Introduction to Hershey's Food Corporation

Hershey Foods Corporation is the largest and leading producer of chocolate and non-chocolate candy and grocery items.  Started by Milton Hershey in 1894, the Hershey Foods Corporation has grown from a no-holds-barred businessman's dream of fortune into a widely successful, global industry.  It is an industry, however, with it's fair share of competition. 
Mars Inc., Nestle, and Nabisco are all vying for the position of top seller in the chocolate and non-chocolate candy industry in North America.  The question becomes, how can Hershey keep ahead of the competition?  What strategies have they implemented in order to hold on to their top spot in the industry? 

About Hershey Foods Corporation

Hershey Foods Corporation was founded in 1894 by a very determined businessman by the name of Milton Hershey.  He was raised as a Mennonite in Gap, PA.  In the fourth grade his father took Milton out of school and had him work as a printer's apprentice.  Hershey realized that this was not his calling however.  In 1876 Hershey opened his own candy store in Lancaster, PA.  The business failed after six years but he had already developed a love for candy and the candy business so it was too late to turn back now.  After some candy business ventures in other states, Hershey eventually returned to Lancaster where he opened up another candy business-the Lancaster Caramel Company.  In 1893 Hershey bought some chocolate making machinery from Germany and in 1894 Hershey Foods Corporation was made (1). 

Strategies

Milton Hershey had an innate ability to choose people who were hardworking and loyal to work for him.  He also had an incredible ability to implement plans at just the right time.  His creative imagination and need for the highest standards of quality are what drove Hershey to become the successful businessman that he was.  These same principles are what form the foundation of the vastly successful Hershey Foods Corporation today. 

A strategy, as defined in our book, is a comprehensive action plan that identifies long term direction and guides resource utilization to accomplish an organizations mission and objectives with sustainable competitive advantage (2).  Hershey's mission is "to enhance shareholder value as a focused, snack food company in North America and selected international markets and to be a leader in every aspect of our business (3)."  Hershey implements their strategies in such a way so as to uphold their mission statement and to keep a competitive advantage over their rivals. 

Implementing Strategies

There are four main types of strategies that our Management book deals with in Chapter 8.  These strategies are: Growth Strategies, Retrenchment Strategies, Stability Strategies, and Combination Strategies (4).  Growth Strategies involve expansion of an organizations current operations (5).  Retrenchment Strategies are when organizations reduce the scale of their current operations in order to gain efficiency and improve performance (6).  Stability Strategies are implemented when an organization looks to maintain its present course of action (7).  Lastly, Combination Strategies involve using all of these strategies (8).   We found that Hershey's has successfully used some of these strategies in different business ventures that they have been involved in. 

Along with these strategies, we found that Hershey utilizes a few competitive strategies.  These include Differentiation, Cost Leadership, and Focus.  Differentiation deals with seeking competitive advantage with goods and services that are different from the competition (9).  Cost Leadership strategies seek to lower costs more than competitors by improving efficiency of organizational systems (10).  And focus strategies concentrate attention on a special market segment to serve its needs better than the competition (11).  Below are examples of these strategies as used by Hershey in order to gain an advantage over their competition. 

 Examples:

Growth:

• In March of 2000, Hershey announced that they plan to unveil several new products this year such as Twizzler's Twist-n-Fill licorice, Big Kat candy bars, and Jolly Rancher Chewmongus Candies (12).

• Hershey Foods Corp., who were a long time sponsor of Little League Baseball, had to end the sponsorship in February of 2000.  They did this in order to help Hershey's overall marketing needs (13).
• In November of 1998, Hershey made a decision to put its dry pasta business up for sale.  They are doing this so that they can concentrate all of their efforts on the chocolate and candy business (14).  In  February of 1999, a deal was made for the sale of the pasta division between Hershey's and former Hershey's employee C. Mickey Skinner.  Skinner, the former president of the pasta group, and his organization New World Pasta purchased the division for $450 million (15).

• On May 30 of 1997, Hershey's introduced the Kissmobile.  The Kissmobile is a 25 foot long, 11 foot tall van that travels across America giving, "Hugs and Kisses" to people in an attempt to help raise money for the Children's Miracle Network as well as promote brand awareness to consumers.  This also kicks off the celebration of the corporations 90th Anniversary (16).

• September 25, 1995.  Hershey's announces the first ever reduced fat baking chips to the nation.  These baking chips have half the fat of traditional semi-sweet chocolate chips, and about 25 percent fewer calories.  In addition, the Hershey's Kitchens have developed a variety of 50 percent reduced fat dessert and snack recipes using the new baking chips (17).
• June 11, 1996.  The first hard candy from Hershey's is introduced, new Hershey's TasteTations.  These new hard candies are available in four different flavors -- caramel, butterscotch, peppermint, and chocolate.  The new candies are being packaged in variety packs, containing one of each flavor, in hopes of increasing consumer penetration.  Each variety pack comes with an attractive $.25 price sticker (18).

• July 29, 1999.  Hershey's announced that it will open a new distribution facility in Pennsylvania.  The new center will eliminate a a number of the company's smaller facilities which will potentially lead to increase in profits by about $50 million (19).

Interesting Facts about Hershey's

• Hershey's developed a contest that allowed teenage students to come up with ideas for ways in which Hershey's could recycle their plastic lined paper storage bags (20).
• Hershey's made roughly $4 billion in sales in 1999 (21). 
• The Hershey's candy of the month is PayDay (22).
• The Hershey's website offers tips on how people can successfully run a fund raising campaign (23).
• The Hershey's kiss is manufactured on July 1, 1907 (24).

Conclusion

In selecting a company to write this assignment, my partner and I looked for what was most important to us, a company from Pennsylvania (where we both live) and, secondly,  that they are successful.  We knew that Hershey Foods Corporation was indeed from PA but were they successful?  In researching this company we found that the answer was yes. 

Throughout our research, we uncovered many interesting facts, which we listed above, and gained a greater knowledge of Hershey's corporation.  Before, we had assumed that Hershey was only an entertaining city to visit as a young child, and a candy company that provided many cavities and pain in early years. 

This project, like the others, has enhanced our knowledge of a well-known corporation, and also has increased our multimedia and management skills which will ultimately benefit us later in business-related work. 

Review Questions

1)  How does Hershey's fit into Michael Porter's Five Forces Model? 

2)  What is the mission of Hershey's corporation? 

3)  Where was Milton Hershey's first factory located? 

Bonus Question -- 1000pts

1)  Where does Dave Chappell rank on a list of our favorite instructors here at OU? 

Answers to Review Questions

Bibliography

1)   Hershey's Webpage.  www.hersheys.com  March 3, 2000. 

2)   Schermerhorn, John R. , Management 6th edition, John Wiley and Son's Incorporated, New York 1999, pg. 158 

3)   Hershey's Webpage. op. cit. 

4)   Schermerhorn, John R., op. cit.  pg. 165-166 

5)   Schermerhorn, John R., ibid.  pg. 165 

6)   Schermerhorn, John R., ibid.  pg. 166 

7)   Schermerhorn, John R., ibid.  pg. 166 

8)   Schermerhorn, John R., ibid.  pg. 166 

9)   Schermerhorn, John R., ibid.  pg. 168 

10)  Schermerhorn, John R., ibid.  pg. 169 

11)  Schermerhorn, John R., ibid.  pg. 169 

12)  Sulon, Bill.  Hershey Foods Adds New Products while Fixing Distribution Problems.  The Patriot News.  March 1, 2000. 

13)  Beauge, John.  Hershey Foods Ends Sponsorship of Little League Baseball.  The Patriot News.  February 25, 2000. 

14)  Canedy, Dana.  Hershey to Sell Pasta Business and Focus On Sweeter Profit.  New York Times.  November 10, 1998. 

15)  Taylor, John.  Deal for Hershey Foods' Pasta Unit Completed.  Omaha World Herald.  February 2, 1999. 

16)  Hershey's Kisses Chocolates to Celebrate 90th Anniversary with Kissmobile Tour.  PR Newswire.  May 30, 1997. 

17)  Hershey's Introduces First Ever Reduced Fat Baking Chips. PR Newswire.  September 12, 1995. 

18)  Hershey's Tastetations the First Hard Candy From Hershey's. PR Newswire.
June 11, 1996. 

19)  Sulon, Bill.  Hershey Foods Expects New Facility in Pennsylvania to Save Millions. The Patriot News.  July 29, 1999. 

20)  Warner, Mary.  Pennsylvania Students Develop Recycling Solution for Hershey Foods.  The Patriot News.  March 12, 1998. 

21)  Hoover's Webpage.  http://hoovweb.hoovers.com/.  March 3, 2000. 

22)  Hershey's Webpage. op. cit. 

23)  Ibid. 

24)  Ibid.