Strategic Management Project on Hershey Foods

Hershey Company 2009

Presented By: Aliya & Andleeb

Introduction: 



Hershey is one of the oldest chocolate companies in the United States, and an American icon for its chocolate bar. It is one of a group of companies established by Milton Hershey. Other companies established by Milton Hershey include:  



Hershey Trust Company, Hershey Entertainment and Resorts Company, which runs Hershey park, a chocolate-themed amusement park, the Hershey Bears minor professional hockey team, Hershey park Stadium and the GIANT Center. Most of the employees for the factory come from the surrounding counties, towns, and boroughs, such as Lebanon County, Hummelstown, South Hanover, and Harrisburg.

Mission: 

Bringing sweet moments of Hershey happiness to the world every day.

Proposed Mission: 

Hershey is pledged to provide high quality products to consumers, community and children. Bringing sweet moments of Hershey happiness to the world while conducting business in a socially responsible and environmentally sustainable manner.

Hershey Products: 



Hershey produces a variety of products that are chocolate or candy based, and The Hershey Company also produces gum. Some of these products began production over 100 years ago such as the Hershey Kiss and Hershey Bar.

Hershey Products: Chocolate-based products  Hershey's chocolate bars  Hershey's Symphony  Hershey's Extra Dark  Almond Joy  Mounds  100 Calorie Bar  Hershey's Bliss  Hershey's Drops  Hershey's Miniatures  Hershey's Pot of Gold 

Hershey Products..  Kit

Kat  Hershey's Nuggets  Hershey's Kisses  Reese's Peanut Butter Cups  Pieces  Whoppers  York Peppermint Pattie  Hershey Canada  Non-Chocolate Candies

Strategy Formulation Input Stage

EFE IFE CPM

External Factor Evaluation (EFE) Matrix: Sr.#

Opportunities

Weight

Rating

1 2 3

Increasing demand of organic products Global expansion / emerging market Escalating demand for weight conscious people Inclination towards environment friendly organizations Increasing awareness regarding Child Labor issues New opportunities for using varied media Multiplicity among consumer tastes Threats Slow economic growth

0.11 0.12 0.05

3 3 2

Weighted Score 0.33 0.36 0.1

0.04 0.04 0.10 0.10

2 2 3 3

0.08 0.08 0.3 0.3

Increase in conversion of sugar to ethanol

0.06 0.14 0.13 0.11

2 4 3 3

0.12 0.56 0.39 0.33

Total Weighted Score

1.00

4 5 6 7

1 2 3 4

Increase in prices of main ingredients An increase in Health conscious consumer

Poor (1), Below Average (2), Above Average (3), Superior (4)

2.95

Internal Factor Evaluation (IFE) Matrix: Sr.#

Strengths

Weight

Rating

Weighted Score

1

Brand Recognition

0.16

4

0.64

2

Socially Responsible Image

0.15

4

0.60

3

Research and Development

0.14

3

0.42

4

Strategic acquisitions and joint ventures

0.12

3

0.36

5

Innovative and reliable workforce

0.10

3

0.30

Weeknesses 1

Need of independent Board Members

0.09

2

0.18

2

Heterogeneity of supplier is missing

0.08

2

0.16

3

Manufacturing cost is high

0.06

1

0.06

4

Future contract hedging

0.05

1

0.05

5

Less variety of organic snacks

0.05

1

0.05

Total Weighted Score

1.00

major weakness (1), minor weakness (2), minor strength (3), major strength (4)

2.82

Competitive Profile Matrix: Hershey Critical Success Factors

Nestle

Mars

Weight

Rating

Score

Rating

Score

Rating

Score

Brand recognition

0.13

4

0.52

3

0.39

3

0.39

Product Quality

0.13

4

0.52

3

0.39

3

0.39

Price Competitiveness

0.14

3

0.42

3

0.42

4

0.56

Financial position

0.12

3

0.36

4

0.48

3

0.36

Management

0.13

3

0.39

4

0.52

3

0.39

Customer Loyalty

0.11

4

0.44

3

0.33

3

0.33

Global Expansion

0.17

3

0.51

4

0.68

3

0.51

Market share

0.07

2

0.14

4

0.28

3

0.21

Total

1.00

3.30

3.49

3.14

Matching Stage

Strengths: 1. Brand Recognition 2. Socially Responsible Image 3. Research & Development 4. Strategic acquisitions and joint ventures 5. Innovative & reliable workforce

Weaknesses: 1. Need of Independent Board Members 2. Heterogeneity of supplier is missing 3. Manufacturing cost is high 4. Future contract hedging 5. Less variety of Organic Snacks

Opportunities:

SO Strategies:

WO Strategies:

1.

1.

1.

SWOT Matrix:

2. 3. 4. 5. 6. 7.

Increasing demand of organic products Global expansion / emerging markets Escalating demand for weight conscious people Inclination towards environment friendly organizations Increasing awareness regarding Child Labor issues. Use of varied media Multiplicity among consumer tastes

2.

3.

4.

Can produce organic / sugar free products by using R&D dept. (S3,O1,O3) Hershey must portray its brand through marketing the ethical ways they do business (S1,O5) Hershey can promote its image using varied media. (S2,O6) Design new products from employee ideas.(S5,O7)

2.

3.

Trust may divest shares. (W1,O2) Costs may be lowered by manufacturing products in countries where they are purchased. (W3,O2) Conduct survey to get feedback of consumer preferences to improve taste . (W5,O6,O7)

Threats:

ST Strategies:

WT Strategies:

1. 2.

1.

1.

3. 4.

Slow economic growth Increase in prices of main ingredients Increase in Health Conscious consumer Increase in conversion of sugar

2.

Sales may be increased through new partnerships with NGOs. (S2,S4,T1, T2) Can produce products specially designed for health conscious consumers by using

2.

To reduce risk and price uncertainty use hedging. (W4,T2) Introducing new range of organic items to cater health conscious segment.(W5,T3)

The Strategic Position and Action Evaluation (SPACE) Matrix: Financial Position: •Leverage •Working Capital •Cash Flow Total Industry Position: •Growth Potential •Profit Potential •Financial Stability Total Stability Position: •Price range of competing products •Competitive Pressure •Price elasticity of demand Total Competitive Position •Market Share •Product quality •Customer loyalty

Total

Rating: 5 4 4 ---13

3 3 4 ---10

-3 -4 -4 ----11

-2 -1 -2 ----5

Space Matrix: Conclusions:  FP Average = 13/3 = 4.33  IP Average = 10/3 = 3.33  SP Average = -11/3 = -4  CP Average = -5/3 = -1.66  Space Matrix Coordinates:  X-axis: CP+IP or (-1.66 + 3.33) = 1.67  Y-axis: FP+SP or (4.33 + -4) = 0.33

FP

Aggressive: Market Development Market Penetration Product Development

(1.67,0.33)

C P

IP

SP

BCG Matrix: High

Medium

Low

Stars:

Question Marks:

Breath freshener market share 33.6%

Non chocolates market share 14.8%

Cash Cows:

Dogs:

Chocolate market share 34.3% Confectionary market share 28.7%

Gum market share 2.5%

Medium

Low

The Grand Strategy Matrix: Rapid Market Growth

Market Development Market Penetration Product Development Weak Competitiv e Position

Slow Market Growth

Strong Competitive Position

Output Stage

Quantitative Strategic Planning Matrix (QSPM)

Presence in Asian Market (China, Bangladesh & India)

QSPM Matrix: Sr. No. Key Factors: Opportunities 1 Increasing demand of organic products 2 Global expansion / emerging markets 3 Escalating demand for weight conscious people 4 Inclination towards environment friendly organizations 5 Increasing awareness regarding Child Labor issues 6 New opportunities for using varied media 7 Multiplicity among consumer tastes Threats 1 Slow economic growth 2 Increase in prices of main ingredients 3 An increase in Health conscious consumer 4 Increase in conversion of sugar to ethanol

Producing New Products for Health & Weight Conscious Consumers

Weight

AS

TAS

AS

TAS

0.06 0.06 0.03 0.02 0.02 0.05 0.05

1.00 4.00 1.00 3.00 1.00 1.00 0.00

0.06 0.24 0.03 0.06 0.02 0.05 0.00

4.00 0.00 4.00 0.00 0.00 0.00 3.00

0.24 0.00 0.12 0.00 0.00 0.00 0.15

0.03 0.07 0.07 0.06

3.00 0.00 0.00 0.00

0.09 0.00 0.00 0.00

1.00 0.00 3.00 0.00

0.03 0.00 0.21 0.00

0.08 0.08 0.07 0.06 0.05

3.00 4.00 3.00 3.00 0.00

0.24 0.32 0.21 0.18 0.00

2.00 0.00 4.00 0.00 2.00

0.16 0.00 0.28 0.00 0.10

0.05 0.04 0.03 0.03 0.03 1.00

2.00 1.00 2.00 1.00 0.00

0.10 0.04 0.06 0.03 0.00

0.00 0.00 0.00 0.00 3.00

0.00 0.00 0.00 0.00 0.09 1.38

Strengths 1 Brand Recognition 2 Socially Responsible Image 3 Research and Development 4 Strategic acquisitions and joint ventures 5 Innovative and reliable workforce Weeknesses 1 Need of independent Board Members 2 Hetrogenity of supplier is missing 3 Manufacturing cost is high 4 Future contract hedging 5 Less variety of organic snacks Total

1.73

Conclusion:



As per QSPM Hershey must adopt the Intensive Growth strategy (Aggressive strategy) and go for Global expansion --- Presence in Asian Market

(China, Bangladesh & India). This strategy is recommended as the TAS is 1.73 which is more than the alternative strategy.

Thank You