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Cadbury Halal problem

Introduction
Cadbury is a company well known amongst Asian countries for its prized product
created with a darker mix of chocolate among other competitors, often referred to as
“Dairy Milk”. The company has been operating at Malaysia for quite some time now, and
two of its products are widely known among the general population. However, rumors
began during and after 2010s that the both these products, namely Dairy Milk and
Toblerone, were both made with ingredients that were prohibited to be consumed by
Muslims. Malaysia’s population is dominated by Muslims, and a good percentage of
chocolate consumers came from this dominating demographic. The rumor came as a
heavy loss of sales and decline in confidence for Cadbury as the rumor suggested that not
only were these products forbidden to be consumed by Muslims, but also that the
company would hide the “prohibited” ingredients by masking them under codes. Tests
were conducted in on the theory and first results confirmed the rumor.

Challenges Faced by Cadbury

The organization faced a huge fall in its sales following the rumor and the
conditions were worsened by the fact that the first few researches suggested that the
organization was in fact using Pig fat in production of its chocolates which are considered
Haram in the Muslim culture. The reason behind this perception was the use of the oil
which was labeled as e-120, often confused by many of the consumers that it was made
from prohibited animals’ fat. However it was brought to light that the ingredient could
also be alternately manufactured from vegetable oil, making it Halal for consumption by
the Muslims. The company also faced charges by the JAKIM (Jabatan Kemajuan Islam
Malaysia) authority of Malaysia, which is the federal government agency who tends to
the Islamic affairs of the country. The organization was also concerned of the situation, as
the same rumor could drastically affect its Muslim market in other countries.

Cadbury had also been operating in many other Muslim Countries such as
Indonesia and the middle-east, and the issue, if was not resolved immediately, meant that
the company might have needed to close its operations due to public pressures. As stated
earlier the early government tests gave positive results for pig fragments found in
Cadbury’s chocolates. This meant that any Muslims would have further been prohibited
to consume Cadbury chocolates. With the majority being those of Muslims, Malaysian
market for confectionery products would have soon put Cadbury at the lowest rank in the
market. Although the organization got new tests conducted on their products by the
Malaysian Islamic Authorities, which found no traces of prohibited ingredients in the
products, but another Islamic consumer body said they wanted to maintain their stance on
the call for boycott of Cadbury products. However the charges were cleared via further
testing by the Ministry of Health of Malaysia.

Factors that led to these issues

Lack of emphasis on production process via marketing.
The basic reason for the uprising of the issue was most probably that the Cadbury
had not previously assured its consumers and the general population of Malaysia that its
products were Halal via marketing. It was concluded even at the end of the ruse that the
company was always using Halal ingredients in the first place, but due to the fact that this
aspect was not emphasized on the by the regional management of the organization to its
consumers, the people fell prey to these rumors and as a result Cadbury experienced a
significant fall in its sales of the chocolates. This fall in sales would never have happened
if the management was careful of their marketing and had emphasized on their products’
ingredients before the questions were raised.

Low level of trust between the organization and consumers

Another factor that comes into question is that Multinational Corporations are
often looked at with a suspicious eye by locals, and the corporations need to gain the trust
of general people as well as gain customers to establish itself in the market before
competitors are able to react to their strategies. Cadbury, had been operating and selling
its products in Malaysia for quite a duration when the rumor took hold, and the situation
could have been dismissed if the management of Cadbury’s regional office of Malaysia
had been a little more proactive. The resulting problem caused nearly a year of lowered
sales for the organization as well as loss of trust from potential and existing consumers.
The company had to have made analyze the significant fall in its sales and this analysis of
the situation would have resulted in them getting out of the problem without facing a call
for boycott from Islamic Authorities of Malaysia.

Lack of communication with consumers

A factor that led to the escalation of the crisis was also that the organization was
not in proper communication with the consumers regarding its products. Although the
product of Dairy Milk is mostly targeted for children, the customers are usually parents
which meant that a little knowledge of the product would have proved helpful for a
consistent reputation. The issue also had an impact on future sales of Cadbury’s products
in Malaysia, as a large portion of the population had become skeptical of their products,
implying that they would rather go for alternatives when presented with a choice for
selecting Cadbury products. This also referenced to the fact that since 2014 when the
incident occurred there has been little or no positive significant change in the revenue
generated by Cadbury from Malaysia.

Steps taken to counter these measures

To a great extent the issue has been resolved by the organization by its marketing
towards the fact that its products are made entirely from Halal ingredients and all
processes of production were critically audited by internal auditors and fully analyzed
before that products were sent off to the market. Cadbury’s website for Malaysia even
has a video that clearly outlines these details and explains how Cadbury chocolates are
carefully produced and even the raw materials used have to be certified as Halal so the
finished goods are Halal as well.

Contradiction from the earlier reports

The contradiction was also one of the reasons that the company had to bear the
fall of revenues as at first the council arrived on the results that the product contained
forbidden ingredients, but after a few months changed their statement after further testing
when they claimed that the products were clean and consumable by Muslims. The
consumer authorities demanded from the representatives of JAKIM itself that the
government publicly admits that the earlier tests were wrong or poorly conducted. Hence,
the organization faced multiple issues due to the rumor without even being guilty in the
first place and the only fault that could be given was the lack of reaction by the
organization when the rumor first started spreading. Cadbury could have saved the fall of
its sales if it had been more vigilant about the news that was circulating around
consumers regarding its products.

The company’s website for the country also outlines the events the organization
has conducted to boost its promotion of the products. The company labels the Malaysian
as “chocolate lovers”. The first few lines of the website clearly states that the researches
that concluded inclusion of porcine in Cadbury chocolates were never confirmed or
verified and thus were hollow in their results. The related articles show that the
organization was facing the setback in its reputation and sales since the beginning of the
year 2014, and the problems seemed likely to continue in the near future.

Theories and concepts for analysis of challenges faced by

Cadbury
 Cadbury is a multinational, Malaysia is a foreign country
Being a foreign company Cadbury must have already realized the need to adjust
its operations in Malaysia fully according to the Malaysian culture and then act
accordingly. However, even after adjusting successfully with the culture and gather a
significant market share, the company was ultimately treated as a foreign one due to its
origins and serious allegations we given against the company’s production procedures
and the company was blamed without any concrete evidence.

Knowing the environment of Malaysia

The theme used by Cadbury products tend to remain the same throughout every
country the organization operates in, however their internal culture and procedures are
usually altered in accordance with the requirements and culture of the surrounding
environment itself, making Cadbury flexible to work in any type of environment whilst at
the same time maintaining the same theme used to market its products. This means that
the organization prefers using ethnocentric predisposition when trying to maintain its
brand value and image via its theme. The organizations’ regional offices usually follow
the strategies outlined to them by the head office located at Uxbridge, United Kingdom.
However different changes have come to the second largest confectionery brand since it
was taken over the American based company, Mondelez International in 2010. The
organization has since faced many threats and challenges as the new management
initially was not welcomed by the regional mangers due to the leniency that was
previously granted to them when the company was owned by Kraft foods.

Adjusting with the Malaysian Culture

Initially, the organization had adjusted successfully to the requirements of the
local markets of Malaysia, but this situation started changing at the end of 2012 when the
rumor was first reported to be spreading in the country. The organization, however failed
to realize that the Malaysian culture was a high-context one, where relationships were
given importance and people preferred deeper personal involvement which was in
conflict with the culture the company faced in other western countries such as USA. One
of the reasons why Cadbury had failed to realize that the rumor would get out of hand
was because the USA-based Mondelez came from a culture where explicit
communication was used, meaning that every word is to be properly communicated and
nothing should be implied, which made them think that the population would not pay
much attention to researches who had no concrete evidence against the organization’s
products. The organization was obviously quite wrong in the matter and the issue might
still have a negative impact on future sales of the organization. Another reason why the
people believed in the hoax researches was that in Malaysian culture spoken agreements
 were preferred to written agreements and the people trusted their local bodies more than a
“foreign” company.

Steps taken to improve communication

Lack of communication with the local population has also led the organization to
translate their full website in to Bahasa Melayu, or Malay, the most common language
spoken throughout Malaysia and other neighboring countries such as Singapore and
Indonesia. The availability of the organization’s information and working as well as the
news and events regarding the organization provide a good viewpoint for the locals, and
is move by the regional management to once again establish and gain the trust of the
Muslim population.

Differences of culture between western markets and Central

Asian markets
There are huge differences between the cultures of Central Asian countries such as
Malaysia and western country markets such as those of Europe and America. The first major
difference that any company producing edible items is that the laws are quite strict when it
comes to consumption of certain products or products containing certain elements which are
prohibited in the religion. Muslims cannot consume porcine and this is a casual item of
consumption in the western countries, so the organization has to be quite careful in production as
they need to find alternatives for their usual raw materials. Another difference that arises is that
the company gets bound when applying certain methods of marketing which are considered
wrong according to the Shariah.

Strategies adoptable by multinationals to counter such

situations
Ethnocentric Predisposition
Cadbury is a multinational which was originally founded by John Cadbury and was
recently acquired by Mondelez Inc. in 2010, the multinational is most widely known for Dairy
Milk chocolate. If it chooses to follow ethnocentric predisposition for the whole organization, it
would require significant change in some areas of its operations and keep the same stance in
other areas.

Global Integration
Firstly, to maintain its position in the Muslim markets, Cadbury would need to operate
with different production methods and use different raw materials that fall within the Halal
category of Islamic law. This means that global integration is not fully possible to be
implemented for the production perspective. However if it can make its products with Halal
ingredients without a significant rise in costs and at the same time maintain the taste, and then it
would be essential to use the same methods all over the world.

Marketing
Secondly, the organization has good reputation amongst many of its consumers
specifically in Malaysia or such was the information provided at their website. The organization
has been able to establish itself in the Malaysian market as a producer of high quality
confectionery products. This means that no significant changes are required in this area if the
organization adopts the practice.

Mass production
Mass production can obviously be used once the company has adopted the right
production methods which are workable everywhere.

Governance
Governance can be top down in the organization where the regional offices should report
to the head office of the organization.

Polycentric Approach

Mission
The issue that was discussed in the article simply rose because people were suspicious of
the legitimacy of the production procedures used by Cadbury in Malaysia. This was further
worsened by the findings of earlier test conducted on their facilities. If Cadbury had paid more
attention to public acceptance to gain trust of their consumers by previously emphasizing the use
of Halal raw materials in their products the organization would not have faced such a problem at
all. However if the organization is to adopt this approach they would need to work effectively in
building their reputation once again and establish their trust in the eyes of people.

Governance
A shift in governance is not an absolute necessity for Cadbury to implement, but it can
certainly prove helpful, as regional managers have a better idea of how the Malaysian culture
works. This in turn will make sure that the regional offices are more proactive and in
synchronization with the traditions of the country.

Divisions
 Decentralization according to the regions will ensure that each individual plant is acting
in synchronization with their specific regions. This will help the organization in not only
strengthening its relationship with its consumers but also help in targeting sub-sets of cultures
which are living in these areas.

Product Development
It is not necessary for Cadbury to use product development as a strategy as their star
products have already penetrated the market and are generating enough revenues. Besides, the
recent accusations have also led to a fall in trust of Cadbury in Malaysia. However, one the
organization gains the public trust and interest; it would be wise to introduce newer products in
the market as it would help Cadbury in gaining Market share in Malaysia.

Production
Polycentric orientation states that the production use would likely be batch production,
but this cannot be the case when it comes to the mass market of Malaysia as it would be more
costly for Cadbury in the long run. Instead it would be better for Cadbury to use Mass production
for its operations as being a large corporation it can afford finances to support its production
methods and also make use of the factor “economies of Scale” in the process. Economies of
Scale would mean that the organization would be able to get a lower cost of raw materials due to
purchasing in large quantities.

Finance
The company can make huge profits by operating in the market of Malaysia, who
Cadbury itself states are “Chocolate lovers “. It would only be logical that the organization keeps
a portion of its earned profits in the country to further expand and finance its operations. The
retention of profits would also make the governments happy as it would mean a greater
generation of GDP and subsequently a higher economic growth. The strategy would not only
help Cadbury gain the confidence from the government, but it could also help Cadbury in
gaining positive reputation amongst other stakeholders as well.

Regiocentric Orientation

Mission
This aspect of the orientation from Cadbury to Malaysia would be considered most useful
as it would combine profit maximization with also a significant importance given to public
acceptance. This already seems the current strategy of the organization but the part of public
acceptance seems to fall with a lower importance that it should have been. The organization may
be able to generate even higher revenue.
 Strategy and Structure
Both these factors are highly sensitive for the organization and it would help if the
orientation was used as it would help the regional offices maintain their separate production with
the freedom of work that could be better maintained with a decentralized regional environment.
Also standardizing within the region means that the organization will have a single method for a
single region and the method may change according to the areas, so if making Halal chocolates
cost higher for Cadbury, they can use their older methods and raw materials for production in
other countries where usage of such raw materials are allowed.

Finance
The redistribution of profits with in the region also show that the profits made and
retained would be used to further strengthen the organization’s hold in the market which is one
of much needed moves of the organization. If Cadbury is able to gain the trust of their consumers
again, then the organization no doubt has the ability to hold a majority of market share, if not the
majority of market share.

Conclusion
The most suitable orientation for the organization to adopt would be Regiocentric
Orientation. However the organization can work between strategies and use these options to
create a diverse mixture to properly formulate their strategy. For future Cadbury needs to be
vigilant concerning the news that circulate about their products and their organization so that
such an outrage does not occur again. The organization is well known for its high quality
products and is the second largest brand in confectionery along with being one the oldest in the
market. The issue faced by the organization in Malaysia as explained by the article may seem to
show that the organization will be looked at with suspicious perception from the general public
of Malaysia, but the efforts of the organization are clearly visible on their website how they are
trying to gain back the trust of their consumers.