Hershey Company Marketing - Case Study Example

Marketing Report by {name} Foundation Course – Tutor: La Trobe University Department of Management 21st April 2015 The Hershey Company Executive Summary The report purposes to identify an appropriate new product for Hers Company in India. In so doing, it will use a SWOT analysis in order to determine the appropriate strategy to use in order to capture the consumers. From the report, it is evident that an O-S strategy is chosen because it meets the needs and wants of many consumers and in addition, the opportunities presented give the company competitive advantage. The last part of the report is the recommendations where market segmentation of the new product is investigated. Moreover, the 4Ps of marketing are scrutinized and justified to show how the dark chocolate brings about sustainability in terms of healthy eating choices and habits. Introduction In the following report, an analysis of Hershey Company is given in order to identify a new product that would be successful in India. In so doing, the new product needs to be determined and that is why a SWOT analysis is carried out by Hershey Company. SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a tool that provides an organization with internal and external factors that influence work (Kotler, et al., 1996, p. 106). Opportunities and threats are the external environments of a business while the strengths and weaknesses are internal factors. The importance of this tool is to be able to examine individual products and their relationship to markets. Secondly, it gives individuals and or organizations obtained knowledge with regard to the exploration of competitor’s characteristics. It is through the SWOT analysis conducted that an organization gains information that can be shared with other functional areas of an organization. Hence, new communication possibilities are provided and explored for new efforts and solutions to existing problems. Last, but not the least, a SWOT analysis is used to adjust and refine plans mid-course (Kotler, et al., 1996, p. 107). The Hershey Company was founded by Milton S. Hershey in Hershey, Pennsylvania in 1894. It is the leading chocolate producer and its market share is 30.5% because it has exceptional market tactics and strategies. It has below 80 different brands that it sells to 70 different countries around the globe. Hershey’s Kit-Kat’s, Almonds Joys, Kisses, Twizzlers, Ice Breakers, and Reeses are its iconic brands. The Hershey Company’s competitors are Nestle and Mars Inc. Mars holds the next highest after Hershey and uses M&Ms and Snickers as some of its brands. On the other hand, Nestle occupies one third of the market share just like Hershey, hence is a major threat (Datamonitor 2009). Market description Hershey Company is an international confectionery industry dealing in candies, gums and chocolate. In India, the potential buyers of these products total to 45% of the population and the majority being the young and elderly people. These potential buyers and sellers are from the age group between 18 and 55 years. The market leaders of Hershey Company in India are SWOT table Strengths Weaknesses 1. Brand awareness and loyalty 2. Micromarketing 3. Keeping current and honest marketing 1. Production 2. Management leadership 3. Globalization Opportunities Threats 1. High/low pricing strategy 2. Innovation 3. Cancellation of support on sugar price 1. Competitors advertisements 2. Change in consumers lifestyle 3. High substitutes SWOT rankings and explanation Strengths Weaknesses 1. Brand awareness and loyalty. The over 80 brands of the Company have popular brands in them with strong brand equity. Thereby, helps Hershey maintain stable revenue due to the different customer types. Moreover, Hershey is able to introduce new brands to the market easily (Datamonitor 2007). According to Stark and Stewart, organisations find it important to keep consumers other than look or get new ones (2011). Brand awareness has made Hershey Company products well-known and is an advantage over the small industries or brands in the market. 2. Micromarketing is where a Company markets to a small target audience and Hershey has done that by tailoring products to the wants of customers (Grewal & Levy 2012). The main web page of Hershey has dedicated a section for selling personalized candies. For example, predesigned arrangements for weddings, holidays, birthdays and baby showers are options to meet the needs of customers. 3. Keeping current with marketing and prices times is an emphasis stressed by Hershey. Pricing trends are competitive and does not back down on previous commitments, thus honest irrespective of the fluctuations in the market prices. Thereby, this reliability saves on company customers. For instance, the rise of health concerns led Hershey to develop low sugar chocolates and candies. 1. Production. Efficiency of Hershey in terms of its costs of packaging, handling and distribution are extremely high. The high costs are associated with thematic merchandising strategy, which exerts pressure on the company’s gross margin. The manufacturing capacity of Hershey has fallen behind its market demand with regard to its new product line. According to Product Alert 29, Hershey’s manufacturing capacity is not enough to produce all of its usual package types. Other merging problems related to distribution concerns emerged technological advancements. This brought about delays in shipments that eventually caused earnings to drop by 19% since it lacked adequate facilities (Schiavo 2015). 2. Globalization. Hershey international expansion strategy posses as a weakness because most of its acquisition occurred in the domestic market. Whereas, majority of its divestiture took place in the international markets. For decades, Hershey has tried to sell its products in Mexico, but it failed because of competing companies and the same applies to Japan markets. According to Brenner, it is a fact that Hershey is the only confectionery giant that does not have international factories and revolves only in the U.S (1999). 3. Management leadership. The management at Hershey lacks an international mindset in this competitive age and is evident in the knowledge they have on world markets (Brenner 1999). For example, some of the top management in charge of international operations does not speak a second language. Communication is paramount for organisations if they want to expand to international markets. Changes in the company should not be drastic to the extent of affecting the management of the organisation. Opportunities Threats 1. High/low pricing strategy is “where product is set at low in order to attract people by making them feel as if they are saving money” (Grewal & Levy 2012, p. 419).Therefore, for dark chocolate, Hershey is advertising lower prices and this has drawn many consumers because they seem to be promoting healthier products. 2. Innovation. Constant innovation is required in this industry in order to meet the demands of their customers. The view taken by many consumers with regard to candies, drinks and foods is that of having functional elements and not refreshments. As such, confectionery giants continue to innovate and extend their product lines. Other companies go to the extent of giving their consumers products that are fresh, at the same time, considering aspects like convenience and portability. 3. Cancellation of support on sugar price. The government cancelling to give support to sugar price equations is a cost disadvantage for domestic confectioners. This interference by the government has forced confectioners to fight for their rights with regard to input prices using the Sugar Program Reform Act of 1998 (Candy Industry 1999). 1. Competitor’s advertisement has proved that Hershey’s are lacking even though they are happy and joyful with a slogan of, “life is delicious (The Hershey’s Company 1996).’ Advertising is a way of branding that attracts consumers to Company products and services. 2. Change in consumers’ lifestyle. Nowadays, consumers tend to go for low-fat and healthy food, which means the food should contain more attributes, but with the same taste (Schiavo 2015). The preference of many consumers is to eat sugarless candy versions with the same taste as confections with sugar. As such, confectioners are struggling to invest in R&D that provides the Company with tasty functional candy. 3. High substitutes. Emergence of candy substitutes like healthy snacks to the market has seen industries take away market share from candy. This is evident in reference to aspects like retailing space, taste, healthy attributes, and packaging, Consumers desires are satisfied with a myriad of candy flavor alternatives that are non-candy. Thereby, giving a chance for competitive categories to introduce “healthier alternatives” for all meals (breakfast, lunch and dessert) during candy-eating occasions (Schiavo 2015). Recommendations The new dark chocolate has natural flavors and it tastes leaves one with a fresh breadth the whole day. As such, the quality of the dark chocolate is of high standards. The design, packaging, features and customer service are all dependent on the needs of the customer. Promotion aspect of the product is going to be done through advertisements. More so, direct marketing, sales promotion and personal selling will be encouraged in order to lure as many consumers as possible. The shop is strategically located and will largely use the Internet to sell its products directly to the consumers. Lastly, the price will depend on the package the client chooses and also the season. If it’s the season of love, the dark chocolates will be expensive among other seasons in the calendar. Geographic segmentation is the form of market segmentation encouraged because of its common characteristics in influencing buying attitudes. Therefore, the characteristics analyzed in this case include income per head, tastes, population, and competition nature in the market plus the type of trade carried out by the country. Demographic segmentation is also an appropriate method in this case because we will divide the population into discrete segments by sex. Psychographic and behaviouristic segmentation also plays vital roles in regard to identifying personality traits in populations and loyalty to products respectively. The new dark chocolate has customer value associated with showing love and affection to another individual of the opposite sex. This brings people together and encourages young people to bond in a positive way that brings about unity, love and understanding in the community. The less privileged people in society are also not left behind because the elderly show them a sense of belonging by giving them presents during holidays. The O-S strategy is appropriate for this new product because the opportunity of having to increase or lower the prices gives them a competitive advantage. Therefore, this opportunity complements the strengths associated with the new dark chocolate since the company intends to sell less sugary products. The introduction of more sugar free dark chocolate means products of high sugar will have increased prices. But due to the customer loyalty aspect, the company is not going to suffer since its revenues will be maintained. Based on health benefits, the company uses the high and low strategy to increase prices on the dark chocolate with high sugar content and reduce on those with low sugar content because they are the healthier choice. Reference List Adweek Asia Adweek 1998, ‘Study see sweet future for Asia’, vol. 12, no. 23, p. 3. Brenner, JG 1999, The emperors of chocolate: Inside the secret world of Hershey and Mars, Random House, New York. Candy Industry 1999, ‘Opportunities abound for fat replacers and sweeteners,’ vol. 164, no. 4, p. 42. Datamonitor 2007, 2013, “The Hershey Company SWOT Analysis,” Business Source Premier, viewed 18 April 2015, EBSCOhost. Datamonitor 2009, “The Hershey Company,” Business Source Premier, viewed 18 April 2015, EBSCOhost. Grewal, D & Levy, M 2012, Marketing, The McGraw-Hill Companies Inc, New York. Hershey Foods Corporation, Annual Report 1996-1999. The Hershey’s Company Homepage 1996, viewed April 19, 2015, The Hershey Company n.d, Mergent online, accessed on 19 April 2015.Snack Food & Wholesale Bakery 1999,’ vol. 88, no. 6. Schiavo, A 2015, ‘Hershey (HSY) stock retreating today as consumers lose sweet tooth,’ viewed 20 April 2015, Wall Street Journal. Stark, K & Stewart, B 2011, “It’s cheaper to keep ‘em,” viewed 18 April 2015, . Read More