Methods and Techniques for Analyzing Business Competition - Essay Example

? Environmental Analysis Paper Environmental Analysis Paper Introduction They Hershey Company is the largest North American manufacturer of quality sugar and chocolate confectionary products, headquartered in Hershey, Pennsylvania in the United States. The Company was founded in 1894 by Milton S. Hershey and is among the oldest United States’ chocolate companies. Since its inception, it has grown in leaps and bounds with revenues of about $ 6 billion and nearly 14,000 employees across the world in 2012 (The Hershey’s Company, 2012). The Hershey Company markets brands such as Hershey’s Kisses, Ice Breakers, and Hershey’s Reese among others. Also, it is the leader of the dark and premium chocolates such as Hershey’s Extra Dark, Cacao Reserve, and Hershey’s Special Dark. Other popular brands such as Milk Duds, Payday, Kit Kat, and Almond Joy have tremendously contributed to the success of the company to achieve revenues of about six billion dollars (The Hershey’s Company, 2012). Like other businesses in the world, the Hershey Company operates with business environment that is pre-disposed with business environmental factors such as legal-political, socio-cultural, economic, and technological factors. This paper will seek to conduct an environmental scan and economic analysis on Hershey’s, including the remote, industry, and operating environments. Macroeconomic Forecast Macroeconomic forecast helps provide the consumers, businesses, and government with information necessary in making better decisions (Kew and Stredwick, 2009). The macroeconomic forecast indicators affect Hershey’s in the future and are important that they are considered to be part of the strategic planning of the Company. Increasing GDP in America (though at a smaller rate) and in other countries where its products are sold is favorable in boosting the purchase of the products and increases the prospects of the Hersey’s success (McGuigan, et al., 2011). In the light of this, the strategic planning of Hershey’s will include considering increasing its supplies especially after global financial crisis has completely faded away. Also, reducing rate of unemployment widens the pool of people earning income and therefore increasing the number of people able to buy Hershey’s products (Brenner, 2010). However, unemployment rates in some countries have remained constant or have soared therefore threatening to reduce sales of Hershey’s products in those countries. Thus, Hershey’s strategic planning will moderate supply in various markets based on the prevailing unemployment rates (McMahon., 2008). In addition, inflation as a macroeconomic factor affects the Hershey’s products presently and in the future. Increase in prices of commodities in various markets that Hershey’s sells its products; tend to affect the performance of the Company (McGuigan et al, 2011). The increase in the cost of production of other consumable commodities including sugar and chocolate confectionary products make the consumers to be cautious in their purchasing, as well as prompting them to focus more on basic commodities than on commodities that they consider to be “luxurious” (Brenner, 2010). The seemingly high inflation rates in most markets call for a strategy that meets all the market niches. For example, Hersey’s products can be packaged in quantities and prices that reflect the inflation rates of particular markets. Demand and disposable income is another macroeconomic factor that affects the success of a company like Hershey’s (Morden, 2007). Reduced demand and disposable income of consumers may affect the sales of Hershey’s products in America and in countries where the Company’s products are sold (McGuigan et al, 2011). Therefore, Hersey’s strategy should seek to enhance consumers’ demand and to package quantity and prices that reflect the disposable income of the targeted markets. Non- Economic Factors in the Remote Environment Social and Cultural Social and cultural factors include those health consciousness, emphasis on safety, and cultural aspects among others. These factors’ trends affect the demand for products of a given company and its operations. Social and cultural factors in Hershey’s remote environment include increasing health concerns especially in respect to obesity, and peanut allergies (McMahon, 2008). There is an increasing concern among the American and other countries populations regarding the relationship between sugar and chocolate confectionary products and obesity. This concern is compounded by the awareness of the health risks associated with obesity such as diabetes and heart diseases. Also, there is a belief among some section of the population that these products may lead to allergies (Fleisher and Babette, 2007). Political Factors The political aspect in Hershey’s remote environment is reflected in the regulations by the U.S. Food and Drug Administration on post-nutritional information. This requirement affects Hersey’s business because of the stringent procedures involved and the concern that it raises in the public. Also, price floor legislation for chocolate ingredients in America affects the pricing strategy of the Company (Kew and Stredwick, 2009). Technological Factors The Hershey’s Company has invested heavily in technology especially on automation, Research and Development, and technological innovation. The company has made significant progress in manufacturing technology which has helped it reduce its cost of production thereby making its products more competitive in the sugar and chocolate confectionary products industry (Fleisher and Babette, 2007). Demographic Factors The Hersey’s Company products target people of all age groups. Apart from targeting the general public with its products, the Company targets a section of the population that desire changing the tastes of chocolate products, as well as those who desire richer products. Demographic factor in this Company is also reflected in its labor force where most of them are young people from local universities and colleges; they offer relatively cheaper labor, therefore reducing the Company’s cost of production (Kew and Stredwick, 2009). Competitive Analysis of Hershey’s The Hershey’s Company has been revising the prices of its products based on the prevailing micro and macro economic factors. Recently, it raised its wholesale candy prices by 9 percent. The rise was attributed to the increased cost of production, which arose as a result of increasing fuel prices which is used to operate candy kitchens, air condition the warehouses, and in trucks used to distribute the products (Hitt, Ireland, and Hopkinson, 2007). Also, the weakening dollar has led to the rise in the cost of the imported cocoa products. The rising health care costs of the workers have raised the costs incurred by the Company, which has in turn led to the rise in the costs of their products (Brenner, 2010). The pricing trend of Hershey has been to keep its product size the same while raising the prices as needed. This implies therefore that things like slots in wrappers, manufacturing equipments, nutrition panels, and store shelves remain the same. This pricing strategy has not negatively impacted on the competitiveness of the Company as its competitors are faced with similar cost of production challenges (Kew and Stredwick, 2009). Since Hershey’s Company is one of the largest it enjoys better economies of scale than most of its competitors and therefore able to keep its prices relatively lower than theirs. Hershey’s Current Situation The mission of Hershey’s Company is to bring sweet moment of Hershey happiness every day to the world. The mission shows the Company’s desire to achieve unparalleled business success through enhanced consumer satisfaction and business innovation. The current competitive position of the Hershey’s Company is impressive. The Company is not only the largest manufacturer of sugar and chocolate confectionary products in North America, but also records very impressive financial results. Also, it is well positioned in the American market, as well as having markets in over sixty countries across the world (The Hershey’s Company, 2012). Its pricing strategy is among the best, a situation that has enabled it to effectively compete with its competitors in the industry. According to D'Antonio (2007), there are five forces that are central to external analysis of any given company. The first one is Intensity of rivalry which is at the moment moderately unfavorable to its industry attractiveness (Hitt, Ireland, and Hoskisson, 2007). The second one is the pressure from substitutes which are presently moderate to the company’s industry attractiveness. The third force is threat of entry which is currently moderately favorable to the company’s attractiveness in the industry. The fourth one is the power of buyers that is at the moment moderately unfavorable. The final force is the power of suppliers which greatly depends on suppliers and can be rated as moderately favorable to Hershey (Morden, 2007). That notwithstanding, there are three current opportunities that should be addressed through the strategic planning process of the Hershey’s Company. These opportunities and issues include: product diversification in order to widen the market reach and increase revenues; increase health consciousness to ensure that the Company address public health concerns such as obesity; and positive market outlook to ensure that the company enjoys positive public perception (McMahon, 2008). Strengths and Weaknesses in Hershey’s Company There are various strengths and weaknesses in the Hershey’s operating environment that can be leveraged to capitalize on the emerging opportunities. The first strength is the strong brand portfolio that the Company enjoys; this portfolio dominates most of the market and can capture emerging opportunities by incorporating more brands that meet emerging needs and expectations of the consumers (D'Antonio, 2007). Also, they already have immense diversified products that meet customers’ expectations and can capitalize on further diversification to capture emerging market trends. In addition, the Company has strong customer relationship over many of its partners, which makes it easy for it to maintain or exceed existing market size (McMahon, 2008). However, the Hershey’s Company has some weaknesses. One of the main weaknesses is that it heavily depends on the United States Market. The Company has invested heavily in the United States’ market compared to other markets. While this present a risk in an event of the collapse or significant decline of the American economy, it also presents an opportunity whereby most of the Company’s business strategy should be build around the American market which is more familiar to them (The Hershey’s Company, 2012). The second main weakness is high leverage; Hershey’s has borrowed significantly through various financial instruments in order to increase the potential return on investment. This can, however, help the firm to take advantage on the emerging opportunities that require heavy investments (Hitt, Ireland, and Hoskisson, 2007). Three strategic long-term objectives that can be measured to determine the success of the strategic plan include: increasing the market share by 20 percent after five years; increasing sales by 20 percent after five years; Increasing capitalization by 15 percent after five years. References Brenner, J. G. (2010). The emperors of chocolate: Inside the secret world on Hershey & Mars. New York: Broadway books. D'Antonio, M. (2007). Hershey: Milton S. Hershey's extraordinary life of wealth, empire, and utopian dreams. New York: Simon & Schuster Paperbacks. Fleisher, C and Babette, B. (2007). Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition. FT Press. Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2007). Strategic management: Competitiveness and globalization: concepts. Mason, OH [etc.: South-Western. Kew, J., & Stredwick, J. (2009). Business environment: Managing in a strategic context. London: Chartered Inst. of Personnel and Development. McGuigan, J et al. (2011). Managerial Economics: Applications, Strategy and Tactics. South-Western Educational Publishing. McMahon, J. D. (2008). Built on chocolate: The story of the Hershey Chocolate Company. Santa Monica, CA: General Pub. Group. Morden, T. (2007). Principles of strategic management. Aldershot: Ashgate. www.hersheys.com. The Hershey’s Company Profile (2012). Retrieved July 14, 2012 from http://www.reuters.com/finance/stocks/companyProfile?symbol=HSY Read More