Optimal Market Structure for Cadbury

This report analyzes the market structure in which Cadbury operates and discusses the optimal market structure for the company. It explores the characteristics of the current market structure and how it has affected Cadbury's business. The report also examines the relevance of government interventions in the confectionery industry. The market structure is identified as monopolistic competition, but the report suggests that an oligopoly market would be more beneficial for Cadbury. In an oligopoly market, Cadbury can implement competitive strategies and maintain stable pricing.

Management
Economics

Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
TASK 2.......................................................................................................................................................4
TASK 3.......................................................................................................................................................5
TASK 4.......................................................................................................................................................7
Discussing optimal Market structure for Cadbury...................................................................................7
Government interventions.......................................................................................................................8
CONCLUSION...........................................................................................................................................9
REFERENCES..........................................................................................................................................10
Books and Journals................................................................................................................................10

INTRODUCTION
In the report, the concepts of Management economics are comprehended in relation to
one of the largest brand of confectionery market, Cadbury. The report studies that how different
type of Market structure are influential over business operations of a company. the report first
analyzes the relevance between characteristics of current market structure in which company is
operational, with the nature of company’s business. Then, it studies, how transformation of
market structure in confectionery industry has affected and helped transforming business of
Cadbury. And, at last it discusses which market structure will be most suitable for the company,
as per the concepts of Microeconomics and what the relevance of Government interventions is.
TASK 1
In the words of TJ. Webster, Managerial economics is describes as, "Managerial
economics is the synthesis of microeconomic theory and quantitative methods to find optimal
solutions to managerial decision-making problems?” The author specifies that, Managerial
Economics is that branch of management which basically involves and synthesize together the
concepts of Microeconomics and other economical concepts as well. Hence, help businesses
gaining much advantages from benefits of studies of both. This was also supported by Hirschey
and Pappas, where managerial economics was defined as "Managerial economics applies
economic theory and methods to business and administrative decision making." From this
definition it can be seen as, author has undertaken to give blow to administrative decision in
businesses through use of Management economics. Its studies are helpful in undertaking
business administration smoothly and efficiently (Samuelson, Marks and Zagorsky, 2021).
Cadbury is one of the leading business in the market of confectionery products, that is
involved in providing range of products to its customers, that includes chocolates, gums and
candies as well. Confectionery markets is basically that market where products of handmade
qualities are conceptualized, designed and manufactured or final use of consumers, and Cadbury
holds major market share in this market. The company is more than a century old in this market,
and is also surrounded by many significant competitors, such as Nestle and Ferrero. This large

scale of business operation of Cadbury is evident from the fact that this company is operational
in more than 60 countries and has a team of more than 40000 workers.
TASK 2
The market structure in which Cadbury is operating has very distinct characteristics.
Although, Cadbury is the leader in Confectionary industry of not only the United Kingdom, but
for the world, but this does not mean that company is exercising Monopoly rights in the market.
There are many other sellers and all of them are willful to compete with each other. In the
Confectionary market, however global players like Cadbury are significant, but there are also
many other players in indigenous and domestic society as well, that have remarkable control in
indigenous market as well (Datta, 2017). Therefore, if one look at the market structure from over
and top, market of confectionaries appears to be Monopolistic competition. The significance that
this market structure has over business operations of Cadbury can be understood from the
following points:
Many buyers and sellers- This is the foremost characteristics of this market,, where one can
witness many buyers, which are having good knowledge of market but not the complete
knowledge of market. Also, there are many sellers in the market but they all have some range of
product differentiations, which they use to make their product distinctive from each other and
also through this differentiation they intend to offer consumers values. About these
differentiations, consumers are assumed having a little knowledge. All these circumstances
forms the basis of competition between Cadbury and its other competitors like Nestle and
Ferrero.
Slightly differentiated products- As discussed earlier, that although there are many sellers in
the market and they all are selling similar kind of products in the market. But somehow, their
products seem to be different from each other. These products are not completely identical. This
difference can be in terms of size, taste, weight or any other criteria. Also, the branding of
products, and the values that consumers perceive about particular product of a particular
company also makes differentiation. For example, the Cadbury has branded its products as
products of the festivals. Like, its products are useful to be exchanged as gifts on festivals and
there they offer most values to consumers hence, its products are also perceived by consumers

with same values and meanings. Therefore, differentiation in products offers basis for
competition (Ajiitabh, 2017).
Maximization of profits- Maximization of profit gains is the biggest motive for the sellers in the
market. They adopt various techniques in the light of competition and for benefits of company
itself. In Monopolistic competition market, product differentiation gives the biggest way to pave
profits for the company. This characteristic of this market differentiate it from others because in
Monopoly profits are seen in the control of seller, in Oligopoly market stiff competition is seen
influencing the profits of company very much and in perfect competition the profits are fixed by
the market forces. Monopolistic competition market offers company to generate more revenues
by offering more values in products and, then company can make maximum gains. This is the
best characteristic of this market, and it was rightly adopted by Cadbury. Cadbury focused more
and more on its products, especially the chocolate and made range of differentiations. The
variety that is seen inn chocolates of Cadbury cannot be easily witnessed in any other brand. This
has resulted in company becoming the leader in confectionary industry.
Low barriers to entry and exit- The barriers to enter and exit the market are very low. New
entrants in this market require investment and product innovations, a different idea that makes its
product appear different from other in market. Talking about legal barriers, then they are not that
restrictive and exists in the range, as required for any normal business entity. However,
competition is established, but it can be overcome by right business and marketing decisions.
This is evident from the fact that, there are also many indigenous confectionary companies, that
have a well established domestic market.
TASK 3
Market of Confectionery products is an age old market and not the one that is the product
of recent times and business innovations and developments of modern age. The industry has
basic meaning of food items and food products that are had made. The different term that is used
here is bakery market as well. With the growing businesses, investments and integration of
economies in the world, the market has made significant progress and there can be seen many
internationally prominent business tycoons has emerged. The industry has been taken to new
heights (Dutta, 2018). But it was not always similar to what exists at this time. The

Confectionery industry at one time has shown some different nature and some different market
characteristics. Just like at present, there were many numbers of buyers and sellers in the market.
But one thing that is uncommon is, there existed a little product differentiation in the market. All
such sellers used to sell almost similar products, of which buyers were seen having good
knowledge in the market. Also, there were no branding mechanisms and businesses were also not
spread across borders. Everything was very limited, business scale and sizes of businesses.
Therefore, conditions and nature of market can be predicted similar to Perfect Competition.
Cadbury is one of those company, that has intact of its businesses since then. The age of
company can be related to that time of market structures in confectionery industry. The report
has attempted to understand the nature of business of Cadbury and market conditions of that time
by alignment of characteristics of two.
Many buyers and many sellers- This characteristic is similar to what is existing at present
times. There are numerous buyers and sellers in the market, and they all are selling similar kinds
of products but there exists a little differentiation in products, especially in terms of tastes and
quality. But what has been existed in market structure of that time was, even this type of
differentiation was not present to much extent and products of different seller were almost
identical. Perfect competition market structure gives information about perfectly competitive
sellers, and this competition is possible only when products in market are available at level
offering same values to consumers. Cadbury along with other sellers was selling chocolate and
bakery products of equal quality and had similar usage. Though, prices varied but to very
nominal levels.
Information- Information means the knowledge of quality, prices and types of products. This
information necessarily has to be available with the consumers. In Perfect competition market,
consumers are seen having all types of varied knowledge with them. These information pertains
to quality, size, usage, values, tastes, and prices of confectionery products; along with the
information related to stature, scale and size of businesses of company. At that time in the market
of confectionery products, consumers also appearing to have knowledge about competition
existed before all sellers inn market (Calvet, and et.al., 2020). They were aware that, sellers here
do not have much extra values to offer in their products, when compared to other sellers in
market, and also they are bound to sell products in a particular price range. Therefore, with little

changes in price they tend to change their procurement decisions. Which means, if a particular is
offering products at higher prices, then consumer will easily shift their choices to Cadbury or
some other seller. This nature was more enforced by the fact that, businesses too had no
significant scale of business operations where they could dominate market as well. Like, by
reducing the prices of products if sellers intend to attract all consumers in market, then even they
will not be able to harbor demand levels. Because, fulfilling demand needs supply and supply
requires extra production. For production sellers are required to pool in investments and
investments are low.
No barriers over entry and exit- From all the discussion, carried so far in the report, it can be
easily predicted that, in Perfect competition market structure, barriers over entry and exit of firms
in market were absent totally. Barriers are that restrictions and bondages in market, which do not
allow any new business entity to enter in to market and also do not allow any existing business
entity to easily leave the market. In perfect competition barriers can be said to be absent, because
there were requirements not those great investments, also the products that have to be produced
were almost identical, bakery and chocolate products that were produced by all sellers in market.
Though, competition existed perfectly, but that was among all sellers of nominal business scales,
and thus all businesses were fighting that competition already. Therefore, new sellers were not
required to put extra efforts for fighting competition and they just had to adopt existing
conditions of market (Dinçer and Yüksel eds., 2018). Under these circumstances, firms were also
allowed to leave market at anytime, because exit from the market will not be incurring higher
losses for the firms. All such features were supported by the fact that legal barriers to enter were
also negligible. In that time, normal business entities as well were not required fulfill typical
business legalities. However, it can be noted that, what Cadbury and other businesses were
bound to follow were more societal norms, rather than legal restrictions.
TASK 4
Discussing optimal Market structure for Cadbury
As company is already operating in Monopolistic competition market, where also it s
seen making numerous gains and progress. But this market does not seem to be optimum market
structure for it. Optimum market structure is the one where businesses of any enterprises is

desired to make multiple gains, which are not only limited to profits, but also gibe other
advantages as well, such as of competitive advantage, product and market development etc. In
this manner, Oligopoly market structure appears to be most beneficial for Cadbury (Lévy and
Duménil, 2018). In oligopoly market there are fewer number of sellers, and all of them are seen
consolidating large share in market, competing with each other to acquire more market shares.
Under this, Cadbury can be seen making number of progress that can be discussed as follows:
Competitive strategy- Under this market, Cadbury will be required to keep a close watch over the
policies of its close competitors. Thus, it will be framing such policies that will be beneficial to
company in terms of competition levels in the market, and Cadbury can never be seen by people
at lower grade than its competitors. Therefore, Cadbury will always remain at competitive edge
and in the mainstream of business market.
Stable pricing- Stability of pricing is one the most obvious and the biggest advantage of
Oligopoly market. As companies in this market operates at close competition with each other,
and then keep a close watch on policies and strategies of competitors. In this manner, they also
keep a good watch over pricing policy of competitors as well, and all other players in this market
do not allow any one individual business to gain unfair advantage over the other. For example, if
Nestle will reduce process of its chocolates, to establish itself as the cost leader in the market,
acquiring more consumer market (Codogni, Duda and Kusa, 2017). Then, Cadbury will also
intend to reduce its prices or follow some other counter pricing strategy, that will present it as
competitive and at parity with its competitors. This is because Cadbury cannot afford to lose its
market share to some other business in the market. Therefore, this level of competition, do allow
any single business entity to dominate market with its pricing strategy.
Government interventions
As the market structure for Cadbury in Monopolistic competition market
structure. Therefore in this market government intervention is not suggested in all types of
businesses and firms. The most important reason is because there is high degree of
competition and race of product differentiation. All firms are highly motivated to create range
of value additions in their products, so that they can present their products in best values
before their customers (Ungureanu, Iatagan and Ungureanu, 2020). Also there are strong

motivations for value addition in firms. Dynamics of these motivations are high and very
efficient, and all firms are seen equally participating here.
In case, when there is absence of government intervention completely for Cadbury in
monopolistic market, then situation is considered good. As there will be free competition and
free flow of market forces, driving variants of growth automatically. But, it is good as long as
there is no groupings in Monopolistic market. Collusions of firms in market is that where two
or three firms in market makes cartels and decide to operate together. Here, these cartel firms
make such policies to erase other firms from market and establish their joint monopoly in
market. Therefore, in case of Cartel competition faced by Cadbury in market, then
government interventions are required to sustain healthy competition in market, where no firm
could gain unhealthy and illicit dominant position over other and every player is provided
equal opportunity to carry business and earn profits (Dong and Doukas, 2021).
CONCLUSION
The above discussion in report has helped concluding that, Management economics is
both, an Art and a Science as well. Looking at the science nature of this branch of Management,
there are various principles involved, of Economics and Management as well. And, as an Art,
there is huge requirements of appropriate skills and knowledge of these models and concepts of
Management economics for successful growth and progress in the businesses. In this report,
concepts of market structure and the principles of same, has helped drawing many meaningful
interpretations and understanding regarding large scale business of Cadbury. Also, the transitions
and improvements that has taken place in market of confectionery products through ages, gave
different level of insights about this market. This has helped comprehending different types of
business scenarios. At last discussions of market principles also helped discovering extent of
government interventions needed by Cadbury, as well as for its morality of businesses and
benefits of consumers.

REFERENCES
Books and Journals
Samuelson, W. F., Marks, S. G. and Zagorsky, J. L., 2021. Managerial economics. John Wiley &
Sons.
Datta, D., 2017. Managerial Economics. PHI Learning Pvt. Ltd..
Ajiitabh, D., 2017. TLP for Managerial Economics 2017-2018.
Dutta, A., 2018. TLP for Managerial Economics 2017-2018.
Calvet, L., and et.al., 2020. Modern Optimization and Simulation Methods in Managerial and
Business Economics: A Review. Administrative Sciences. 10(3). p.47.
Dinçer, H. and Yüksel, S. eds., 2018. Handbook of research on managerial thinking in global
business economics. IGI Global.
Lévy, D. and Duménil, G., 2018. Managerial capitalism: Ownership, management and the
coming new mode of production. Pluto Press.
Codogni, M., Duda, J. and Kusa, R., 2017. Entrepreneurial orientation in high-tech and low-tech
SMEs in Malopolska region. Managerial Economics. 18(1). p.7.
Ungureanu, A., Iatagan, M. and Ungureanu, A., 2020. The Importance Of Managerial Education
In Pre-University Education. Annals of Spiru Haret University, Economic Series. 20(4).
pp.45-55.
Dong, F. and Doukas, J. A., 2021. Managerial ability premium factor and fund
performance. Journal of International Money and Finance. 113(C).