Introduction
No entrepreneur believed more passionately that he had created a commercial utopia than did Milton S. Hershey, the founder of the Hershey Chocolate Company. He believed that firm produced a product unexcelled by any other candy maker and that the public already knew this. Having achieved the best, he saw no need to tamper with his products or with the packaging or with his sales methods. What’s more, as long as his company maintained the status quo, his customers would recognize immediately the candy’s worth and its highly distinctive wrappers (Phillips 2002). In Pennsylvania, this entrepreneur built the world’s largest chocolate factory in a city named for him. Guides conducted tours through the factory, and visitors looked with great anticipation for the free samples of chocolate distributed at the end of the tour. Hershey also founded a successful amusement park nearby, which attracted thousands of visitors. Hershey Park served as a forerunner of the theme parks that Disney and others built in the post-World War II period. Hershey saw no need to spend money trying to convince potential customers of the value of his product when the public already had decided that his chocolates were best. When Hershey left the firm, his successors came to realize that their famous founder had believed in a myth that hurt the firm. Although Hershey’s products were popular, the competition seemed ready to seize the opportunity to capture a larger share of the market. The new executives began to advertise (Sanders 1999). The Hershey Company is known as the largest producer of the best kind of chocolates in North America. The Hershey Company is also a global leader in chocolate and sugar confectionery. This paper intends to analyze the company and its goal to maintain its position as a market leader.
The business nature and scope
The nature of the company is selling chocolate confectionaries. Unlike most hot beverages available, chocolate had great nutritional value. Its high fat content, together with some protein, bridged the gap that often existed between stimulants and food. Drinking chocolate thus acquired a particular association with cold climates and seasons, even though the beverage originated in tropical Mesoamerica and was sometimes taken cold. At the same time, excessive fat in chocolate posed problems of solubility and digestibility, not overcome till cocoa butter was regularly and effectively pressed out in the late century. A little chocolate was eaten as a snack throughout its history, but eating chocolate only developed a truly significant market at the end of the nineteenth century. This helped consumption to grow faster than that of tea, coffee and other established competitors (Clarence-Smith 2000). The invention of milk chocolate brought about a convergence of interests with the dairy industry, and the incorporation of chocolate into sweets, biscuits and cakes strengthened links with sugar and wheat. However, chocolate was probably still more drunk than eaten. Apart from its physical properties, chocolate was vulnerable to changing social perceptions. Entering the industrial age as a prestigious luxury for Western aristocrats and an article of daily necessity for Amerindians, chocolate was often rejected as decadent in the West and uncivilized in Latin America (Clarence-Smith 2000).
The image of chocolate reached its nadir in the first half of the past century, when it was typecast as a superannuated and indigestible beverage. A generation later, chocolate was rescued by temperance campaigners, technical change and advertising magic. Pressing out cocoa butter made chocolate drinks a wholesome alternative to alcohol, chocolate bars became a weekly treat in proletarian households, and attractively wrapped chocolate confectionery became an esteemed gift. The relatively steady growth of world demand for chocolate has been a great advantage, but optimistic allegations that consumers are hooked and will continue to crave for chocolate whatever happens, are not supported historically. The need to keep chocolate competitive with similar products is a powerful argument against forcing up the price of cocoa beans. It is an equally powerful argument against allowing the world chocolate industry to drift any further towards oligopoly (Dand 1997). Competition is equally vital at the level of much maligned intermediaries, from dealers and brokers to humble peddlers. Liberal immigration policies and checks on social discrimination are vital preconditions for the effective working of a commodity chain, as entrepreneurial minorities may be the greatest single neglected resource for economic development. As a rule of thumb, the more competition there is between highly skilled traders, the higher is the percentage of the world price that accrues to direct producers. The unhappy marketing-board page in the history of commercialization needs to be turned, once and for all. Enforcing accurate labeling is about the only task that the state can perform better than the private sector (Dand 1997). Hershey’s scope of product includes chocolate and sugar confectionaries. The chocolate products are either in the solid or liquid form. The products of the company are what make them successful in the industry amidst the threat of competitors. Hershey should adopt the strategy of market leader because it needs to prove its dominance in the industry and it needs to fulfill the dream of its founder.
Competitive environment
Economists believed that price stability, by itself, would serve the interests of the tens of millions of impoverished cocoa farmers and farm workers who ultimately faced a monopolistic group of buyers, dominated by a handful of global chocolate manufactures-Nestlé, Cadbury, Rowntree, Hershey, M&M/Mars. The firms had the wherewithal to use cocoa futures’ markets to protect them, and even to profit, from wild price fluctuations (Anderson 2004). Among all the manufacturers Cadbury was the dominant company. Mars Incorporated is another competitor for Hershey it offers various products. These include candy bars, packaged foods and pet food. The company competes with other international giants such as Hershey and Nestlé and with many local candy companies around the world. The company provides financial information to the tax authorities as required by law in the various countries in which it operates. It may also provide financial information to its creditors such as banks so that they will loan the company money. The company also abides by laws and regulations concerning the treatment of its workers, health and safety of its products, and protection of the environment. It must pay competitive salaries and treat its workers well or else it would not be able to attract capable and motivated workers and managers that make it a successful company. The two brothers and their sister cannot expect to run such a large company without qualified help. This type of family-owned company is common in most poor countries. When one reads much of the criticism today about large companies, particularly international, closely held, and family-owned companies, this criticism seems to apply to Mars, Incorporated (Murphy 2005). The competition in the chocolate industry is tough but Hershey withstood it through the use of appropriate actions and strategies.
Marketing strategy and tactics
Advertisements
One strategy used by Hershey is advertisements. In an active, imaginative process, agencies segment and rearticulate an ideal of the target market in terms of gender, age, income bracket, attitudes, etc. Agencies then mobilize this idea of the target market to imagine ways of reaching or addressing this market. In aiming to speak to certain groups, agencies incorporate their concept of the market into the textual address of the advertising campaigns they produce. This differentiated textual address, or way of speaking to specific sections of society, in turn offers viewers ways of understanding and redefining themselves. In effect, the textual address of advertising campaigns can materialize the social categories of consumers that it names (Cronin 2000). Advertising agencies, too, have an imperative to engage with a view of themselves as marketable entities, and must create rhetoric of legitimization for the services they claim to provide. These services crystallize around the identification, measurement and delivery of specific target markets of consumers to clients. These are offered through strategies of advertising address which, they claim, tap into viewers’ desires and motivations. In promoting these targeting skills to potential clients, advertisers are faced with several methodological problems: that of the accurate measurement, and hence legitimization of their expert knowledge, that of the effects of advertising on sales, and that of the accurate measurement of the number of viewers or readers of advertisements (Cronin 2000). The company uses television commercials to market their product. The company also uses the internet as a means to demonstrate their chocolate products to various types of market.
Third party distribution
Hershey also used third party distribution wherein the company allows their product to be sold by non competitors or businesses that sell various kinds of products. Entrepreneurs are seen to possess special information, to be unique, to create pure profit, and to act as the essential indivisibilities governing the size distribution of firms. Building core competencies is more ambitious and different than integrating vertically, moreover. Managers deciding whether to make or buy will start with end products and look upstream to the efficiencies of the supply chain and downstream toward distribution and customers (Foss 1997). If strategic assets are the imperfectly imitable, imperfectly substitutable and imperfectly tradable assets necessary to underpin an company’s cost or differentiation advantage in a particular market, then core competences can be viewed as the pool of experience, knowledge and systems, etc. that exist elsewhere in the same corporation which can be deployed to reduce the cost or time required either to create a new, strategic asset or expand the stock of an existing one. Competences are potential catalysts to the process of accumulating strategic assets. If the firm knows from past experience how to efficiently build the type of distribution network which will improve the competitiveness of its product, then it will be able to put the necessary asset in place more quickly and cheaply than a firm which lacks this competence (Foss 1997). The third party distribution system allows Hershey to reach more markets and it makes sure that more people would be able to purchase their products. This system engages in contracts with companies that have many branches. The third party distribution system would ensure that the company is competitive and can survive in the local and foreign market.
Innovation of products
Innovation of products is one marketing strategy used by the firm to maintain its performance. Innovation of products comes the form of better materials for the creation of the chocolate product or innovations in taste or flavor. New product success is not solely a matter of good fortune, or even of being in the right industry. Admittedly, firms in certain types of industries such as growth industries, technologically developing industries, and high-technology industries on average achieved better new product performance (Cooper 1993). This comes as no surprise. The point must be made, however, that the new product strategy elected had a pronounced and independent effect on performance. That is, the types of arenas selected, and the firm’s direction and commitment to the new product effort, all helped to determine performance. The implications of this strategy-performance link are critical to the management of a firm’s new product efforts. The existence of this link points to the need to define clearly the firm’s new product strategy as a central and integral part of the corporate plan. The development of a new product strategy becomes a pivotal management task (Cooper 1993). Innovation is an important strategy used by firms to increase sales, create a better image and maintain its operations in its different markets. All companies and the industry they belong to have at one point used innovation to stand out and attract more clients who have different tastes. Through innovation Hershey’s was able to maintain its status in the local and foreign industry. The innovation of chocolates into products with better taste helped the firm survive its various problems and threats. Innovations helped in attracting back clients and it brought resurgence in the purchase of chocolate and other similar products.
Evaluation of strategic effectiveness
The alternative to good strategic performance can only be fair or poor strategic performance. Engagements of any and all kinds, conducted by every variety of companies, have consequences for the course and outcome of a conflict; that is to say, they have a strategic effect, or they generate some quantity of strategic effectiveness. To neglect strategy would be like trying to play chess without kings on the board; there would be no point. Failure of strategy, however, does not always flow from neglect of strategy. The problem can lie with policy. A strategist can only orchestrate engagements purposefully for the objective of the business if the business has a clear objective (Gray 1996). Hershey had used three market strategies. One focused on the use of advertisements, another strategy is the use of third party distribution system and the last strategy is innovation of products. In the advertisement strategy the company used television commercials to market their product. The company also uses the internet as a means to demonstrate their chocolate products to various types of market. The third party distribution system allows Hershey to reach more markets and it makes sure that more people would be able to purchase their products. This system engages in contracts with companies that have many branches. The third party distribution system would ensure that the company is competitive and can survive in the local and foreign market. Through innovation Hershey’s was able to maintain its status in the local and foreign industry. The market strategies of Hershey have helped the company survive its tight competition if improved further the market strategies can help the firm become a market leader. If the company would focus on additional advertisements and better innovation on products then the firm would become a market leader.
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