Hershey Company

Kate Anderson
Jackie Hernandez
Vincent LaPlante
Jennifer Lewin
Michael Sanzari
Thomas Tremblay

Management 480
Dr. Gene Baten
December 5, 2011
 Table of Contents
Introduction .................................................................................................................................... 3
Mission Statement .......................................................................................................................... 4
Revised Mission Statement................................................................................................................... 5
Input Stage ...................................................................................................................................... 6
External Factor Evaluation (EFE) Matrix ................................................................................................... 6
Internal Factor Evaluation (IFE) Matrix ..................................................................................................... 7
Competitive Profile Matrix (CPM) ............................................................................................................. 8
Matching Stage ............................................................................................................................... 9
Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix ................................................................ 9
Strategic Position and Action Evaluation (SPACE) Matrix ....................................................................... 12
Boston Consulting Group (BCG) Matrix .................................................................................................. 14
Internal-External (IE) Matrix ................................................................................................................... 15
Grand Strategy Matrix (GSM) ................................................................................................................. 16
Data Collection Matrix ............................................................................................................................ 17
Decision Stage ............................................................................................................................... 18
Quantitative Strategic Planning Matrix (QSPM) ..................................................................................... 18
Recommendations ........................................................................................................................ 20
Epilogue......................................................................................................................................... 22
 3

Introduction

It all started with a decision by a man named Hershey, which ended up becoming one of
the world’s best known chocolate brand and well-known theme park. Milton S. Hershey, the
founder and creator of the Hershey chocolate bar, started his journey in 1876 with his first
candy bar. Hershey started the Lancaster Caramel Company which produced not chocolate, but
a caramel candy. By the 1900s, after the great success of his caramel recipe, Mr. Hershey
experimented with chocolate and finally the Hershey Milk Chocolate bar America knows and
loves was born. The Hershey Chocolate Company, a subsidiary of Milton’s Lancaster Caramel
Company, became a worldwide brand and company. It was in the year of 1894 that Milton
Hershey made the decision to try adding chocolate coating to his caramel candy. This created
the enterprise of the Hershey Chocolate Company, located near his hometown, Derry
Township, Pennsylvania. By 1905, with milk from the nearby dairy farms and local workers, his
new factory was born along with the delicious milk chocolate bars. He later went on to produce
more types of chocolates and products. Hersey did not stop at just chocolate and candy bars,
though. Many are familiar with great theme park called Hershey Park located in Pennsylvania.
Hershey Park was opened on April 24, 1907; it was created to be a leisure park for the
employees of the Hershey Company, but later was opened to the public. Today the park covers
over 110 acres of land including over 60 rides and attractions. Another great success of the
Hershey Company was as early as the 1909, when Mr. Hershey and his wife Catherine
established the Hershey Industrial School, a school for orphan boys which is now known as the
Milton Hershey School. Now it is open to both boys and girls of all diversity. The school provides
free education and residential services including meals and health care to almost 17,000 kids in
need. Hershey has come a long way and still has been growing and evolving even after the
passing of the man who started with a decision to make candy.
Hershey’s product lines have evolved to encompass far more than the original caramel
and chocolate. As part of the confectionery industry, their products range from candy to gum to
baking products. Some of these products include:
• Reese’s
• Almond Joy/Mounds
• York Peppermint Patty
• Kit Kat
• Kisses
• Mr. Goodbar
• Bubble Yum/Ice Breakers/Carefree
• Chocolate chips/baking chocolate
• Cocoa
• Syrup/Dessert topping
With Hershey’s vast variety of products, it is easy to see why they are such a popular
brand.
 4

Mission Statement

Hershey’s mission statement can be found below; the numbers represent a key of components
that should be included in a company’s mission statement.

(7)“Bringing sweet moments of Hershey happiness to the world every day.”

To our stakeholders, this means:

(2)(7)Consumers: Delivering quality customer driven confectionery experiences for all

occasions.

(6)(9)Employees: Winning with an aligned and empowered organization while having fun.

(1)(5)Business Partners: Building collaborative relationships for profitable growth with our
customers, suppliers, and partners.

(5)Shareholders: Creating sustainable value.

(8)Communities: Honoring our heritage through continued commitment to making a positive

difference.

Key:

1. Customers
2. Products or Services
3. Markets
4. Technology
5. Concern for Survival, Growth, and Profitability
6. Philosophy
7. Self-concept
8. Concern for Public Image
9. Concern for Employees

Hershey’s original mission statement is strong and only missing a few key points. In their
mission statement, they left out the Markets component, which is where the firm competes
geographically, as well as the Technology component, which states whether or not the firm is
technologically current. In our revised mission statement, we included these two components
to make a strong statement that allows a range of feasible alternative objectives and strategies.
Hershey is the largest chocolate product distributor in North America; in order to stay ahead of
the competition, the mission statement should remind people that this is where the firm
competes. Hershey also has a strong internal Research and Development team as well as an
 5

external R&D team. This gives them control over new innovations in the chocolate market
because they can decide what to focus on with their internal R&D department. Our additions
to Hershey’s mission statement can be seen in red.

Revised Mission Statement

(7)“Bringing sweet moments of Hershey happiness to the world every day.”

To our stakeholders, this means:

(2)(7)(3)Consumers: Delivering quality customer driven confectionery experiences for all occasions from
the largest chocolate producer in North America.

(6)(9)Employees: Winning with an aligned and empowered organization while having fun.

(1)(5)Business Partners: Building collaborative relationships for profitable growth with our customers,
suppliers, and partners.

(5)Shareholders: Creating sustainable value.

(8)Communities: Honoring our heritage through continued commitment to making a positive difference.

(4) Hershey’s direct research on consumer preferences ensures we satisfy every taste bud.

Key:

1. Customers
2. Products or Services
3. Markets
4. Technology
5. Concern for Survival, Growth, and Profitability
6. Philosophy
7. Self-concept
8. Concern for Public Image
9. Concern for Employees

By incorporating the Markets and Technology components, Hershey now has a complete
mission statement.
 6

Input Stage
External Factor Evaluation (EFE) Matrix

Weighted
Key External Factors Weight Rating
Score
Opportunities
1. Dark chocolate health benefits 0.06 1 0.06
2. Marketing of holidays 0.10 4 0.40
3. Joint ventures outside of U.S. 0.09 3 0.27
4. Organic food market growing 0.05 2 0.10
5. Acquisition of companies outside of U.S. 0.05 3 0.15
6. Technological advancements lower manufacturing costs 0.06 2 0.12
7. Changing tastes=new products (richer products, coffee 0.07 3 0.21
flavoring)
Threats
1. Price of cocoa rising 0.07 2 0.14
2. Price of sugar rising 0.07 2 0.14
3. Easily substitutable products 0.09 3 0.27
4. Health conscious consumers/obesity epidemic 0.05 2 0.10
5. Health concerns (peanut allergies) 0.06 1 0.06
6. Unfavorable currency exchange rate 0.08 2 0.16
7. Natural disasters affecting growth of products 0.10 1 0.10
Total 1 2.28

Hershey’s External Factor Evaluation, EFE, consists of opportunities and threats within
their industry. These help evaluate the economic, social, cultural, demographic, environmental,
political, governmental, legal, technological, and competitive factors that can affect them. By
identifying opportunities and threats within the confectionery industry, Hershey can assess how
well they are responding to the key factors. Each factor is assigned a weight according to
importance, and the entire weights total 1. Each factor is then rated according to how well
Hershey is responding to that factor (1=poor response…4=superior response). The weight is
multiplied by the rating to give a score, and the scores are totaled. The opportunities and
strengths identified combine to give Hershey a weighted EFE score of 2.28. Hershey is just
under, but close, to the average weighted score of 2.5 which shows that they can capitalize
more on opportunities and do more to avoid external threats.
 7

Internal Factor Evaluation (IFE) Matrix

Weighted
Key Internal Factors Weight Rating
Score
Strengths
1. Strong brand name/image recognition 0.11 4 0.44
2. Diverse product offerings 0.05 3 0.15
3. Strong partnerships (Kraft, Nabisco) 0.06 3 0.18
4. Largest chocolate producer in North America 0.08 4 0.32
5. Sales up 5.9% 0.09 3 0.27
6. Own R&D, as well as external 0.06 3 0.18
7. Strong social responsibility/environmental sustainability 0.06 3 0.18
8. One-of-a-kind amusement park 0.05 4 0.20
Weaknesses
1. Downsizing 0.08 1 0.08
2. High dependence on U.S. market (86%) 0.06 2 0.12
3. High long-term debt 0.10 1 0.10
4. Tumultuous relationship with shareholders (Milton Hershey Trust) 0.06 2 0.12
5. Heavy reliance on brand loyalty 0.05 2 0.10
6. Outsourcing to reduce costs-->inefficient communication 0.05 1 0.05
7. Large CEO bonus in time of recession/downsizing (40% bonus) 0.04 2 0.08
Total 1 2.57

Hershey’s Internal Factor Evaluation, IFE, consists of several strengths and weaknesses
in the functional areas of the business. After identifying strengths and weaknesses specific to
Hershey’s company, each factor is weighted according to importance. Each strength must be
rated as a 3 (minor strength) or 4 (major strength), and each weakness must be rated as a 1
(major weakness) or 2 (minor weakness). The weight is multiplied by the rating to tally the
weighted score, which are then summed to achieve total weighted score. The combined
weighted score for Hershey’s IFE is 2.57. This places Hershey slightly above the average position
of 2.5.
 8

Competitive Profile Matrix (CPM)

Hershey Nestlé Mars

Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.14 4 0.56 2 0.28 3 0.42
Product Quality 0.16 4 0.64 3 0.48 3 0.48
Price Competitiveness 0.05 2 0.10 4 0.20 2 0.10
Management 0.08 3 0.24 2 0.16 3 0.24
Financial Position 0.15 1 0.15 3 0.45 3 0.45
Customer Loyalty 0.20 4 0.80 2 0.40 3 0.60
Global Expansion 0.15 2 0.30 4 0.60 3 0.45
E-commerce 0.05 2 0.10 2 0.10 4 0.20
Variety of Product Line 0.02 2 0.04 4 0.08 3 0.06
Total 1 2.93 2.75 3

The Competitive Profile Matrix (CPM) identifies Hershey’s competitors and its particular
strengths and weaknesses in relation to a sample firm’s strategic position. Hershey’s main
competitors are Nestlé and Mars. The critical success factors that make up the CPM are
advertising, product quality, price competitiveness, management, financial position, customer
loyalty, E-commerce, and variety of product line. These factors are weighted according to
importance and must total 1, and each company is rated on whether the factor is a strength or
weakness (1=major weakness…4=major strength). The weight is multiplied by the rating to tally
the score, and scores for each company are totaled. Hershey has significantly higher scores in
advertising, product quality, and customer loyalty. However, Nestle dominates in the areas of
price competitiveness, global expansion, and variety of product line. Mars is also similarly close
in scores to Hershey and has an advantage in the area of E-commerce. Hershey’s weighted
score is 2.93, Nestlé is 2.75, and Mars is 3.0. These numbers do not necessarily mean that
Hershey is not as good as Mars, but it can be used so that Hershey can focus on what needs to
be done to gain competitive advantage in this specific industry.
 9

Matching Stage
Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

Opportunities
1. Dark chocolate health benefits
2. Marketing of holidays
3. Joint ventures outside of U.S.
4. Organic food market growing
5. Acquisition of companies outside
U.S.
6. Technological advancements lower
manufacturing costs
7. Changing tastes=new products
(richer products, coffee flavoring)
Threats
1. Price of cocoa rising
2. Price of sugar rising
3. Easily substitutable products
4. Health conscious consumers/obesity
epidemic
5. Health concerns (peanut allergies)
6. Unfavorable currency exchange rate
7. Natural disasters affecting growth of
products
Strengths
1. Strong brand name/image
recognition
2. Diverse product offerings
3. Strong partnerships (Kraft, Nabisco)
4. Largest chocolate producer in North
America
5. Sales up 5.9%
6. Own R&D, as well as external
7. Strong social
responsibility/environmental
sustainability
8. One-of-a-kind amusement park
SO Strategies
1. Joint advertising in commercials (S3,
O2)
2. Product development with coffee
flavors (S2, 07)
3. Market dark chocolate health
benefits (S4, O1)
ST Strategies
1. Offer 100-calorie bar (S1, S2, T4)
2. Develop peanut-free processing
facility (S4, T5)
3. Acquire own land to grow resources
(S7, T1, T2)
Weaknesses
1. Downsizing
2. High dependence on U.S. market (86%)
3. High long-term debt
4. Tumultuous relationship with
shareholders (Milton Hershey Trust)
5. Heavy reliance on brand loyalty
6. Outsourcing to reduce costs-->inefficient
communication
7. Large CEO bonus in time of
recession/downsizing
WO Strategies
1. Increase market share in Mexico (W2,
O5)
2. Reduce costs due to technological
advancements (W6, O6)
3. Offer Dagoba Organic line in large retail
stores (W5, O4)
WT Strategies
1. Monitor bonuses to executives until
global economy stabilizes (W7, T6)
2. Increase advertising outside U.S. (W2,
T4)
 10

The SWOT Matrix is an important matching tool that uses factors from both the Internal
Factor Evaluation (IFE) and the External Factor Evaluation (EFE) to develop four types of
strategies: SO (strengths-opportunities) Strategies, WO (weakness-opportunities) Strategies, ST
(strengths-threats) Strategies, and WT (weakness-threats) Strategies. Strengths and
weaknesses are taken from the IFE while opportunities and threats are taken from the EFE.
From there, various internal and external factors are matched together to come up with the
four different types of strategies mentioned before.

SO Strategies are ones that use internal strengths to take advantage of external
opportunities. Our group found that it would be beneficial for Hershey to focus mainly on
intensive strategies. With such diverse product offerings and changing tastes of consumers,
product development can be an attractive SO Strategy. Furthermore, with the recent news of
dark chocolate health benefits and Hershey being the largest chocolate producer in North
America, they should market the dark chocolate health benefits in which a market penetration
would be another attractive SO Strategy.

WO Strategies are ones that aim at improving weaknesses by taking advantage of

external opportunities. Two out of our three WO Strategies are seen as intensive strategies.
With such a high dependence on the U.S. market (86%), and Hershey’s recent acquisition of
Grupo Lorena in Mexico, we think Hershey should increase their market share in Mexico. In this
case, market development can be an attractive WO strategy for Hershey. Another WO Strategy
that could be beneficial for Hershey involves their Dagoba Organic line. With such a heavy
reliance on brand loyalty from consumers (which is not always a good thing), they might get
tired of seeing candy as their only option from Hershey. Recently, Hershey’s organic food
market has been on the rise. With that opportunity, they should consider offering their Dagoba
Organic line in large retail stores. Therefore, product development could be attractive WO
Strategy to play out.

ST strategies are ones that use strength’s to avoid or reduce the impact of external
threats. A big threat to Hershey since they are such a large chocolate producer is the obesity
epidemic that faces America. Because of this, we thought it would be advantageous for Hershey
to use their strong brand name and diverse product offerings and come out with a 100-calorie
bar for the health conscious consumers. With this strategy, product development can be an
attractive ST Strategy. Something Hershey’s recognized for is their strong social responsibility
and environmental sustainability. They can use this to their advantage and try to acquire their
own land to grow resources on. Hershey can greatly benefit from this because they would no
longer have to worry about the price of both cocoa and sugar rising.

Finally, WT Strategies are directed at reducing internal weaknesses and avoiding

external threats. One thing that a lot of Hershey’s shareholders had a problem with was the
 11

large bonus that the CEO received. With both the recession and Hershey’s recent downsizing, a
lot of people didn’t agree with this. In addition, the exchange rate wasn’t doing well either. We
believe that Hershey could monitor their bonuses to executives until the global economy
stabilizes. Once it stabilizes, people won’t have as much of a problem with this. Another WT
Strategy we thought Hershey should pursue is to increase their advertising outside of the U.S.
Something Hershey falls back on is their high dependence on the U.S. market. However, with
more and more health conscious consumers in the U.S., the market might not be as favorable in
the future as it is now. Therefore, Hershey could be proactive about this and try to increase
their advertising in other countries. They should first try to make them aware of their brand
name, and eventually introduce their product.

Although this SWOT Matrix shows Hershey’s current snapshot in time, it shows them a
lot about their company: things they’re good at, things they can fix, what they should look out
for, what they can capitalize on, and most importantly, what their current options are as of
right now. It is important for this SWOT Matrix to continually be monitored and modified since
things are constantly changing.
 12

Strategic Position and Action Evaluation (SPACE) Matrix

Rating
Financial Position
Long-term debt is $1,505,900, an increase of 17.6% from 2007. 1
Earnings per share is $1.41, up .45 from 2007. 4
Net income is $311,405,000, up 45.4% from 2007. 6
Net sales are $5,132,768, up 3.8% from 2007. 5
16
Industry Position
Prices of sugar, cocoa, milk, gas, and nuts are up. 1
Confectionery industry grew by 3.6% in 2009. 5
Chocolate accounts for 55.8% of market value in confectionery 6
industry.
Seasonal sales are growing. 4
16
Stability Position
Exchange rates are fluctuating. -3
Natural disasters are affecting the growth of resources. -4
Hershey has weathered recession well according to outside critiques. -1
Hershey has easily substitutable products. -4
-12
Competitive Position
Hershey has strong brand recognition. -2
Hershey is North America's largest chocolate producer. -1
Hershey's sales were up 5.9% in 2007. -1
Hershey offers a one-of-a-kind amusement park. -3
-7

Conclusion
SP Average is -12/4 = -3 IP Average is +16/4 = 4
CP Average is -7/4 = -1.75 FP Average is +16/4 = 4
Directional vector coordinates: x-axis: -1.75 + (+4) = 2.25
y-axis: -3 + (+4) = 1
Hershey should pursue Aggressive strategies.
 13

FP
Conservative +6 Aggressive
1. Backward, forward, horizontal integration
+5
2. Market penetration
3. Market development
+4
4. Product development
5. Diversification (related or unrelated)
+3

+2

+1
(2.25, 1)
CP IP
-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
-1

-2

-3

-4

-5
Defensive Competitive
-6

SP
The SPACE Matrix is designed to help determine a company’s overall strategic position.
The y-axis assesses financial and stability positions, while the x-axis looks at competitive and
industry positions. The SPACE Matrix is a useful tool because it looks at both internal (financial,
competitive) and external (stability, industry) factors simultaneously.

To develop Hershey’s SPACE Matrix, key factors that make up each dimension are
selected. The financial and competitive positions should be compared to competitors, while the
industry and stability positions should be compared to the industry. The financial and industry
variables are rated from 1 (worst) to 7 (best), while the stability and competitive factors are
rated from -1 (best) to -7 (worst). Then, average scores for each dimension should be
determined. Lastly, the position on the graph is a result of adding the averages of the
competitive and financial positions on the x-axis, and the financial and stability positions for the
y-axis. Hershey ends up with an x-coordinate of 2.25 and a y-coordinate of 1, which places
Hershey in the Aggressive Quadrant. Based on where a company lands in the SPACE Matrix
helps the company determine what strategies they should employ. In Hershey’s case, they
should consider all types of integration, all intensive strategies, and all diversification strategies.
 14

Boston Consulting Group (BCG) Matrix

Relative Market Share

High 1.0 Medium .50 Low 0.0

High +20

Stars Question Marks

Industry Sales Growth Rate

II I
• Backward, forward, horizontal integration
• Market penetration
(1, 3.6) • Market development
Medium P d td l t
0

Cash Cows
Dogs
III
IV

Low -20

The BCG Matrix is designed to how well different divisions of a company are doing in
relation to each other. However, Hershey did not have divisional information available, so the
BCG Matrix was constructed looking at Hershey as a whole. The x-axis looks are relative market
share, while the y-axis looks at industry sales growth. Hershey is the industry leader in the
confectionery industry, so their market share is 1. The latest industry sales growth rate
available put the industry growing at 3.6%. With a coordinate of (1, 3.6), this places Hershey in
the Star quadrant. With high market share and a somewhat high industry growth rate, Hershey
should pursue integrative and intensive strategies to maintain or strengthen their position.
 15

Internal-External (IE) Matrix

(2.57,
2.28)

Quadrant V Strategies: Hold & maintain—market penetration, product

development

The Internal-External (I/E) Matrix uses both the IFE and EFE total weighted scores. The
weighted scores are taken directly from the IFE and EFE. The IFE total weighted score
(represented on the x-axis) is 2.57, while the EFE total weighted score (represented on the y-
axis) is 2.28. Therefore, the plot on the matrix would be (2.57, 2.28). To interpret this, with 2.57
as their IFE total weighted score, Hershey has an average (a score of 2.0 to 2.99) internal
position. In addition, with 2.28 as their EFE total weighted score, Hershey is considered medium
(a score of 2.0 to 2.99).

After plotting the point (2.57, 2.28), Hershey falls into cell V. Cells III, V, or VII can be
managed best with hold and maintain strategies. Typically, market penetration and product
development are two common strategies that are used for divisions that fall in these cells.
Because we didn’t have the division information available to us, we couldn’t construct an I/E
Matrix for the divisions.
 16

Grand Strategy Matrix (GSM)

The Grand Strategy Matrix (GSM) has become a popular tool for formulating alternative
strategies. With this matrix, organizations can fall into one of the four strategy quadrants. The
GSM is based on both the competitive position and market (industry) growth.

Referring back to our Competitive Profile Matrix (CPM), Hershey’s total competitiveness
score was 2.93 compared to our competitors Mars (score of 3) and Nestle (score of 2.75). With
these scores, we can say that Hershey is in a relatively strong position in comparison to their
competitors. Hershey’s market (industry) growth rate is currently at 3.6%. Therefore, we are
considered to have a slow market growth rate.

In the GSM, the competitive position lies on the x-axis while the market growth lies on
the y-axis. As mentioned before, our competitive position is 2.93 and the industry growth rate
is 3.6%. However, because the confectioner’s industry growth rate is below 5%, it is considered
to have a slow market growth rate which would make 3.6 negative. Plotting that as a point
would be (2.93, -3.6) which would fall into Quadrant IV. This means that Hershey has a
relatively strong competitive position, but they are in a slow-growth industry. Firms that fall
into Quadrant IV typically have high cash-flow levels and limited internal growth needs.
Therefore, Hershey can try to pursue related or unrelated diversification, and joint ventures.
 17

Data Collection Matrix

SWOT SPACE BCG I/E GSM Total

Intensive
Market penetration X X X X 4
Market X X 2
development
Product X X X X 4
development
Integration
Forward X X X 3
Backward X X X 3
Horizontal X X 2
Defensive
Retrenchment 0
Divestiture 0
Liquidation 0
Diversification
Related X X 2
Unrelated X X 2

The Data Collection Matrix looks at each matrix from the Matching Stage and compares the
strategies recommended by each matrix to all of the available strategies a company can undertake. The
strategies recommended by each matrix are tallied and summed to determine the most common
strategies suggested. In Hershey’s case, market penetration and product development are the most
common strategies throughout all of the matrices in the Matching Stage. This information is used to
determine the alternative strategy options in the QSPM.
 18

Decision Stage
Quantitative Strategic Planning Matrix (QSPM)

Strategic Alternatives
Increase joint advertising Increase advertising
within the U.S. outside of the U.S.
Key Factors Weight AS TAS AS TAS
Opportunities
1. Dark chocolate health benefits 0.06 - - - -
2. Marketing of holidays 0.10 4.00 0.40 3.00 0.30
3. Joint ventures outside of U.S. 0.09 1.00 0.09 3.00 0.27
4. Organic food market growing 0.05 2.00 0.10 1.00 0.05
5. Acquisition of companies outside U.S. 0.05 1.00 0.05 3.00 0.15
6. Technological advancements lower manufacturing costs 0.06 - - -
7. Changing tastes=new products (richer products, coffee flavoring) 0.07 3.00 0.21 2.00 0.14
Threats
1. Price of cocoa rising 0.07 - - - -
2. Price of sugar rising 0.07 - - - -
3. Easily substitutable products 0.09 3.00 0.27 1.00 0.09
4. Health conscious consumers/obesity epidemic 0.05 - - - -
5. Health concerns (peanut allergies) 0.06 - - - -
6. Unfavorable currency exchange rate 0.08 - - - -
7. Natural disasters affecting growth of products 0.10 - - - -
1.00
Strengths
1. Strong brand name/image recognition 0.11 4.00 0.44 2.00 0.22
2. Diverse product offerings 0.05 2.00 0.10 1.00 0.05
3. Strong partnerships (Kraft, Nabisco) 0.06 4.00 0.24 1.00 0.06
4. Largest chocolate producer in North America 0.08 2.00 0.16 1.00 0.08
5. Sales up 5.9% 0.09 - - - -
6. Own R&D, as well as external 0.06 - - - -
7. Strong social responsibility/environmental sustainability 0.06 3.00 0.18 4.00 0.24
8. One-of-a-kind amusement park 0.05
Weaknesses
1. Downsizing 0.08 - - - -
2. High dependence on U.S. market (86%) 0.06 - - - -
3. High long-term debt 0.10 - - - -
4. Tumultuous relationship with shareholders (Milton Hershey 0.06 - - - -
Trust)
5. Heavy reliance on brand loyalty 0.05 4.00 0.20 2.00 0.10
6. Outsourcing to reduce costs-->inefficient communication 0.05 - - - -
7. Large CEO bonus in time of recession/downsizing 0.04 - - - -
1.00 2.44 1.75
 19

The QSPM is designed to determine the feasibility of actions that can be taken by a
company to improve its overall position. Information from the Input and Matching stages
should be considered when establishing the two potential alternatives. In Hershey’s case, we
chose to evaluate whether Hershey should increase its joint advertising within the U.S. or
increase advertising outside of the U.S.

The QSPM is designed by listing the opportunities, threats, strengths, and weaknesses
and their weights from the IFE and EFE matrices. Then, each factor is considered in relation to
both alternative strategies. If the factor is relevant to one strategy but not the other, a score
cannot be given for either. Furthermore, if a factor is deemed relevant, the strategies cannot
receive the same score for the same factor. The Assigned Scores (AS) are rated 1 (not attractive)
to 4 (highly attractive), and the score is multiplied by the weight to determine the Total
Attractiveness Scores (TAS). After each factor has been considered, the TAS for each strategy is
summed; whichever strategy receives a higher total is the more feasible option. In Hershey’s
case, increasing advertising within the U.S. outshone increasing advertising outside the U.S.,
with scores of 2.44 and 1.75, respectively. However, this does not mean that Hershey should
not consider increasing advertising outside of the U.S.; it just shows that, in this particular
matrix with these particular factors, increasing advertising in the U.S. is a more feasible option.
 20

Recommendations

To maintain and even strengthen Hershey’s position in the confectionery industry, we provide
the following recommendations:

• Increase joint advertising to market their major products

o Hershey can use joint advertising to add profit. This will also allow Hershey to
instantly gain more customers based on the trust consumers may have with their
business partner. Having a joint venture is also beneficial when it comes to
advertising capital when they promote Hershey; Hershey is tapping into that
valuable investment. The additional revenue streams will not require a large
amount of additional effort as well.
Hershey’s Syrup/Ice Cream- Hershey should take advantage of their syrup
market and add it to the popular ice cream market. Promoting these
together as a sundae ice cream strategy would be beneficial.
Hershey’s Chocolate/Graham Crackers (s’mores) - Hershey could go
family- oriented with this and promote s’mores by taking their premium
chocolate and combining it with a graham cracker and marshmallow
businesses. During a cool summer night, why not show a family around a
campfire making s’mores with Hershey chocolate?
Hershey’s Syrup/Milk- There are many different chocolate milks in the
market; Hershey could compete with these competitors by advertising
their syrup in conjunction with milk to make chocolate milk.
• Maintain strong brand image to retain customers
o Branding is a very powerful component in business. Brands should have a logo
that is easily identifiable by consumers. The consumers decide if they will buy a
product or use a service based on how they view the brand. The brand itself tells
us or lets us imagine how good or bad the product is even if we have never
tasted it before! Hershey has established a very strong brand image and has
retained a majority of its customer over the years as well as gained new ones.
Hershey must continue to maintain their image and uphold it to the highest
integrity because once you lose it, it is hard to get it back.
• Expand product offerings to address wants/needs of health-conscious consumers
o Organic line
Hershey’s organic line includes Dagoba Organic; however, it is only
offered in specialty organic stores. By expanding into larger retail stores
like Stop n’ Shop and other major grocers, the line will be more easily
accessible to consumers seeking organic products. They should use their
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strong R&D to determine the types of products customers are looking for
in organic sections.
o 100-calorie bar
While Hershey currently produces 100-calorie bars, they are available in
limited variety and locations. Hershey should consider expanding these
lines to reach more consumers.
• Have R&D department look into advertising and increasing market share outside the
U.S.
o Hershey should take advantage of the global market and all the possible profits
outside the United States. Hershey needs to keep getting their name out there
even though it is already well-known. Advertisements should center on their
premium chocolate, along with the new lines that come from research and
development. In order to have Hershey’s new products become successful and
known outside the U.S., they need to advertise which would include:
commercials, online advertising, billboards, and print ads.
• Get finances under control; downsizing yet giving large CEO bonus
o It is a very hard time right now in the United States and globally since we are in a
recession. Times are tough and a lot of people are unemployed. It would look
bad for the brand if the company was continuously giving the CEO and other
executives extremely high bonuses, so Hershey should be very careful and take
the economy into consideration when compensating employees.
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Epilogue

In 2008 MSNBC had announced that several Hershey chocolate products were
reformulated to replace cocoa butter with vegetable oil as an emulsifier. As it stood, the FDA
does not allow a product to be called "chocolate" if the product contains such ingredients.
Hershey stood by the change stating that it was done in order to keep production costs down
so they would have to raise prices or, worse, decrease sizes. For “hardcore” chocoholics this
was a low blow; some of their favorite treats no longer contain milk chocolate. Consumers even
complained about the Almond Joy enough that Hershey’s had to put the milk chocolate back in
it.
Hershey, as well as other competitors in the industry, is acquiring nonprofit and
nutritional products to complement their existing ones. Hershey uses tons of sugar but a poor
sugar harvest caused prices to increase in the second part of 2009 from their main suppliers,
Brazil and India. Wholesale sugar prices were up 70% in the first 8 months of 2009, reaching a
new high of 22.21 cents per pound. Some research analysts expect international wholesale
sugar prices will reach 40 cents a pound. India, which up until 2 years ago was a net exporter of
sugar, is becoming a net importer of sugar because of two straight poor harvests. Brazil’s sugar
cane harvest has been suffering because of too much rain. Brazil produces nearly half of the
world’s sugar, but they have been converting up to half of its supplies into ethanol instead of
refined sugar. By entering into other markets that do not use as much sugar, Hershey can hope
to offset its losses due to price increases of their resources.

One of the products Hershey was selling was known as Hershey Kissables, which were
miniature Hershey Kiss shaped candies coated with a sugary shell. The candies came in a
rainbow of colors and were even created in holiday versions for Easter, Valentine’s Day and
Christmas. Hershey’s even introduced a dark chocolate version called Kissables Dark. But by July
2009, only four years after their introduction, Hershey’s ceased production of the Kissables for
reasons which they are unwilling to disclose.
Other recent Hershey products includes Hershey Drops, which are bite-size versions of
their more popular candy bars, such as their signature chocolate bar and their cookies n’ cream
bar. They also created miniature versions of the Reese’s peanut butter cup and, as well as bite-
size sugar coated pieces to mimic candy bars like Almond Joy. Most recently, they released
Hershey’s air-whipped chocolate, which is noticeably different because of the tiny air bubbles in
the chocolate bar.
On November 9, 2011, Hershey’s introduced the launch of Cookie Headquarters, the
one-stop holiday baking destination for personalized expert advice and recipes. The holidays
are officially in full swing and who couldn’t use a little extra help conjuring up those mouth-
watering holiday treats? Hershey's Cookie Headquarters is an online resource full of recipes and
tips and access to a team of experts to answer consumers' baking questions during the busy
holiday baking season through consumer posts on HersheysKitchens.com, Hershey's Kitchens
Facebook pages and the @HersheysKisses Twitter. "When it comes to baking, timing is
everything," said Hershey's Kitchens baking expert Linda Stahl. "For the first time ever,
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Hershey's is inviting consumers to connect and get customized tips and advice - directly from
the experts and each other - to help bakers in the kitchen this holiday season."