Individual assignment topic analysing the hershey organization

Ho Chi Minh University of Technology School of Industrial Management Strategic Managements Semester 212 – Class: CC02 Lecturer: Prof Lai Van Tai Individual Assignment Topic: Analysing the Hershey Organization Student Name: Pham Tran Dang Khoa Student ID: 1952787 Ho Chi Minh city, Vietnam 0 2021- 2022 0 I Introduction about Strategic Managements course Strategic Management is a postgraduate course of two-years involving advanced lessons in psychology, sociology, and economics with the aim to develop an analytical approach in students which is an important factor of strategic issues management The course is divided into four semesters, each for a period of six months The course teaches about how managers must employ the formal and informal relationships that exist between various organisations in an industry, originate solutions for various problems encountered by an organisation, and effectively formulate and implement an organization's key strategies, the results of which shapes the structure and functioning of an organization Strategic management trains the eligible candidates in developing functional and managerial skills, building relationships with organisations, providing the recruitments in corporate management and strategy along with providing a platform for students, teachers, and industry experts to exchange leadership and management concepts A strategic management student is required to use his/her knowledge from other domains and fields including business administration, finance and marketing, risk management, negotiation, statistics and human resource There are various universities and colleges for business and economics which offer strategic management as specialization or a concentration track for a business management degree 0 II Acknowledgement My name is Pham Tran Dang Khoa, a member in class CC02, course: Strategy Managements, leading by prof Lai Van Tai I am over helmed in all humbleness and gratefulness to acknowledge my depth to all those who have helped me to put these ideas, well above the level of simplicity and into something concrete I would like to express my special thanks of gratitude to my teacher as well as our principal who gave me the golden opportunity to this wonderful project on the topic Analysing Organization and I choose Hershey Organization to give the best analysis, which also helped me in doing a lot of Research and I came to know more about so many new things I am really thankful to them Thank you very much, prof for what you have taught to us in this semester Best regards, Pham Tran Dang Khoa – 1952787 0 Table of Contents I Introduction about Strategic Managements course ii II Acknowledgement iii Table of Contents iv Introduction about the company .1 1.1 Overview about Hershey 1.2 Hershey History – A History of Goodness 1.3 Hershey Products .2 Situation of Hershey organization in nowadays .2 Hershey’s Vision/ Mission/ Core Values 3.1 Vision statement 3.2 Mission Statement .4 3.3 Core Values 3.3.1 Deliver 3.3.2 Collaborate 3.3.3 Develop .5 3.3.4 Question 3.3.5 Innovate 3.3.6 Inspire Hershey’s SWOT analysis (SFAS, IFAS, EFAS, CPM matrix) 4.1 SWOT analysis 4.1.1 Strengths Analysis .5 4.1.2 Weaknesses Analysis 4.1.3 Opportunities Analysis 0 4.1.4 Threats Analysis 4.2 SFAS Analysis 4.3 IFAS – EFAS Analysis .12 Hershey Five Forces Analysis 12 5.1 Threat of New Entrants 13 5.2 Threat of Substitutes 13 5.3 Bargaining Power of Customers 14 5.4 Bargaining Power of Suppliers 14 5.5 Competitive Rivalry 15 The Hershey Company’s Competitors 15 6.1 CPM matrix .16 Hershey’s Strategic Formulation 17 7.1 Corporate level strategy 17 BCG Matrix 18 7.2 Business level strategy .21 Conclusion .22 III Appendix 23 IV Reference list .24 0 Introduction about the company 1.1 Overview about Hershey Hershey Company, also known as (1894–1927) Hershey Chocolate Co., (1927– 68) Hershey Chocolate Corporation, and (1968–2005) Hershey Foods Corporation, American manufacturer of food products, chiefly chocolate and sugar-based confections Hershey’s Milk Chocolate, in its brown-and-silver wrapper, was perhaps the best-known American candy bar of the 20th century Company headquarters are in Hershey, Pennsylvania The Hershey Company traces its origins to the 1880s, when Milton S Hershey founded the Lancaster Caramel Company in Lancaster, Pennsylvania After seeing German-made chocolate-processing machinery at the World’s Columbian Exposition of 1893 in Chicago, Hershey decided to go into the chocolate business During the 1960s Hershey bought the manufacturer of Reese’s Peanut Butter Cups and two pasta businesses In recognition of its diversification, the company was renamed Hershey Foods Corporation in 1968 Two notable changes came shortly afterward After many decades at cents, the price of the standard milk chocolate bar went up to 10 cents (bar size had diminished over the years) And in 1970 the company responded to increased competition—most notably from Mars, Inc.—by advertising to consumers for the first time 1.2 Hershey History – A History of Goodness Milton Hershey’s love for confection started at a young age and flourished when he established The Hershey Chocolate Company in 1894 By 1900, we sold our very first candy bar Today, Hershey’s portfolio of brands has expanded beyond the beloved and iconic HERSHEY’S Milk Chocolate Bar  1894: Lancaster Caramel Company: Milton Hershey incorporates the Lancaster Caramel Company and establishes Hershey Chocolate Company as a subsidiary 0  1900: Milk Chocolate bars: Launch of Hershey’s Milk Chocolate bars  1907: Hershey’s Chocolate Kisses: Hershey begins manufacturing Hersey’s Chocolate Kisses  1963: H.B Reese Candy Company: Hershey acquires H.B Reese Candy Company  1971: Hershey’s Tropical Bar: Hershey’s Tropical Bar sent to the moon with Apollo 15 Astronauts  1973: Hershey’s Chocolate World: Hershey’s Chocolate World, the first retail center, opens  1979: $1 Billion Achieved: Hershey achieves $1 billion in annual sales  2000: World Cocoa Foundation: Founding member of the World Cocoa Foundation and begins investment in West Africa to support cocoa farmers and improve cacao agriculture  2008: $5 Billion in sales  2018: Michele Buck becomes CEO: first female CEO  2019: #35 on Diversity Inc: The Hershey Company recognized as #35 on Diversity Inc Top 50 Companies for Diversity  2020: #21 on Diversity Inc  2021: #10 on Diversity Inc 1.3 Hershey Products Hershey is best known for their chocolate products: Hershey’s Brand Chocolate Products: Hershey’s Extra Dark, Hershey’s Symphony, Hershey’s Drops, Hershey’s Miniatures, Hershey’s Pot of Gold, Hershey’s Nuggets Hershey’s Kisses Reese’s Brand products Situation of Hershey organization in nowadays In August 2021, the Hershey Company established a new health & safety policy requiring full vaccination for all corporate employees working in our 19E corporate office, Tech Centre, U.S commercial sales offices, customer teams, Hershey's Chocolate World Salaried Employees, Amplify, One Brands and Lily’s offices by 0 October 4, 2021 To support this, the company sponsored multiple vaccination clinics and allowed employees to seek accommodations for religious or medical reasons The company has engaged in an interactive process with our employees to evaluate when an accommodation is needed Nearly 98 percent of the teams covered by this policy have become vaccinated Over recent weeks, separations for a small number of teammates, less than two percent of our corporate and commercial teams who did not get vaccinated, have occurred Our manufacturing and retail employees have worked safely on the front lines since the start of the pandemic with heightened health and safety protocols, including masks, physical distancing, sanitizing and on-site vaccination clinics To date, The Hershey Company has committed over $2 million in cash and product donations to support COVID-19 response efforts around the world Our corporate giving team is working closely with our community non-profit partners to ensure they are supported during this time Our support and community response efforts continue to evolve as needs change throughout the pandemic Additionally, our Hershey Company Employees 1st Fund is actively supporting Hershey employees and their families who experience severe economic hardship as a result of this situation Hershey’s Vision/ Mission/ Core Values 3.1 Vision statement Hershey’s vision is “We not only offer the best merchandise at the best prices, but we’re always working to make your shopping experience enjoyable.” The company aim at delivering the best services to its customers at affordable prices Hershey is not only committed to offering healthy products but also changing the perceptions that people have about chocolate brands being unhealthy (Hershey Company, 2019) 0 The key components of the vision statement are: Offer the best merchandise at the best prices, Make your shopping experience enjoyable The “offer best merchandise at the best prices” component focuses on all the customers and potential consumers of the Hershey products The company has operations in more than 90 countries, and they aim to expand the services by delivering the products to a price that everyone can afford Their products are affordable, which makes them popular amongst the corporate and the customers “Make your shopping experience enjoyable” is focused on making sure that customers get value for their money In this component, Hershey aims at ensuring the customers get the best products at competitive and affordable prices The Hershey Company has also invested in supporting the underprivileged such as setting up Hershey Trust Company to help disadvantaged children 3.2 Mission Statement Hershey companies corporate mission statement states, “Proceeding with Milton Hershey’s heritage of responsibility regarding shoppers, group and youngsters, we give high calibre HERSHEY’S items while directing our business in a socially mindful and earth practical way.” 3.3 Core Values 3.3.1 Deliver The idea is to seek solutions by putting our prototypes to test This method resolves our problems quickly and helps us learn more To so, we proactively connect with our colleagues and resources when seeking an answer We always make sure that our decisions positively impact our community and are acted upon sooner, rather than later 3.3.2 Collaborate We believe in accomplishing together by building global partnerships Our approach towards collaboration includes the desire to learn from others, value their opinions, and appreciate their skills and expertise Irrespective of having different 0 High level of customer satisfaction Weaknesses The marketing of the products left a lot to be desired Limited success outside core business Opportunities Lower inflation rate 0.1 0.4 X 0.1 0.3 X 0.1 0.2 X 0.1 0.5 The product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors Hershey is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture X 10 the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers The low inflation rate brings more stability in the market, enable credit at lower interest rate to the New customers from online channel 0.05 0.15 Opening up of new markets 0.1 0.3 0.1 0.3 The company can face lawsuits in various markets given 0.1 0.4 X Growing strengths of local distributors 0.1 0.3 X Total Score 1.00 Threats Intense competition X X X 3.4 11 0 customers of Hershey The company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics The adoption of new technology standard and government free trade agreement has provided Hershey an opportunity to enter a new emerging market Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales Different laws and continuous fluctuations regarding product standards in those markets A threat in some markets as the competition is paying higher margins to the local distributors 4.3 IFAS – EFAS Analysis Internal Factors (IFAS) External Factors (EFAS) Opportunities - Lower inflation rate - Online customers - Government green - Market development Threats - Intense competition - Face lawsuits - Rising pay level Strengths - Market strategies for its products - Developing new products - Reliable suppliers - Customer satisfaction - Strong dealer community - Strong distribution network - Good returns on capital expenditure Strength Opportunities (SO) Strategies Leveraging brand recognition in new segments Weaknesses - Gaps in the product range - Limited success outside core business - Only compatible with present business - High days inventory Weakness Opportunities (WO) Strategies Investing into customeroriented services and supply chain Weaknesses Threats (WT) Strategies Get out of the business and focus on growth areas Strength Threats (ST) Strategies Investing into R&D to thwart Consumer/NonCyclical industry disruptors Hershey Five Forces Analysis Porter’s Five Forces Analysis of Hershey's covers the company’s competitive landscape as well as the factors affecting its sector The analysis focuses on measuring the company’s position based on forces like threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers and competitive rivalry 12 0 Hershey's Five Forces analysis helps to analyse its current position in the market based on factors like competitors, customers, suppliers, financial strength & alternate solutions 5.1 Threat of New Entrants The threat of new entrants in the Hershey's Porter Five Forces Analysis can be explained as follows: The Hershey Company, popularly known as Hershey’s, is one of the leading chocolate manufacturers in the world It produces chocolate and nonchocolate confectionery as well as baked sweets The confectionery market is roughly 206 billion USD currently and is projected to reach up to 225 billion USD in the next couple years The target market of Hershey’s, as also elaborated in one of their marketing slogans (“There is something for everyone”) is basically everyone They offer a wide range of products from chocolates, candies, and mints, to spreads and beverages to cater to different income and age groups Hershey’s operates in more than 70 countries worldwide For any new entrant, it is very difficult to maintain competitive prices due to the economies of scale that works in the favour of Hershey’s and the other larger players in the market Additionally, these incumbent players enjoy well-established supply chain and distribution channels, as well as a well-maintained brand image Any new entrant will have to compete with these players for shelf spaces and other shared resources, which adds up to create an overall high entry barrier Hence, on a global level, the threat of new entrants is low 5.2 Threat of Substitutes Below are the threats of substitute products of Porter’s Five Forces analysis of Hershey's: The chocolate confectionery industry offers highly differentiated products The industry offers chocolate spreads, bars, and candies and while other sweets and baked goods are close substitutes, these are not true replacements for chocolate products These sweets and confectionery items are produced by large companies and restaurants, as well as local eateries and shops at different price points and varieties So even though the number of substitutes is limited, the customers not face any 13 0 switching costs in shifting to a substitute product Hence, the threat of substitutes is a moderate force within the industry in which the Hershey Company operates 5.3 Bargaining Power of Customers In the Hershey's Porter Five Forces Analysis the bargaining power of the customers can be explained as: The volume of customers for the confectionery industry is very high The industry size is more than 200 billion USD, with some of the leading players like Mars and Hershey’s with worldwide sales in tens of billions of USD With respect to the total sales, the sales value per customer is small, which means that the bargaining power of customers is relatively low Further, the products offered by the industry are differentiated in terms of the taste and composition of the products Some of the products are exclusive to the companies and are highly popular among the consumers, which further indicates to low bargaining power of customers The customer segment, too, is very broad, and even though the low- and middle-income group segments can be price sensitive, the overall customer volume dilutes the force However, there is no switching costs to customers and there are many customers available, there can be some bargaining ability for customers in that context But, overall, it is a weak to moderate force for the confectionery industry 5.4 Bargaining Power of Suppliers Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Hershey's: Hershey’s sources its primary raw material i.e., cocoa from local farmers in West Africa The other raw materials are obtained from a wide range of suppliers Due to the large number and low concentration of suppliers, their bargaining power is low Further, none of the suppliers provide any exclusive or largely undifferentiated product, which means that they cannot affect production by withholding supplies The companies can easily switch to alternative suppliers without incurring major costs of switching 14 0 4.1.2 Weaknesses Analysis Weakness are the areas where Hershey can improve upon Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning  There are gaps in the product range sold by the company This lack of choice can give a new competitor a foothold in the market  Limited success outside core business – Even though Hershey is one of the 0 it has faced challenges in moving to other leading organizations in its industry product segments with its present culture  Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments  Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel This can impact the long-term growth of Hershey  High attrition rate in work force – compare to other organizations in the industry Hershey has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees  The marketing of the products left a lot to be desired Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors  Financial planning is not done properly and efficiently The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present 4.1.3 Opportunities Analysis  The new technology provides an opportunity to Hershey to practices differentiated pricing strategy in the new market It will enable the firm to maintain its loyal customers with great service and lure new customers through other value-oriented propositions 0  Lower inflation rate – The low inflation rate brings more stability in the market, enable credit at lower interest rate to the customers of Hershey  New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform This investment has opened new sales channel for Hershey In the next few years, the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics  Government green drive also opens an opportunity for procurement of Hershey products by the state as well as federal government contractors  New environmental policies – The new opportunities will create a level playing field for all the players in the industry It represents a great opportunity for Hershey to drive home its advantage in new technology and gain market share in the new product category  Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Hershey an opportunity to enter a new emerging market  The new taxation policy can significantly impact the way of doing business and 0 can open new opportunity for established players such as Hershey to increase its profitability  The market development will lead to dilution of competitor’s advantage and enable Hershey to increase its competitiveness compare to the other competitors 4.1.4 Threats Analysis  Increasing trend toward isolationism in the economy can lead to similar reaction from other government thus negatively impacting the international sales  Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales 0  The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets  The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term  Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Hershey  Imitation of the counterfeit and low-quality product is also a threat to Hershey’s product especially in the emerging markets and low-income markets  Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors 4.2 SFAS Analysis Key Strategic Factors Strengths Successful track record of developing new products Reliable suppliers Weight Rating Weighted Score Duration I II III Comments 0.1 0.4 X Product innovation 0.05 0.15 X It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks 0 High level of customer satisfaction 0.1 0.4 0 X the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers Weaknesses The marketing of the products left a lot to be desired Limited success outside core business Opportunities Lower inflation rate 0.1 0.3 X 0.1 0.2 X 0.1 0.5 10 0 The product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors Hershey is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture X The low inflation rate brings more stability in the market, enable credit at lower interest rate to the New customers from online channel 0.05 0.15 Opening up of new markets 0.1 0.3 0 X X customers of Hershey The company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics The adoption of new technology standard and government free trade agreement has provided Hershey an opportunity to enter a new emerging market Threats Intense competition 0.1 0.3 The company can face lawsuits in various markets given 0.1 0.4 X Growing strengths of local distributors 0.1 0.3 X Total Score 1.00 3.4 11 0 X Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales Different laws and continuous fluctuations regarding product standards in those markets A threat in some markets as the competition is paying higher margins to the local distributors 4.3 IFAS – EFAS Analysis Internal Factors (IFAS) External Factors (EFAS) Opportunities - Lower inflation rate - Online customers - Government green - Market development Threats - Intense competition - Face lawsuits - Rising pay level Strengths - Market strategies for its products - Developing new products - Reliable suppliers - Customer satisfaction - Strong dealer community - Strong distribution network - Good returns on capital expenditure Strength Opportunities (SO) Strategies Leveraging brand recognition in new segments Weakness Opportunities (WO) Strategies Investing into customeroriented services and supply chain 0 Weaknesses - Gaps in the product range - Limited success outside core business - Only compatible with present business - High days inventory Strength Threats (ST) Strategies Investing into R&D to thwart Consumer/NonCyclical industry disruptors Weaknesses Threats (WT) Strategies Get out of the business and focus on growth areas ... for their chocolate products: Hershey? ??s Brand Chocolate Products: Hershey? ??s Extra Dark, Hershey? ??s Symphony, Hershey? ??s Drops, Hershey? ??s Miniatures, Hershey? ??s Pot of Gold, Hershey? ??s Nuggets Hershey? ??s... gave me the golden opportunity to this wonderful project on the topic Analysing Organization and I choose Hershey Organization to give the best analysis, which also helped me in doing a lot of... merchandise at the best prices” component focuses on all the customers and potential consumers of the Hershey products The company has operations in more than 90 countries, and they aim to expand the 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