Kraft and Cadbury Companies: Cross-Cultural Issues

Introduction

The contemporary world is characterized by expansion of international trade where earlier geographical barriers for cross-national trade are being dismantled (Tjosvold and Leung, 2003). Companies have discovered that in order to expand, grow, and be sustainable, they have to explore foreign markets that have potential. However, moving into these new regions involves encountering new and different cultures. Firms find out that employee management, management styles, conflict resolution strategies, and business negotiation deals and skills differ in the new cultural environments as compared to home environment (Tjosvold and Leung, 2003). As a result, firms are forced to adjust and modify their way of operation in the new cultural environment for meaningful results to be achieved.

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USA and United Kingdom constitute two countries that experience and practice increased economic and trade interdependence. Many USA firms are establishing presence in UK, and at same time, UK organizations continue to increase their presence in USA. As this happens, the two societies exhibit cultural differences as far as trade and business investments are concerned. Cultural and management differences between USA and UK is exhibited and reflected in aspects of business structure, styles with regard to management, organization meeting, and negotiating skills, team working, communication styles, and business dress code.

In 2010, Kraft Foods Company made one of the world’s huge takeovers of Cadbury Company. The takeover in form of acquisition was completed after Cadbury’s shareholders accepted Kraft Foods Inc.’s $19.7 billion (Prynn, 2010). This takeover has been described a ‘hostile’ takeover, as majority of Cadbury’s management, employees, and general consumers were opposed to the move from the word go (Stillman, 2010).

However, after 100 days of battle in negotiation, Kraft Foods Inc. managed to take over Cadbury. Analyzing the case of Cadbury takeover and the subsequent long battle and hostile takeover, it can be deduced that majority of people were opposed to the takeover due to perception that Cadbury’s long time heritage, culture, and brand was at risk of death (Prynn, 2010). However, in all these issues, one issue that comes out, which requires research analysis has to do with cross-cultural management, given different cultural orientation between UK and USA. It is from this concern that this research report aims to investigate, analyze, and recommend the most appropriate cross-cultural aspects and strategies that Kraft Foods Inc. needs to adopt to successfully fit in the shoes of Cadbury.

Different business environment between Kraft and Cadbury

Kraft and Cadbury are located in two different countries that exhibit relative differences as far as management styles and human resource management issues are concerned. USA and UK exhibit different cultural aspects, and this has been captured in earlier research works of Geert Hofstede, and other cultural management research works. As a result, Kraft and Cadbury are two companies with different cultures and orientation, an aspect that further explains the big difference that exists between the two companies. Culture in management style influences the way a company conducts its activities that later explains its success or failure. The differences in cultural orientation and management styles between Kraft and Cadbury can be reflected in aspects of business structures, business management styles, conduct of meetings, and negotiation styles, team working, and perception of work teams, communication styles, and business dress code.

Overall, business structure in USA is characterized by scientific approach to organization management. According to this principle, many organizations in USA business environment are oriented towards looking for the best and more effective methods of management. Workforce in most organizations is in constant flux and people leave, are sacked, or made redundant frequently (World Business Culture, N.d). Employee-employer relationship is largely transactional in nature and the CEO holds immense powers in the organization. Unlike in other societies, senior managers in USA exhibit less collegiate approach to management. Board of Directors for the company does not participate in daily running of the business, and in most cases, the board is dormant as CEO assumes most roles for the company (World Business Culture, N.d).

Other aspects that can be associated with Kraft as part of operating in USA business environment include management style, which is individualistic in nature and managers remain accountable for decisions in the organization. Consensus is rarely achieved or encouraged, as the CEO assumes all powers. As a result, consensus or compromise-oriented culture is rare in most USA organizations (World Business Culture, N.d).

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Meetings in USA organizations are confrontational; however, diplomacy together with harmony is rarely manifested. Further, meetings are always formal in presentation, while adequate preparedness and research work is required. Teamwork in most USA organizations is fluid and short-lived, only geared towards accomplishment of set goals. Business communication style in USA organizations is direct and open with regard to issues at hand. Moreover, coded speech is rare as it is seen to be time wasting, and unlike in other cultures, Americans are interested in personal information matters (World Business Culture, N.d).

Cadbury Company on the other hand exhibits different cultural aspects that are different from those of Kraft Foods Inc. In UK business environment, the Board of Directors wields immense powers in organization decision-making process. Generalization (and not specialization) is what characterizes work in UK; however, merit is rarely considered, as emphasis is put on experience, skills, and job orientation. Organizations in UK are largely flatter and adopt less bureaucratic approach in organization (World Business Culture, N.d).

In addition, management style in most UK organizations tends to emphasize on man-management skills, and managers always cultivate interpersonal skills for teamwork in the organization. Close relationships are established between managers and employees, with much humor and soft relationships taking place among managers and employees (World Business Culture, N.d). Moreover, communication style is largely indirect and coded language messages are preferred. Meetings in UK organizations are frequent, and little preparation is required. Agenda is loosely followed, employees and managers contribute freely, and the resolutions become the basis of decision-making process. Teamwork is the basis of business environment in UK and members of team establish close, cordial, and supportive interpersonal relationships.

Hofstede cultural dimensions and its application to UK and USA

Hofstede dimensions for USA and UK.
Hofstede dimensions for USA and UK.

According to Hofstede, societies are differentiated according to five main cultural dimensions – power, individualism, masculine, uncertainty, and long-term orientation (Hofstede, N.d; Gannon and Newman, 2002). As it can be evidenced from the above cultural dimensions, USA exhibits high PDI, IDV, UAI, and LTO, while UK only exhibits higher MAS as compared to USA (Hofstede, N.d). High PDI for USA indicates a society that exhibits equality among different social structures, while high IDV shows USA as a more individualistic society than UK. On other hand, higher UAI for USA than UK exhibits a society that does little to control future outcomes, while higher LTO shows that unlike UK, USA has less regard to cultural traditions, and the society expresses high belief in meeting its obligations. On her part, UK demonstrates higher level of MAS, which indicates that UK has higher gender role differentiation than USA.

Cultural problems in Kraft-Cadbury acquisition

Immediately after Kraft acquired Cadburys, it made its first cultural blunder by closing one of Cadbury’s factories, the Somerdale Factory, thus rendering about 400 employees jobless (UK House of Commons, 2010). This event led to uproar among public in UK, Cadbury employees, and government officials. By undertaking this decision, Kraft Foods went against its earlier pledge and as a result, it has lost faith, trust, and reputation among the public, UK workforce, and government of UK (Heffernan, 2010). Moreover, it has been observed by UK’s House of Commons Committee that since the merger, Kraft Food management has done little to visit the affected workforce of Cadburys and as a result, there has been little contact between senior management from Kraft and the workers (UK House of Commons, 2010).

Commenting on the same issue of Kraft acquiring Cadbury, Andrew Bonfield, Cadbury’s finance director, observed and warned that cultural clash was likely to occur, given the unique nature upon which Cadbury has been built as compared to Kraft (Bowers, 2009). Cadbury pursues ‘principled capitalism’ that is built on socially benign business culture as compared to Kraft’s traditional MNC culture (Pearson Education Canada, 2010). As a result, Andrew Bonfield sees many problems when it comes to cultural fit and decision-making processes between the two organizations (Bowers, 2009).

Decision-making process in the new business environment involving Kraft Foods Inc seems to rest with the company’s CEO, Irene Rosenfield. Further, the CEO conducts unilateral decision making with no prior consultation or involvement of other management team members, a culture totally different from Cadbury’s. For a long time, Cadbury has established itself as a market brand due to its unique culture ethos and heritage it has established over time. Cadbury has created and operated upon democratic leadership style that frequently has encouraged consultative management approach (Smith, 2010).

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Managers, workers and other stakeholders in the company interact freely, consult frequently, and provide suggestions that are incorporated in decision making process and as a result, loyalty in the company has been at the highest. Key decisions in Cadbury take place within a broad consultation and participation environment unlike in Kraft Foods Inc. where the power to decide and initiate changes in the organization seem to lie solely with the CEO. Further, activities of the new organization with regard to decision-making seem to operate on ‘remote control’ since the parent office of Kraft Foods remains situated in USA.

Approaches Kraft Foods Inc. should initiate to realize culture-fit

Tjosvold and Leung (2003) observe that, cross-cultural management in the new world constitutes challenges that many people face in relation to cross-border trade. The issue is further complicated by increasing global competition, which requires productive and innovative cross-cultural teamwork. Therefore, with increasing economic interdependence, as well as intellectual and technological dynamics, the essence of cross-cultural teamwork is inevitable and organization transcending across geographical borders need to develop effective cross-cultural management teams. It is from having the right and astute ability to work and live across cultural boundaries that in turn will shape the quality of lives and success of many organizations in new cultural environments (Tjosvold and Leung, 2003).

Cultures from different nations can be summarized into three main groups: task-oriented, highly organized planners and people oriented (Lewis 2000). At the same time, understanding culture is fundamental to understanding many of the differences in businesses in many parts of the world (Ahlstrom and Bruton 2009). Culture is seen as the acquired knowledge people utilize in interpreting experience and actions. The knowledge acquired in turn influences the values, attitudes, and behaviors of those people, as a result culture is seen to be connected to knowledge, beliefs, customs, and habits acquired by members of a society (Hofstede, 2001; Ahlstrom and Bruton, 2009). In reality, managing culture in a cross-cultural environment is not an easy task; however, the key or strategy is for the manager to facilitate some level of uniformity.

Kraft Foods Inc. has to initiate decision-making processes that encourage and facilitate culture-based value system, participation, trust and rationality (Aswathappa and Dash, 2007; Bhattacharyya, 2010). In this way, managers and subordinates in the new company will feel as part of the new organization unlike now when they feel threatened (Shieh and Wang, 2009). Further, before arriving at the decision, the company’s top management should be trained to take part in collecting information and necessary resources instead of resorting to quick-fix approach, as demonstrated by the Kraft Foods’ CEO (Bhattacharyya 2010).

Communication seems to be another issue at Kraft Foods Inc. as a result of acquisition, where the CEO does not effectively communicate to company managers and subordinates. Bhattacharyya (2010) observes that, in cross-cultural management, the issue of communication is likely to arise and transform into a big problem when not handled appropriately. However, the key to success is ingrained in the aspect of developing and fostering cross-cultural communication skills.

Therefore, to succeed in cross-cultural management, it requires acquisition and development of key skills and embracing cross-cultural cooperation (Marrewijk 2004) that Kraft Foods’ management team will need to have. Bhattacharyya (2010) talks about the need for new managers to undergo systematic cross-cultural training, and on the other hand, Adler (1997) talks on the need for cross-cultural managers to develop and employ cultural sensitivity and diplomacy when developing appropriate and strong inter-relationships ties with organization’s stakeholders (cited in Hamilton 2007). London and Sessa (1999) on the other hand suggest that managers should foster productive communication and have strong negotiation skills while further, develop, and motivate cross-cultural decision-making teams.

Experience gained in working with multi-cultural groups

Working and interacting with multi-cultural members in teamwork has been one of the best, motivating, and enriching experience. Diversity in workplace, education, and learning institutions, as well as in other avenues are an aspect that is on the rise, and as members of the global community, great and critical benefits can be accrued from working with diverse groups of people. Diversity teams offers one an experience that in one way or the other constitute life changing experience the way duty are performed, aspects are perceived, and relationships are conducted.

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For instance, in diversity groups, one gets into contact with members from different backgrounds and diverse cultural orientation. Language spoken is sometimes different, and individuals’ capacities, abilities, skills, knowledge, and overall perception to social issues vary and differ greatly. Individuals’ way on interpreting, encoding, and sieving information is totally different and unique in diverse groups, and this exerts pressure on an individual, forcing such individual to continuously adjust to various change aspects.

One key benefit of diversity groups involves gaining knowledge and skills with regard to interpersonal skills and relation. When individuals from diverse cultures find themselves in a diversity group, there is always sense to relate with each other in the most effective, harmless, and benefiting way. As a result, members become accustomed to opportunities to learn great aspects of interpersonal relations with each other, and this in turn harnesses and promotes cordial interaction. Another great lesson learnt in diversity groups has to do with conflict resolution skills. By having members from diverse background with different orientation, conflicts are likely to arise, but it is from the exemplary skills at resolving any issue of contradiction that glues the group together. Members learn to appreciate and respect each other. Addressing each other even with different opinion is always approached in the most mature, understanding, respectful, and motivating manner.

Diversity groups at the same time provide an opportunity to experience and acquire exemplary communication skills. For example, when in diversity groups, interaction through communication becomes necessary, and this aspect enables or forces one to develop effective communication skills. Members become beneficial and always help members to acquire the most appropriate communication skills. At the same time, diversity groups provide the perfect avenue for one to develop appropriate decision-making skills, together with problem-solving skills. As a result of having diverse interaction and members possessing different unique skills and knowledge, it becomes usual for members to participate in different activities of finding solutions to problems at hand.

Through this, members become astute in making decisions, exploring different strategies to decision-making and develop adequate problem-solving skills. Furthermore, in diversity groups, it becomes possible to for one to sharpen leadership and organizational skills and competences due to various roles and assignments one is accustomed to and required to accomplish. Moreover, an individual is able to develop self-skills and strengths like confidence, self-belief, time-management, and punctuality, adherence to rules and regulations, and setting achievable goals.

Conclusion

This research project has essentially looked at the aspect of international cross-culture management, which is an issue in modern globalizing world. It has been established that, with globalization and increased internationalization activities that companies are involved in, the aspect of cross-cultural management is inevitable. To demonstrate how cross-cultural management has become an issue of great importance in modern world, the research investigates and analyzes the acquisition of Cadbury by Kraft Foods Inc. The two companies are located in two different locations that exhibit differences in culture. When the deal of acquisition was struck after ‘hostile’ negotiations, Kraft Foods Inc. managed to make the acquisition although majority of employees, public, and customers of Cadbury were not happy.

Nevertheless, Kraft Foods Inc., immediately after acquisition, resorted to USA management styles of authoritative and unilateral decision-making. This path is likely to bring numerous challenges to Kraft if pursued, and that is why in the research paper, several cross-culture management strategies are suggested. What Kraft Foods Inc., has to do is to ensure and manage smooth cultural fit with Cadbury Company. The process needs to be participative in nature, as well as allow involvement of key stakeholders of the company. Moreover, effective communication should be fostered and facilitated among different stakeholders of the company. Overall, the company has to create culture ethos and heritage that Cadbury had put in place, which had resulted into great loyalty, sense of belonging, pride, confidence, and people-centered approach.

Reference List

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