Hershey (HSY) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Hershey (United States)

Based on various researches at Oak Spring University , Hershey is operating in a macro-environment that has been destablized by – there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, wage bills are increasing, etc

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Introduction to SWOT Analysis of Hershey

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hershey can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hershey, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hershey operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Hershey can be done for the following purposes –
1. Strategic planning of Hershey
2. Improving business portfolio management of Hershey
3. Assessing feasibility of the new initiative in United States
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hershey

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Strengths of Hershey | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Hershey are -

Ability to lead change in Food Processing

– Hershey is one of the leading players in the Food Processing industry in United States. Over the years it has not only transformed the business landscape in the Food Processing industry in United States but also across the existing markets. The ability to lead change has enabled Hershey in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Cross disciplinary teams

– Horizontal connected teams at the Hershey are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Strong track record of project management in the Food Processing industry

– Hershey is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Training and development

– Hershey has one of the best training and development program in Consumer/Non-Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Low bargaining power of suppliers

– Suppliers of Hershey in the Consumer/Non-Cyclical sector have low bargaining power. Hershey has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hershey to manage not only supply disruptions but also source products at highly competitive prices.

Effective Research and Development (R&D)

– Hershey has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hershey staying ahead in the Food Processing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Sustainable margins compare to other players in Food Processing industry

– Hershey has clearly differentiated products in the market place. This has enabled Hershey to fetch slight price premium compare to the competitors in the Food Processing industry. The sustainable margins have also helped Hershey to invest into research and development (R&D) and innovation.

Superior customer experience

– The customer experience strategy of Hershey in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High brand equity

– Hershey has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hershey to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Organizational Resilience of Hershey

– The covid-19 pandemic has put organizational resilience at the centre of everthing Hershey does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Digital Transformation in Food Processing industry

- digital transformation varies from industry to industry. For Hershey digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hershey has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Successful track record of launching new products

– Hershey has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hershey has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

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Weaknesses of Hershey | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Hershey are -

Aligning sales with marketing

– From the outside it seems that Hershey needs to have more collaboration between its sales team and marketing team. Sales professionals in the Food Processing industry have deep experience in developing customer relationships. Marketing department at Hershey can leverage the sales team experience to cultivate customer relationships as Hershey is planning to shift buying processes online.

High dependence on Hershey ‘s star products

– The top 2 products and services of Hershey still accounts for major business revenue. This dependence on star products in Food Processing industry has resulted into insufficient focus on developing new products, even though Hershey has relatively successful track record of launching new products.

Low market penetration in new markets

– Outside its home market of United States, Hershey needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Skills based hiring in Food Processing industry

– The stress on hiring functional specialists at Hershey has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Compensation and incentives

– The revenue per employee of Hershey is just above the Food Processing industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Products dominated business model

– Even though Hershey has some of the most successful models in the Food Processing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hershey should strive to include more intangible value offerings along with its core products and services.

Need for greater diversity

– Hershey has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

Ability to respond to the competition

– As the decision making is very deliberative at Hershey, in the dynamic environment of Food Processing industry it has struggled to respond to the nimble upstart competition. Hershey has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

No frontier risks strategy

– From the 10K / annual statement of Hershey, it seems that company is thinking out the frontier risks that can impact Food Processing industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

Lack of clear differentiation of Hershey products

– To increase the profitability and margins on the products, Hershey needs to provide more differentiated products than what it is currently offering in the marketplace.

Employees’ less understanding of Hershey strategy

– From the outside it seems that the employees of Hershey don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

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Hershey Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Hershey are -

Learning at scale

– Online learning technologies has now opened space for Hershey to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Hershey is facing challenges because of the dominance of functional experts in the organization. Hershey can utilize new technology in the field of Food Processing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Building a culture of innovation

– managers at Hershey can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Food Processing industry.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hershey to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Hershey to hire the very best people irrespective of their geographical location.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Hershey in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Food Processing industry, and it will provide faster access to the consumers.

Loyalty marketing

– Hershey has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.

Buying journey improvements

– Hershey can improve the customer journey of consumers in the Food Processing industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Hershey can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Low interest rates

– Even though inflation is raising its head in most developed economies, Hershey can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Manufacturing automation

– Hershey can use the latest technology developments to improve its manufacturing and designing process in Food Processing sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Leveraging digital technologies

– Hershey can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Better consumer reach

– The expansion of the 5G network will help Hershey to increase its market reach. Hershey will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Food Processing industry, but it has also influenced the consumer preferences. Hershey can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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Threats Hershey External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Hershey are -

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Hershey.

Regulatory challenges

– Hershey needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Food Processing industry regulations.

Increasing wage structure of Hershey

– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Hershey.

Consumer confidence and its impact on Hershey demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Food Processing industry and other sectors.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Hershey needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Hershey may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Food Processing sector.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Hershey business can come under increasing regulations regarding data privacy, data security, etc.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Hershey in Food Processing industry. The Food Processing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

Stagnating economy with rate increase

– Hershey can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Food Processing industry.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Easy access to finance

– Easy access to finance in Food Processing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hershey can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Shortening product life cycle

– it is one of the major threat that Hershey is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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Weighted SWOT Analysis of Hershey Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hershey needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of Hershey is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of Hershey is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Hershey to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Hershey needs to make to build a sustainable competitive advantage.

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