candidates to join the company. The final decisions on recruitment were taken by the European Managing Director and the Managing Director of Cadbury Schweppes' German company, Piasten, who would be responsible for overseeing the development of the Polish company.

Development of an induction plan ensures that new employees deliver effective work performance as quickly as possible after joining the company. As part of its induction plan for the Polish operation, Cadbury Schweppes brought key Polish employees to the UK to provide an overview of the Group's global operations, an introduction to the company's philosophies, values and history and then the confectionery industry and Polish market. The Polish team was also introduced to colleagues established businesses elsewhere in the Group, who would be able to provide information and advice when needed.

In new ventures such as this, there is a real demand for company knowledge and experience, particularly in the early stages of development. Such opportunities are often taken up by existing Cadbury Schweppes managers who are encouraged to move internationally within the Group to gain wider experience, while transferring their knowledge newcomers.

Cadbury Schweppes offers a series of career programmes for junior and senior managers to gain such experience and managers from the Polish business are already moving elsewhere within the Group!

Page 7: Community benefits

A new business brings many benefits to the local community. One of the benefits derived from this project was that the funds generated by the sale of land to Cadbury Schweppes helped to enable a new school to be built in Kobierzyce.

Another key benefit was that, in an area of high unemployment, local applicants secured many of the factory jobs. Cadbury Schweppes is also committed to actively contribute to the communities in which it operates and to improve the environment in which people live and work. Its operating units support community activity through locally targeted programmes throughout the world. This may include financial support, commercial sponsorship and the provision of local facilities.

Cadbury Schweppes | Poland - a developing market