STRATEGIC MANAGEMENT PAPER ON

Hersheys Company

SUBMITTED BY:
Fredrick Dale D. Fernandez
4-ABE
October 12, 2015

Vision Mission Statement

Mission Statement
Bringing sweet moments of Hershey happiness to the world every day.
Vision Statement
Continuing Milton Hersheys legacy of commitment to consumers, community and children, we
provide high-quality HERSHEYS products while conducting our business in a socially
responsible and environmentally sustainable manner.

Analysis of Mission and Vision:

MISSION
STATEMENT

PARAMETER
1. Customer

YES/NO
YES

2. Products or
Services

YES

3. Markets

YES

4. Technology

NO

5. Survival growth NO
profit

6. Philosophy

YES

7. Self-Concept

NO

8. Public Image

NO

9. Employees

NO

EVALUATION
The company stated they aim to bring Hershey
happiness to the world which means that they
would like to serve all the people in the world
and that the company requires no age in order
to be satisfied with the product.
Their mission statement suggests that their
product is actually the experience youll get
after tasting their chocolates and that is what
they call the Hershey happiness.
It is clearly stated that their market is
international and they would like to serve all
the people around the world. What theyre
giving the people around the world is the
happiness their chocolates will give to each
consumers.
They have not stated any technology of their
product.
They have not mentioned anything about the
companys growth and profitability. Their
mission is just to bring happiness to every
individual in the world.
Their mission states that their goal is to bring
sweet moments through the Hershey happiness.
Meaning the philosophy they try to impart to
consumers is the experience with their product
together with the people around, the family and
friends having fun together.
The company shall exert all efforts to transform
every opportunity to expand their sphere of
business activities into instruments to help our
constituents realize their own goals and
aspirations.
The company focuses on the satisfaction of its
customer and it seems that they dont care about
their public image as long as they achieve their
goal in serving its customers.
The company did not state anything about its

employees. The company should show value

and appreciation to its employees because the
quality of their product highly depends on its
employees.

VISION
STATEMENT

PARAMETER
1. Does it clearly
answer the
question What
do we want to
become?

YES/NO
YES

2. Is it concise yet
inspirational?

NO

3. Is it Aspirational?

YES

4. Does it give
clear indication
as to when it
should be
attained?

NO

EVALUATION
It is stated that they aim to continue the vision
and values of the man who started the company,
Milton Hershey. Although it is not clearly stated
on what do they want to become it has
something that the company would get
directions on what they should do and that is
continuing the legacy of the man who started it.
Their vision is not concise compared to the
required statement. However, it is inspirational
since they are committed in serving its
customers with the quality and values of the
man who started the company. It becomes
inspirational simply because the consistency of
the company never failed to provide its
consumer needs since day one.
It is aspirational simply because their vision
gives clear indication as to what the company is
trying to achieve. The workers and owners have
something to look up to in serving and
providing their consumer needs. Sticking to the
legacy of the man who started the company is
very aspiring.
There is no time frame as to when their vision
will be achieve. But since they are trying to
continue the legacy of Mr. Milton then their
vision will be passed over through generation to
generations.

Critical Success Factors

Weight

1.
2.
3.
4.
5.
6.
7.
8.

Hersheys
Rating
4
4
3
3
3
4
3
2

Brand recognition
0.13
Product Quality
0.13
Price Competitiveness
0.14
Management
0.13
Financial Position
0.12
Customer loyalty
0.11
Global expansion
0.17
Market Share
0.07
Total
1.00
COMPETITIVE PROFILING MATRIX

Score
0.52
0.52
0.42
0.39
0.36
0.44
0.51
0.14
3.30

Nestle
Rating Score
3
0.39
3
0.39
3
0.42
4
0.52
4
0.48
3
0.33
4
0.68
4
0.28
3.49

Mars
Rating Score
3
0.39
3
0.39
4
0.56
3
0.39
3
0.36
3
0.33
3
0.51
3
0.21
3.14

The Competitive Factor Evaluations Matrix shows that Hershey is well positioned against Mars but
slightly behind Nestle, in part because of Nestles financial position, their market share and their global
footprint. However, Hershey is well positioned in terms of brand recognition, customer loyalty and the
quality of their products. The Hershey trust company controls the Hershey Company. At the time of the
case, the chairperson of the board had been replaced. Hersheys management position may be weaker than
its competitors because the trust has the right to cast over two thirds on any matter that requires common
stockholders to vote upon. The result may be biased decisions regarding the company since the trust can
make decisions without common stock holders approval. Their financial position is weaker than Nestle
because a majority of its sales are US based and because cocoa costs have climbed from 40 cents a
pound in 1990 to 135 cents a pound in 2009.

Critical Success Factors:

1. Brand Recognition I assigned a weight of 0.13 because the brand recognition plays a big
role in every brand existing in this world. For the reason of constant advertisements creates
a brand recognition in your memory. This means that if you are in a hurry to grab some
chocolates the brand recognition will play back the first brand that your mind is used to see
and know.
Weight: 13% - I rated the companies based on the brand popularity according to the
annual reports posted on trusted websites. This reports will accurately tell us which brands
are more powerful compared to competitors brand.
Hersheys rating 4
Based on the Brand raking websites, the Hershey company ranks as the 2nd most powerful
brand playing in the industry. This means that they are well known all over the world and
the first brand that people will recall when they think about chocolates and candies. The
Hershey brand gained this reputation through serving its consumers with the right quality
and values they impart.

Nestles rating 3
Based on the brand raking websites, the nestle company ranks 28th in the most powerful
brand in the industry. This means that they are far from the brands power of Hershey.
Mars rating 3
Mars Company is not included in the list of powerful brand in the market. However, the
products (M&Ms, Snickers, Etc.) of mars are very popular in some countries but it is not
directly linked to the mars company. This resulted to disorientation of the buyers that the
products they like the most was created by Mars Company.

2. Product Quality I assigned a weight of 0.13 because the product quality is important in
terms of why consumers buy the product repetitively. Though it is important it is not the
major factor for the confectionary industry.
Weight 13%
I rated the company based on the product quality and the safety precautions they observe
while making their confectionaries. This is an important basis simply because their end
product hardly relies on the quality of the work they put in.
Hersheys rating 4
I assigned 4 to the Hershey Company simply because they have a set of values that they
follow and quality is their number one strength in making their product. They also maintain
the same quality in all their manufacturing sites. Thus, they provide the same preference all
over the world.

Nestles rating 3
Although the company recognize in giving quality product to its customer they are having a
hard time in maintaining the same product and satisfaction in their manufacturing sites.
Thus, their products sometimes vary in each nations because of ther dilemma.

Mars rating 3
It is acceptable that every brand aims to produce quality products for their customers. But
Mars companys quality is not enough in satisfying its customers. Whats good about mars
company is that they carefully select the ingredients they use in making their product. They
ensure in putting only the quality ingredients in every product.

3. Price Competitiveness
Weight: 14% - I weighted each company based on the price it offers to the public. The
price of a certain product is also a consideration of consumers when purchasing due to the
increasing inflation all over the world.
Hersheys rating 3
Due to the increasing inflation in the cocoa industry the Hershey Company increased its
price rates up to 8%. Making its products price higher and the price will not be friendly to
some buyers. Although they dont focus on profitability they ensure the quality of the
product they offer.
Nestles rating 3
Nestle has seen a strong start to 2008, partly thanks to its strategy of increasing product
prices quickly in line with commodity price increases. Their increase in their product price
in line with their increasing cost resulting to consumers in buying alternatives of its
products.
Mars rating 4
Although inflation of basic commodities in each state are continue to rapidly grow, the
mars company managed to just increase their products price only by 7%. Their minimal
price increase results to making them the confectionary company who offers the lowest
priced candies in the world.
4. Management
Weight: 13% - The management of a certain company highly depends on the decision
making and actions of the people behind it. Thus, I weighted 0.13 to the management factor
simply because big companies with several offices all around the world requires
competitive schemes of its management team.
Hersheys rating 3
The rating I gave the company is 3 because Hershey is well positioned in the marketplace
and their momentum in the U.S. and key international markets gives them confidence in
their business strategy, The Hershey Company. These organizational enhancements will
help accelerate their global growth by broadening and leveraging their leadership expertise,
knowledge and capabilities across the company. They have an experienced management
team, great talent throughout the organization and the right vision, strategy, talent and
brands to win wherever they compete.

Nestls rating 4
I rated the company 4 because The Nestl Group is managed by geographies (Zones
Europe, Americas and Asia/Oceania/Africa) for most of the food and beverage business,
with the exceptions of our globally managed businesses, which include Nestl Waters,
Nestl Nutrition, Nespresso, Nestl Professional and Nestl Health Science. They also have
joint ventures such as Cereal Partners Worldwide and Beverage Partners Worldwide.
Mars rating 3
I assigned 3 for the company because Mars, Incorporated is run by a global management
team led by Grant F. Reid, Office of the President. The companys management team
brings a wealth of experience to bear in its oversight of the day-to-day operations of the
business across six business segments: Petcare, Chocolate, Food, Wrigley, Drinks and
Symbioscience. Mars has aligned its global leadership structure with these business
segments in an effort to continue to grow and sustain improvement in company
performance.
5. Financial Position
Weight: 12% - I gave this category a weighted score of 12% because its a good indication
to see where the company is getting. I based my score on the annual profit of each
company since its one of the major goal of every company.
Hersheys rating 3
Nestles rating 4
Mars rating 3

6. Customer Loyalty
Weight: 11% - I based my weighted scored in regards to how the company provide their
service to their end consumers. I also based my score of 11% on the way how people see
the company. Another factor I considered regarding this matter is the value the company
follow when it comes to its public service.
Hersheys rating 4
I rated the company with 4 because the Hersheys Company are always listening and
responding to its consumers. They work directly with their retail partners to ensure that
they are delivering a positive, 360-degree brand experience inside and outside of their
store. They are excited about the challenge of reacting quickly and innovatively to an

exponentially changing marketplace. The pace of change will never be slower than it is
today, and that creates challenges, but also great opportunity for nimble, entrepreneurial
thinking. Consumers want a dynamic and engaging shopping experience, and the company
are investing in unique solutions that they bring to market with their retail partners.
Nestles rating 3
I assigned a weighted score of 3 to the Nestle Company because when given a choice,
customers are loyal to Nestle Company. Instead of targeting all customers, Nestle Company
only needs to target new customers in order to grow their business. Customer Loyalty has a
significant impact, so an analyst should put more weight into it. This statements will have a
short-term positive impact on this entity, which adds to its value. The customer loyalty is a
difficult qualitative factor to defend, so competing institutions will have an easy time
overcoming it.
Mars rating 3
I assigned a score of 3 to the Mars Company because one important aspect of the Mars
Marketing Code is their commitment not to direct advertisements to children under 12
years of age. In 2007, they were the first food company to announce a global commitment
to stop advertising food, snack and confectionery products to children under 12.
Specifically, they do not buy advertising time or space if more than a quarter of the
audience is likely to be under 12 and they do not advertise on websites aimed at those
under 13. Visitors to most of their web pages have to enter their birth date before
downloading branded wallpapers or screensavers or participating in activities. Their
advertisements and promotions never depict unaccompanied children under 12 eating snack
foods, nor do they use them as spokespeople for their brands.

7. Global Expansion
Weight: 17% - Global expansion is the major factor in this industry thats why I weighted
it with 17%. Its important for a company to serve all its customers with ease and fast
service thats why I based my rating with regards to the number of operating segments each
company have. For the reason of the more operating segment a company have the more
customers around the world will be satisfied and served. This will result to a higher margin
of profit which will give the company a complete advantage towards its competitor.
Hersheys rating 3
I rated the company 3 because the Hershey Company operate as a single reportable
segment in manufacturing, marketing, selling and distributing various package types of
chocolate candy, sugar confectionery, refreshment, and food and beverage enhancers under
more than 80 brand names. Their five operating segments comprise geographic regions

including the United States, Canada, Mexico, Brazil and other international locations, such
as India, the Philippines, Korea, Japan, and China. They market confectionery products in
approximately 50 countries worldwide.
Nestls rating 4
I gave a rating of 4 to the Nestle Company because the Operating segments format
represents their Groups management structure and the way financial information is
regularly reviewed by their Executive Board. The operating Segments of the company are:

Zone Europe
Zone Americas
Zone Asia, Oceania and Africa

Nestl Waters
Nestl Nutrition
Other

The Group considers the business from both a geographic and product perspective,
through three geographic Zones and several Globally Managed Businesses (GMB). Zones
and GMB that meet the quantitative threshold of 10% of sales, trading operating profit or
assets, are presented on a stand-alone basis as reportable segments. Other business
activities and operating segments, including GMB that do not meet the threshold, like
Nestl Professional, Nestl Nespresso, Nestl Health Science and the Joint Ventures in the
Food and Beverages and Pharmaceutical activities are combined and presented in Other.

Mars rating 3
I rated the Mars Company with 3 because the company serves as one of the leading food
manufacturers in the world, Mars has a significant international presence in more than 74
countries. The major markets of Mars Company includes the following:

Mars Australia and New

Zealand
Mars China
Mars France
Mars Gulf Cooperation Council
Mars Germany

Mars Mexico
Mars Poland
Mars Russia and CIS
Mars United Kingdom
Mars United States


8. Market Share

Weight: 7% - I Assigned a score of 7% to the market share category because this

segments plays a minor role and does not affect the companies very much. Although it
doesnt affect the company that much it still important in researching the different aspects
of the business. I based my score regarding the companys market share all over the world.

Hersheys rating 2
Global Market Share: 6.7%
Best-Selling Candies: Hershey's, Hershey's Kisses
Etc: America's milk chocolate pioneer has been considering making an offer for Cadbury

Nestles rating 4
Global Market Share: 15.6%
Best-Selling Candies: Nestl Crunch, Butterfinger
Etc: Just bought Kraft's frozen pizza business and said it wouldn't bid for Cadbury

Mars rating 3
Global Market Share: 14.6%
Best-Selling Candies: M&Ms, Snickers, Milky Way
Etc: Snickers was named after the Mars family's favorite horse in 1930

IFE Matrix

Key Strengths

1.Brand Recognition

0.

2.Consumer Good will

0.

3.Strategic acquisitions and Joint

Ventures

0.

4.Research and Development

0.

5.Employee empowerment

0.

1. Independent board members

needed

0.

2. Hedged futures contracts

necessary

0.

3. Diversity among suppliers

and shippers

0.

4. Lower manufacturing costs

0.

5. Increase in healthy snack

subdivisions

0.

Key Opportunities

Total

The average total weighted score is 3.44

Analysis:

The average total weighted score is 3.44, which is well above average for
companies in this industry. They are well positioned in terms of research and
growth, have made strategic acquisitions and continue to shore up weaker product
lines through these acquisitions or through partnerships. However, again weakness
is shown by their lack of a truly independent board, which is voted in by common
stock holders.

Key Strengths:

1. Brand recognition:

They have iconic brands such as Hershey, Reeses, kisses, Kit Kat, York and many
others. These brands have been available heavily and marketed for many years and so
have inherent value spanning multiple generations. Any new company or major
competitor has to compete against such long standing brand names that are extremely
familiar to most individuals.
2. Consumer Good Will:

The Hershey Company has existed since the early 20th century and has developed
positive good will for more than one hundred years. The company has collaborated
with many organizations helping to prevent child labor, end adverse farming
practices and promote environmental responsibility. They also have established a
school and theme park in Pennsylvania.

3. Strategic Joint Ventures:

Hershey Foods has acquired over forty other companies since its establishment.
Some of the more notable acquisitions were H.B. Reese, Delmonico Foods, San
Giorgio, Y.S Brands, Nabisco, Leaf America, Dagoba Organic Chocolate, LLC and
Van Houten. These do not include their partnerships with organizations in various
countries throughout the world. These ventures expand both their knowledge and
product base.

4. Research and Development:

Hersheys acquisitions expand its patent base, its knowledge of other products along
with the employees who can create those products, the equipment to produce new
products and help foster creativity with the products it has now.


5. Employee Empowerment:

Hershey foods employees operate in a team environment where new ideas are
fostered as well as creativity. This allows dynamic innovation to develop among its
employees and then to be cultivated by managers into profitable results.

Key opportunities:

1. Independent board members needed:

Hershey foods board members are appointed by those who own the Hershey Trust
Company, that is the Milton Hershey School Trust, as such they are also controlling
stockholders for the Hershey Company. Therefore, their board is independent of any
outside stockholders. This makes independent decisions difficult for those who have
shares outside of those owned by the trust.

2. Hedged futures contracts necessary

Hershey Foods has and will continue to need to hedge their commodity purchases
because of increased prices. Unfortunately, they will only be able to insulate
themselves from only a portion of the price increases if there is a steep rise in costs
because hedging only removes some of the risk associated with commodities
purchasing.

3. Diversity among suppliers and shippers

Hershey foods should attempt to increase their access to a variety of suppliers and
shippers instead of relying on a few major suppliers. This is because of the inherent
instability that having only one or two suppliers from one country creates. They may
not need other suppliers at this time but instability in other parts of the world is
increasing and so too may the risk of having only one or two suppliers in a country
should that country eventually be afflicted with internal issues.
4. Lower manufacturing costs

As cocoa and sugar prices rise, the need for Hershey to decrease the cost in their
manufacturing to offset those costs will increase. The competition for snack food
purchase dollars is intense and snack foods are price sensitive, therefore they will
need to reduce costs in other areas of food production if they are to keep shelf prices
of their candies down to reasonable competitive levels.

5. Increase in healthy snacks subdivisions

 As consumers desire for healthier snacks increase so too Hershey must increase
their creation of healthy snacks. The market for snack foods, candies are driven by
customer demands, and as such, they need to align their business model to fit that
demand. If they do not fit their production with what the consumer demands, they risk
losing market share and profits.

EFE Matrix

Opportunities

1. Increased demand from

emerging markets

0.

2. Ethical labor and

environmental brand exposure

0.

3. New opportunities for

marketing in a varied media
environment
4. Diversity among consumer
tastes spurring new products

0.

0.

5. Increase in global market space

for products

0.

30

1. Continued slow economic

growth

0.

2. Increased price on main

ingredients

0.

3. An increase in health conscious

consumer purchasing

0.

4. Further fragmentation of the

industry

0.

5. Increase in conversion of sugar

to ethanol

0.

Threats

Total

The average total weighted score is 2.93

The average total weighted score is above average at 2.93. Hershey is well suited
to maintain profitability, increase sales and expand globally. They are selling a
majority of their products at mass merchant establishments as well as supermarkets.
They are number two in America for confectionery sales, number one for chocolate
sales in the US, number two in non-chocolate sales in the US and number one in the
US for breath freshener sales. They operate in over 70 countries including India,
China, Brazil, South Korea, the Philippines, Canada and all of Europe. The only
weak spot is in gum sales controlling only 2.8 percent of the US market share and
the continued increase in the cost of the raw commodities they use to produce their
products.

Analysis:

1. Increased demand from emerging markets

Although Hershey sales are still predominantly America based, they now have
operating segments in Canada, Mexico, Brazil, India, Japan and China. These
countries now have sizable middle class communities with access to Hershey
products and the potential sustained demand for Hershey products.

2. Ethical Labor and environmental brand exposure

Hershey is actively working with the international cocoa initiative foundation, the
world cocoa foundation, the roundtable on sustainable oil encourages sustainable farming
practices. These organization seek to eliminate child labor, facilitate the purchase of
supplies that have less of an impact on the environment and are produced with fewer
chemicals.

3. New opportunities for marketing in a varied media environment

New opportunities for Hershey to market its products include, movie tie-ins,
online, on television, through their interactive website and through social media sites.
Although television advertising is not new to Hershey the large increase in channels and
the ability to record shows4.

4. Diversity among consumer tastes spurring new products

Consumers desire a variety of chocolate candies and are also seeking alternative
treats that are healthier than traditional sweets. There is an increased desire for different
types of chocolate products such that the market can support those types; people will buy

new and varied products if they are offered to the public. Consumers are also more health
conscious wanting to snack healthier than they had in the past. These factors create and
opportunity for Hershey to gain market share by creating new chocolate products as well
as diverge from chocolate into healthy snacks.

5. Increase in global market space for products

Hersheys products are sold in millions of retail outlets as well as a variety of

national chain stores. These chain stores are themselves expanding globally, which can
offer new shelf space for Hershey products in these new countries.

External Threats:

1. Continued slow economic growth

Continued slow economic growth here in the US and globally may slow their
sales, and lower expected profits from Hershey Food Investments. This could in turn put
pressure on the company to decrease costs by cutting personnel, investments in
manufacturing, research, development and marketing of their products.
2. Increased price of main ingredients

Cocoa and Sugar both commodities needed to produce Hershey products suffer
from price fluctuations, which can only be partly mitigated by futures contracts. The
price of both of these commodities has increased from 2007 to 2009 necessitating
an increase in the final cost of Hershey confectionaries paid at consumer outlets.

3. An increase in Health conscious consumer purchasing

Nationally Americans are more health conscious. This is in part due to a significant
increase in diabetes but also the aging of Americans, who as they become older are
required to increase their healthy activities in order to decrease their statistical
chances of chronic disease. Health conscious Americans are purchasing healthier
foods and snacks while decreasing their purchasing of high fat, high calorie foods.
Hershey must invest in new healthier foods if they are to maintain profitability.

4. Further fragmentation of the industry

American consumer tastes are varied and so too are their food buying habits. As the
variety of consumer products has increased, so too has the consumers desire for
new and varied products has increased. This cycle is reflected in most consumer
industries but no more so than in the processed food industry. Hersheys market
share can in part increase or decrease with the number of successful brand
extensions they create in the next several years.


5. Increase in conversion of sugar to ethanol

Sugar is produced from sugar cane and alternately high fructose corn syrup.
Hershey products by their nature require large amounts of sugar or alternate forms
of sugar making the cost of manufacturing these products vulnerable to conversion
to ethanol. If more ethanol is produced from sugar cane and corn then there is less
available for food products increasing the scarcity of these commodities increasing
their costs on the market. If the costs of these commodities rise because Brazil is
converting more of its sugar cane into ethanol, the result will be an increase in the
cost of manufacturing food products for Hershey