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Long Term Effects
Reputation
The problem of using cocoa suppliers that involve in forced, child, and trafficked labor is an ongoing issue in the chocolate industry. As the company that provided 43.2% of the chocolates in the U.S, Hershey’s reputation could be damaged if they do not carefully handle the issue. It has been ten years since September 2001, when Hershey made an agreement to put an end to forced child labor in cocoa farm by 2005. Ten years after Hershey’s commitment, hundreds of thousands of children continue to work in hazardous conditions on cocoa farms in West Africa, and human trafficking continues. For countries such as the U.S, which people and its government pay a lot of attentions on companies’ ethical business behaviors. In the long term, Hershey’s reputation will decline if the issue of using forced, child, and trafficked labor is not carefully addressed.
Lost Market Share and Sales to its competitors
Hershey is a manufacturer of chocolate and other candy items, selling its products in over two million retail outlets in 50 different countries.Although Hershey has global reach, more than 90% of its revenue and profits come from the United States. Ever since the Raise The Bar campaign brought Hershey’s issue with forced child labor to attention, over 50,000 consumers nationwide have signed petitions to Hershey to “go Fair Trade”, and thousands more have called the company and protested its stores. Since there was no significant action taken by Hershey to address with the issue yet, there is are possibilities for Hershey to lose its U.S market share to its competitors such as Mars and Nestle, who have committed to begin sourcing cocoa that is independently certified to comply with labor rights standards.
Even though it would be a disadvantage for Hershey in the U.S market if they do not address the issue of the use of child labor in its supply chains, it is not likely that Hershey will experience a significant decline in their financial performance given their strong market share and brand. Hershey, along with its competitors, is expanding globally to reach larger markets and to increase sales, especially in the BRIC (Brazil,Russia, India, China) countries, where using child labor is not their primary concern.
Sources:
“Hershey Factbook 2011.” N.p., July 2011. Web. 25 Apr. 2013. <https://www.thehersheycompany.com/assets/pdfs/hersheycompany/FactBook-July-2011.pdf>.
“Hershey Foods (HSY).” Stock:. N.p., n.d. Web. 25 Apr. 2013. <http://www.wikinvest.com/stock/Hershey_Foods_(HSY)>.
Larsen, Todd. “Annual Report Card: Hershey, Trailing Behind Competitors, Gets “F” For Failing to Remove Child Labor From Its Chocolate Production.” Green America: Hershey Gets “F” For Failing to Remove Child Labor From Its Chocolate Production. Newsroom, 13 Sept. 2011. Web. 25 Apr. 2013. <http://www.greenamerica.org/about/newsroom/releases/2011-09-13-Hershey-Fails-to-Remove-Child-Labor-from-Chocolate-Production.cfm>.
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Hershey Factory Tour
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International Strategy part 1
As for now, Hershey’s international plan is to increase its market share in the international market. Their goal is to increase their revenue 54 percent to $10 billion by 2017, and to increase its sales growth from the international market to 50 percent. Hershey’s priority is to expand immediately in China, Mexico, and Canada, because they can provide huge sales growth. While expanding in these markets, Hershey’s strategy is to create partners though strategies like mergers, acquisitions or joint ventures with foreign companies that better known local markets around the globe. Within these markets, they want to focus on five of its’ brands; Hershey’s, Reese’s, Ice Breakers, Kisses, and Jolly Ranchers. Besides the markets Hershey’s primary focuses on, they also want to expand presence in the Middle East, North Africa, Brazil, and Southeast Asia. As for West and South Africa, India and Eastern Europe, they are long-term growth goals with near-tern market participation.
Some of Hershey’s strengths are:
- Established The Milton Hershey School for orphan boys, which increase public image.
- Hershey started firstly the chocolate manufacturing renaissance.
- Strong name and brand image.
- Diversified prodcuts (gum and chocolates).
- Focuses on multiindustry segments (entertainment, resorts, restaurant, commercial) which help spread company name on large market areas.
- Cooperative with students and professors; toll-free number (1-800-468-1714) that students or professors can call to obtain additional information about the company. This situation makes a difference for company.
- High motivation for employees by providing houssing, parks and school in facility.
Some of Hershey’s weaknesses are:
- Low global market share compare to its competitors in the chocolate confectionary industry.
- Concern for the natural environment is an issue Hershey should address before competitors seize the initiative.
- Excessive dependence on the US market, and a few distributors for revenue generation restricts Hershey’s growth potential.
- High price on cocoa beans
Hershey did not use much vertical integration. Although in December 2004, Hershey added some backward integration with the purchase of the Mauna Macadamia Nut Corporation, and their forward integration seems to end at the Hershey store located in Hershey, PA. Since Hershey did not outsource it production, almost all the chocolates are manufacture in the factories located in PA, but they also have manufacture factories located in Stuarts Draft, VA, Robinson, IL, Guadalajara, Mexico and some global partners that were added due to Hershey’s global strategy. Until February 2007, Hershey decided to outsource the production of their block chocolate bars (main ingredient in many of Hershey’s products) to Barry Callebaut. No further information indicate that Hershey is outsourcing its manufacture, which is one reason I believe cause Hershey’s weaknesses in the global market, because Hershey did not have the competitive advantages of cheap labor and lower material cost or many other things that its competitors have.
Since Hershey is already out and competes on the global market, the company strives to offer standardized products and services with centralization in a few locations. As for some other market like China, Hershey localized their products in order to gain local consumer’s favor and increase sales. Take China as an example, it’s a huge market for Hershey, and the net sales of Kisses in China had grown 97 percent since 2007. The main factor that causes this success is because of the packaging redesigns and promotion they did for the Chinese market are adapt by the local consumers. As for the markets that are similar to the US market, it’s better for Hershey to apply the standardized strategy. Not only they have experience from the US market, which is a huge successful but they also save the costs to redesign and labeling their products.
Chernavtseva, Aleksandra. “Global Strategies – BUS100sashach.” Global Strategies – BUS100sashach. N.p., n.d. Web. 04 Apr. 2013.
<https://sites.google.com/a/email.vccs.edu/bus100sashach/home/global-strategies>
“Hershey’s.” The Hershey Company. N.p., n.d. Web. 04 Apr. 2013.
<http://www.thehersheycompany.com/about-hershey/manufacturing-network.aspx>
Ryan, Jim T. “Hershey’s Chocolate Spread| Central Penn Business Journal.” Hershey’s Chocolate Spread| Central Penn Business Journal. N.p., 04 July 2012. Web. 04 Apr. 2013.
<http://www.centralpennbusiness.com/article/20120705/FRONTPAGE/120709916>
Saleem, Rizwan. “Hershey Foods Corporation Swot Analysis.” Scribd. N.p., 11 May 2009. Web. 04 Apr. 2013.
<http://zh.scribd.com/doc/15196558/Hershey-Foods-Corporation-Swot-Analysis>
W, Jennifer. “Jennifer W_The Hershey Company.” Jennifer W_The Hershey Company. Jennifer W, 09 Oct. 2010. Web. 04 Apr. 2013.
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