Does the Hershey's Company have or have access to the resources needed to fill in the gaps?

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After reading the article: Teaching SWOT, it could be said that Hershey’s company is currently in the diversification quadrant of the SWOT strategy model. Despite the fact that The Hershey’s Company is one of the leading brands in the industry, they have been facing many external threats. Mainly because there has been a significant shift in consumer demand for healthier products which has caused the company to lose demand for their primary product, chocolate. The company has not withdrawn any product from the market due to decline in life cycle. However, the company may be forced to withdraw products due to low quality and/or decline in market share. The company faces strong competitors such as Godiva, Ferrero and Lindt who are strong innovators in the industry which has caused the brand market share to drop significantly in the past couple of years. On the other hand, the company’s supply chain faces a significant threat due to the changes in the climate of West Africa, their major supplier of cocoa. Climate change has caused these lands to become drier and warmer which has caused many farmers to switch to more lucrative crops other than cocoa. All of these threats that the company face, are what has caused the brand to be placed in the diversification quadrant despite their strong strengths.

However, the company should definitely be placed in the aggressive quadrant due to all external opportunities they have manage to find in order to increase their market share and enter new market segments. The company knew about the potential threats they could face long before they happen, that’s why the company decided to expand their market and attract new target segments. Back in 2018, the company announced that they will be rebranding their brand as a snacking company rather than just a chocolate company. Since then, the company has been acquiring brands that will help them enter into a different target segment, the healthy fitness life which is continuously growing significantly. The Hershey’s company is taking advantage of the opportunities they have and focusing on their internal strengths in order to become the leading brand in the snacking industry.

SWOT analysis is a strategic planning tool that can be used by Hershey managers to do a situational analysis of the organization . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Hershey is facing in its current business environment.

The Hershey is one of the leading organizatations in its industry. Hershey maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

Strengths of Hershey – Internal Strategic Factors

As one of the leading organizations in its industry, Hershey has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Hershey are –

Highly successful at Go To Market strategies for its products.
Successful track record of developing new products – product innovation.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Automation of activities brought consistency of quality to Hershey products and has enabled the company to scale up and scale down based on the demand conditions in the market.
High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
Strong distribution network – Over the years Hershey has built a reliable distribution network that can reach majority of its potential market.
Good Returns on Capital Expenditure – Hershey is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.

Weakness of Hershey – Internal Strategic Factors

Weakness are the areas where Hershey can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
Limited success outside core business – Even though Hershey is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Hershey
High attrition rate in work force – compare to other organizations in the industry Hershey has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.

Opportunities for Hershey – External Strategic Factors

The new technology provides an opportunity to Hershey to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Hershey.
New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Hershey. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Government green drive also opens an opportunity for procurement of Hershey products by the state as well as federal government contractors.
New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Hershey to drive home its advantage in new technology and gain market share in the new product category.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Hershey an opportunity to enter a new emerging market.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Hershey to increase its profitability.
The market development will lead to dilution of competitor’s advantage and enable Hershey to increase its competitiveness compare to the other competitors.

Threats Hershey Facing - External Strategic Factors

New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Hershey
Imitation of the counterfeit and low quality product is also a threat to Hershey’s product especially in the emerging markets and low income markets.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.

Limitations of SWOT Analysis for Hershey

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Hershey
SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Hershey

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Hershey managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Hershey

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.