MGT420-STRATEGIC MANAGEMENT
PREPARED BY: JOE DAGHER SANDRA SABBAGH SERGE SADER UNDER THE DIRECTION OF MS. NADA SARKIS
History
1887: Milton Hershey establishes the Lancaster Caramel Company. 1895: The Company begins to sell chocolate. 1900: Hershey sells his caramel company to focus on chocolate 1905: Milton Hershey established an independent trust company to provide the towns financial services and manage the assets that were to fund his many philanthropic endeavors. 1906: The Village of Derry Church is renamed Hershey 1907: Hershey Kiss was introduced. 1927: The firm incorporates as Hershey Chocolate Company and is listed on the New York Stock Exchange.
History
1940: Hersheys chocolate plant is unionized. 1963: H.B. Reese Candy Company is acquired. 1968: The firm adopts the name Hershey Foods Corporation. 1970: Hersheys first consumer advertisement appears in 114 newspapers. 1988: Hershey Purchases the operating assets and manufacturing assets of Peter Paul/ Cadbury brands. 1996: Hershey launches its first hard candy line, TasteTations, and the reducedfat Sweet Escapes Line.
Mission Statement
Bringing sweet moments of Hershey happiness to the world every day
Issue
86% of Hersheys sales are domestic while 14% are international. In contrast, competitors such as Cadbury generate about 71% of their sales from outside the United States. To stay in competition, the company should expand its global presence through a variety of acquisitions and joint ventures with established firms in the international market, and not only focus on the US market.
Macro-environment Analysis
Social responsibility and human rights issues raised about child labor in Hersheys suppliers cocoa farms. Sugar prices fluctuate frequently due to volatile political and economic factors in third world cocoa producing nations, as well as natural conditions. Mergers and acquisitions have soared over the past few years in the industry.
Health issues take center-stage worldwide, and chocolate is regarded as unhealthy.
Technological advances are difficult to teach to farmers in developing countries.
Confectionary manufacturing produces a lot of waste that cost subastantial amounts of money to dispose of.
5 forces model of Porter
Rivalry among competing firms > High Bargaining power of suppliers > Moderate to High Bargaining power of buyers > Moderately Low Threat of new entrants > Low Threat of substitute products > Moderately High
Competitive Advantage
HERSHEYS offers many unique products and services to many different kinds of customers
S.W.O.T. Analysis
Strengths Strong brand name with several iconic brands. Large market share in the US and Canada. Experiential marketing: Hershey theme park. Good public image: Milton Hershey School for orphan boys. Powerful partnerships with Kraft and Coca-Cola. Strong dark chocolate section SO Strategies Add beverages to the product portfolio and employ partnership with Coca-Cola to distribute them efficiently. Use iconic brands to tap Asian markets Raise awareness for health benefits of dark chocolate.
Weaknesses Low global market share. High dependence on sugar farmers. High expenses to dispose of waste. Not enough communication about dark chocolates health benefits.
Opportunities Health benefits of dark chocolate resonate with new health trends. Employ partnership with Coca-Cola to distribute beverages after adding them to the product portfolio. The advents of biofuel technology which can help dispose of chocolate byproducts. Asia is still a largely untapped market.
WO Strategies Turn waste into biofuel to dispose of it and sell it to make extra profits.
S.W.O.T. Analysis
Strengths Strong brand name with several iconic brands. Large market share in the US and Canada. Experiential marketing: Hershey theme park. Good public image: Milton Hershey School for orphan boys. Powerful partnerships with Kraft and Coca-Cola. Strong dark chocolate section ST Strategies Use large North American market share to finance expansion projects and buffer high market-entering expenses. Increase dark chocolate production as well as adding new healthy alternatives.
Weaknesses Low global market share. High dependence on sugar farmers. High expenses to dispose of waste. Not enough communication about dark chocolates health benefits.
Threats Price rises for cocoa, sugar, and milk. The new health trend coupled with the negative image of chocolate in that department. Competitors are very global while Hershey remains mostly local.
WT Strategies Decrease dependence on sugar farmers by performing backward integration.
Internal Forces Evaluation (IFE)
Key Internal Factors Strengths: 1. Strong brand name with several iconic brands. 0.20 4 0.8 Weight Rating Weighted Score
2. Large market share in the US and Canada.
3. Experiential marketing: Hershey theme park. 4. Good public image: Milton Hershey School for orphan boys. 5. Powerful partnerships with Kraft and Coca-Cola. 6. Strong dark chocolate section. Weaknesses: 1. Low global market share. 2. High dependence on sugar farmers. 3. High expenses to dispose of waste. 4. Not enough communication about dark chocolates health benefits. Total
0.09
0.04 0.05 0.05 0.16
4
3 3 3 4
0.36
0.12 0.15 0.15 0.64
0.20 0.08 0.09 0.04 1.00
2 1 2 1
0.8 0.08 0.18 0.04 3.32
External Forces Evaluation (EFE)
Key Internal Factors Opportunities: 1. Health benefits of dark chocolate resonate with new health trends. 2. Employ partnership with Coca-Cola to distribute beverages after adding them to the product portfolio. 3. The advents of biofuel technology which can help dispose of chocolate byproducts. 4. Asia is still a largely untapped market. Threats: 1. Price rises for cocoa, sugar, and milk. 2. The new health trend coupled with the negative image of chocolate in that department. 3. Competitors are very global while Hershey remains mostly local. Total 0.13 0.12 0.15 1.00 3 2 1 0.39 0.24 0.15 2.36 0.15 0.08 0.18 0.19 4 3 2 2 0.6 0.24 0.36 0.38 Weight Rating Weighted Score
Competitive Profile Matrix (CPM)
Nestle
Critical Success Factors Advertising Product Quality Price Competitiveness Financial Position Customer Loyalty Global Expansion Company Image Total Weight 0.2 0.15 0.1 0.1 0.1 0.15 0.1 1 Rating 3 3 3 4 2 4 2 Score 0.6 0.45 0.3 0.4 0.2 0.6 0.2 2.75
Cadbury
Rating 3 4 2 4 2 4 3 Score 0.6 0.6 0.2 0.4 0.2 0.6 0.3 2.9
Mars
Rating 3 3 3 3 2 4 3 Score 0.6 0.45 0.3 0.3 0.2 0.6 0.3 2.75
Three Year Objectives
Exploit the health trend and promote dark chocolate. Secure sugar and cocoa supply. Break into new markets. Increase sales by 10%/year globally.
Strategies
Diversification to break into new markets. Backward integration to secure raw material supply. Positioning as an iconic manufacturer in the industry by pushing the iconic brands. Use existing chains of distribution from other companies. Push the value of flavonoids in dark chocolate to exploit the boom in the health and organic market. Develop new operating methods to adapt to new countries. Break into Asian markets with investment in advertising.
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