One of the strategies Hershey Company is focusing on is winning in digital commerce. It wants to change the way it does business including changing some processes, level of innovation and sales and marketing to make sure everything the company is doing is digital (GmbH, 2017).
Hershey predicts digital sales penetration to be in the mid-single digits in the next five years. They expect to deal with sales like ship-to-home digital platforms like Amazon or staples which will see the basket size will be around three times over physical retail. With delivery and pick-up strategy, it will further increase.
The strategy revolves around community, conversion, content, and search. It aims to link the physical and digital retail ecosystems. They know that digital is the front door to the store and digital visits are therefore preceding the physician visits. A company having is content when they get a consumer through a successful search result.
The strategy, therefore, aims at converting a purchase with a long-term aim of repeating the buying and getting on the customer’s digital shopping list (GmbH, 2017). The company defines community as its direct relationship with the customers, and it aims at adding to the retailer relationship.
The company understands that India is a vital place for company’s world business and therefore it remains a key focus of the company. It is one of the fastest growing economies in the world both in disposable income and substantial growth. The chocolate category is around $1.2 billion in revenue, and it is still growing with over 11%, and it is, therefore, best for further investment.
The company has already established brands such as cocoa powders, chocolate syrup, milkshakes and spreads but it has a strategy to establish a new brand. In 2018, the strategy is to introduce kisses in the market which is considered as one of the leading markets in the world (GmbH, 2017).
SWOT (strength, weakness, opportunity, threat) with strategic implications for the company
Hershey has embarked on snack segment, and it has already benefited from Amplify snack Brands which has penetrated in household and purchase frequency. The company has an opportunity to expand to other countries, and this is one of the best investment opportunities in the market.
The company has started its sales in China, India, and Australia and it looks forward to expanding more in Asia and Europe. Expanding to other countries is a good opportunity and strength considering it has a strategy to use digital in serving customers and it will be an effective move since the expansion to other countries will help its strategy.
It has an opportunity to continue in maintaining strong customer since it has a strategy to serve them through the digital market. Hershey has also embarked on dark chocolate that does not use sugar, and this can boost the strategy since the consumers will be searching for dark chocolate and the search engine will direct them to Hershey digital since it has dark chocolate
The company was once sued for allowing child labor in its business operations. However, the company set a plan to fund a campaign to solve child labor in West Africa. It also announced that it was taking its commitment to the source very seriously.
Hershey has targeted a commitment to a hundred percent third-party certified cocoa by 2020 (GmbH, 2017). They also set a certified Bliss chocolate line for human rights. This will clean its name and therefore be in the best place as it implements its strategy on the digital market.
The company has several locations in the United States and the world as well which gives that company strength and an opportunity in marketing and targeting the new markets. It has the greatest location in New York and other locations as well. It has locations in great China, Canada, India, Japan, Korea, Malaysia, Mexico, Philippines and in the United Arabs.
A company will always work to win the mind of the public while avoiding negative publicity to avoid losing heavily on customers and Hersey is no exception. The company had been sued and connected to child labor, and it was said that the company was allowing child labor in its business operations (Manza, 2014). However, just like any other successful company would do, it planned on addressing the issue by setting a plan and funding the plan to clean its name.
The company was also associated with violation of 400 international students who thought they were enjoying singing in summer of work experience and healthy exposure to American culture. This can affect the strategy for digital market considering most customers are students. The company also had a cyber-attack where it was hacked, and the hacker wanted a recipe. This can be a threat especially to the strategy which is focusing on online purchase.
Hershey depends on advertisements mostly for marketing. Like many products especially foodstuffs targeting young adults and children requires a lot of advertisements and Hershey which produces snacks and chocolate is no exception. It is, therefore, a small threat for the company since it can spend more on advertising. This can affect the strategy since it needs to be advertised. The company also has a small threat to demand decrease due to diabetes fears. Many people are avoiding sugary products in fear of diabetes especially young women who consume the product in large quantities.
There is also a lack of support from developing countries when the company tries to extend to those countries. This can affect the strategy since the marketing need support from the government for it to succeed in the developing countries the company is opening up. The other threat on the strategy is counterfeit products which can be purchased online and affect its strategy.
BCG (Boston consulting group) matrix with strategic implications for the company
For Hershey, most of the revenue comes from the domestic market when compared to international. From what has been recorded, it collects most of the revenue in the United States. Although the company does not lead in manufacturing chewy candy, it gets a lot of revenue from the domestic market (GmbH, 2017).
It has contingency store value and volume. The revenue mostly contributed by the chewy candy that has several fruit flavors and texture with a juicy center. Hershey takes to the market chewy candy under different brands and flavors including Reese, Twizzlers, and Jolly Rancher.
The growth is due to chewy candy which continues to be produced in different forms due to innovation and introduction of new flavors. The growth of disposable income is helping since citizens get cash to spend on more sweet treats. In the international sector, Hershey earned revenue from China, Mexico, and Brazil mostly (GmbH, 2017). As seen from the record, the business of the company was in line from what they had predicted in these three markets. The revenue collected mostly coming from consumable and take-home pack
Hershey industrial growth rate is high domestically compared to internationally due to the increased consumption of sweet food in America. It has seen growth and expansion in different regions and locations in the United States. It recorded a growth rate of 10.5 percent from the earliest of 9.2 percent (GmbH, 2017).
It is expected to grow further due to its drivers who can offer respite and fuel it further. The growth is mostly from the buyout of Amplify snack brand and tomato chips. The growth was higher in the North American segment due to increased volumes and net price realization which benefited growth.
The bottom and top line improved year over the year. It is growing from the solid market of the Hershey chocolate brands and Amplify buyout. Snacking boosted the category year growth with other products like ready to eat popcorn. The snacking increase was due to household penetration and buying frequency.
The company established separate divisions to strengthen and nurture the emerging better for consumer portfolio. It also had visibility into second-hand strategy and skinny pop and ready to eat popcorn helped in strengthening and sustaining the move.
Barkin also sparked the company’s growth. From the analysis, dark-chocolate snacks have grown and contributed to the company growth. It also grew due to SKU cuts which contributed mostly in the mid-year in 2018 (GmbH, 2017).
The company had also maintained an optimized portfolio. It has also grown internationally including opening up in China, India, Australia and other areas in Asia specifically. The innovations are accelerating the growth. In these regions, there are key markets where customers spending growth is positive.
Possible strategic alternatives-explain strategies that you recommend for future growth of the company
I would recommend many policies and plans and improvements for the company to grow in the future or keep growing. The operating environment needs an agile approach to the portfolio, strategy, and pricing. Hershey has to keep on taking a proactive approach to ensure it optimizes the portfolio and offers improved profitability. The company can also role up some plan sleeves to strengthen the Amplify brands further for more yields from the buyout in the coming years.
When you look at the consumer behavior, the taste for sweet chocolate is changing. Hershey needs to change the production of chocolate or products made from sugar or which is added sugar. Consumers are now concerned about healthy eating since they have snack choices like chips, nuts and nutritional bars. There are alternative snacks that the company can invest in and innovate to take the consumers who are getting away from traditional sugar confections.
Hershey can also accelerate the business in the essential international regions like Mexico, Brazil, and China since they have a growing consumer positivity. It can activate the core brands faster in these countries. The currency in these countries is increasing as well as in India. Hershey can add more focus on China since it has the largest consumer ground and it has the potential for growth and improvement.
The company, I recommend, can add more production capacity and resources since it will help in boosting growth in China, India, Brazil, and Mexico. The company has to optimize manufacturing operations to assist the Chinese business. Chocolate consumption is also decreasing in other countries, and the company should have an alternative. I recommend that it embarks on dark chocolate and chocolate added milk instead of sugar.
Evaluation of current organizational structure- explains how/if their current organizational structure is effective
The Hershey organizational structure consists of a United States commercial team with the role to keep on building the leadership of the company and keep on capitalizing on Hershey scale in the United States market (Organizational structure/culture, 2011). The structure also involves an international team which is commercial and roles to purchase profitable growth chances in the central market in Asia and the Americas.
The organizational structure also involves an innovative and global team that is responsible for creating and developing world brands, and it should develop a benefit-driven growth platform for the long-term and short-term and strengthening marketability in the globe. Several executives have various roles to ensure the company’s organizational structure is re-aligned. The organizational structure is responsible for implementing world strategies Organizational structure/culture, 2011).
The Hershey organizational structure is effective since it has changed the competitiveness of the organization. The company has been enjoying the leading post of the number one seller of chocolate in North America. The organizational structure has seen that the company is competing with other organizations that manufacture chocolate. It has been able to combat competition and keeps on growing by capitalizing on the global market. The structure has enabled the company in implementing its strategies. The company has better workers due to fair treatment and living in comfortable and pleasant areas.
They are provided with various educational and environmental programs. The team is committed to diversity, and the company includes several support groups for the various demographics of the organization. It follows the values of community, and it volunteers since there are several programs to assist workers to get involved. The Hershey organizational structure is also effective since it works in collaboration in solving company issues and also in decision making.
Recommended changes (If needed) to the structure, culture, values, processes, rewards, or technology
It is always a challenge to change the culture of any organization for leaders since it consists of an interlocking set of objectives, assumptions, attitudes, communication practices, and values. It is necessary for a company like Hershey to start with leadership tools including vision and cement the change with management tools like defining roles, control systems, and measurements and apply pure power tools.
Like any company would change the culture, Hershey needs to change a bit of the culture to move from the culture that believed that workers who are treated fairly and who lived in a comfortable environment become better workers.
Many reasons can make an organization change its organizational structure. Hershey has to change or shift the organizational structure since it has a strategy that wants to see succeed. To fully, effectively and efficiently implement the strategy, the company needs to change the organizational management to make sure the global group is capable of implementing the prepared strategy. When a company changes the strategy; it has to change the team also.
Hershey has changed its strategy on the digital market, and therefore, the company has to change the organizational structure to ensure that the global team that is responsible for implementing the strategy can be able to do it effectively.
The company has to make sure that the elements support each other. The company needs to change the structure since it wants to expand the business overseas and it must prepare for business growth. It is also moving to new product lines and introducing a change in management.
- Chapter 11: Organizational structure/culture. (n.d.). Retrieved from http://jmfrrell.blogspot.com/2011/06/chapter-11-organizational.html
- Chocolate and child labor: A hurdle for Hershey. (2012, November 16). Retrieved from http://fortune.com/2012/11/16/chocolate-and-child-labor-a-hurdle-for-hershey/
- GmbH, F. (2017, December 1). US Chewy Candy Market1 – The Hershey Company Followed Mondelez International in Terms of Revenue in 2016 | Markets Insider. Retrieved from https://markets.businessinsider.com/news/stocks/us-chewy-candy-market-2017-2021-the-hershey-company-followed-mondelez-international-in-terms-of-revenue-in-2016-1010174381
- Hershey Snacks Drive Second-Quarter Growth. (2018, July 27). Retrieved from https://www.cspdailynews.com/snacks-candy/hershey-snacks-drive-second-quarter-growth
- Hershey’s shift into broader snack segment propels earnings. (n.d.). Retrieved from https://www.bakingbusiness.com/articles/46720-hersheys-shift-into-broader-snack-segment-propels-earnings
- India critical to Hershey’s international business, remains a key focus market: CEO. (2018, October 18). Retrieved from https://www.cnbctv18.com/retail/india-critical-to-hersheys-international-business-remains-a-key-focus-market-ceo-1119911.htm
- Manza, K. (2014). Making chocolate sweeter: How to encourage Hershey Company to clean up its supply chain and eliminate child labor. BC Int’l & Comp. L. Rev., 37, 389.