The Hershey Company Blue Ocean Strategy Guide & Analysis| Assignment Help
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Part 1: Current State Assessment
Industry Analysis
The Hershey Company operates within the highly competitive global confectionery and snacking industry. This landscape is characterized by established players, fluctuating commodity prices (cocoa, sugar, dairy), and evolving consumer preferences towards healthier options and diverse flavor profiles.
- Competitive Landscape: Hershey competes across chocolate, sweets, mints, gums, and salty snacks. Key business units include Chocolate (Hershey’s, Kisses, Reese’s), Sweets & Refreshments (Jolly Rancher, Twizzlers, Ice Breakers), and International.
- Primary Market Segments: The company targets various consumer segments, including families, individual snackers, and gift-givers. Geographically, North America constitutes the largest market, with growing international presence.
- Key Competitors & Market Share: Major competitors include Mars, Mondelez International, Nestle, and Ferrero. According to Hershey’s 2023 10-K filing, Hershey holds a leading market share in the North American chocolate market, estimated at approximately 32.8% in the U.S. chocolate category.
- Industry Standards & Limitations: Industry standards include mass production, reliance on traditional marketing, and distribution through established retail channels. Limitations include price sensitivity, health concerns, and seasonal demand fluctuations.
- Industry Profitability & Growth: The confectionery industry exhibits moderate growth, driven by emerging markets and product innovation. Profitability is influenced by commodity costs, marketing spend, and operational efficiency. Hershey’s 2023 annual report indicates a net sales increase of 11.6% year-over-year, reflecting both volume growth and price increases.
Strategic Canvas Creation
For the Chocolate Business Unit (Hershey’s, Kisses, Reese’s), the strategic canvas would consider the following:
- Key Competing Factors: Price, Brand Recognition, Product Variety, Distribution Reach, Marketing Spend, Innovation (new flavors, formats), Health & Wellness (sugar-free options), Sustainability (ethical sourcing).
- Competitor Offerings:
- Mars (M&M’s, Snickers): High on brand recognition, distribution reach, and product variety. Moderate on health & wellness and sustainability.
- Mondelez (Cadbury, Milka): Strong on international presence, product variety, and marketing spend. Moderate on price and health & wellness.
- Hershey: High on brand recognition (particularly in North America), distribution reach, and price competitiveness. Moderate on product variety, health & wellness, and sustainability.
- X-axis: Price, Brand Recognition, Product Variety, Distribution Reach, Marketing Spend, Innovation, Health & Wellness, Sustainability.
- Y-axis: Offering Level (Low to High).
Draw your company's current value curve
Hershey’s value curve currently mirrors competitors in areas like brand recognition and distribution reach. However, it differentiates itself through price competitiveness and a strong focus on classic, familiar flavors.
- Mirroring Competitors: Hershey’s value curve aligns closely with competitors in brand recognition, distribution reach, and marketing spend, reflecting the need to maintain visibility and market presence.
- Differentiation: Hershey differentiates through price competitiveness, particularly in its core chocolate offerings. It also emphasizes classic, familiar flavors, appealing to a broad consumer base.
- Intense Competition: Competition is most intense in brand recognition, distribution reach, and marketing spend, where companies invest heavily to maintain market share.
Voice of Customer Analysis
- Current Customers (30):
- Pain Points: High sugar content, limited healthy options, lack of innovative flavors beyond core products, packaging waste.
- Unmet Needs: Desire for more sustainable sourcing practices, personalized product options, and convenient on-the-go formats.
- Desired Improvements: Reduced sugar content, more natural ingredients, improved packaging recyclability, and greater flavor variety.
- Non-Customers (20):
- Soon-to-be Non-Customers: Shifting to healthier snacks, reducing sugar intake.
- Refusing Non-Customers: Perceived as unhealthy, outdated brand image, limited appeal to specific dietary needs (vegan, gluten-free).
- Unexplored Non-Customers: Consumers seeking premium, artisanal chocolates or those with specific dietary restrictions not currently addressed by Hershey.
- Reasons for Non-Use: Health concerns (sugar, artificial ingredients), lack of perceived value compared to healthier alternatives, limited appeal to specific dietary needs.
Part 2: Four Actions Framework
For the Chocolate Business Unit:
Eliminate: Which factors the industry takes for granted that should be eliminated'
- Excessive Focus on Mass Production: Shift from solely focusing on large-scale production of standardized products to more flexible and customizable offerings.
- Minimal Value, Significant Cost: Over-reliance on traditional advertising channels with diminishing returns.
- “Always Been Done”: The assumption that chocolate must be high in sugar and artificial ingredients.
- Rarely Used: Complex promotional schemes that require significant administrative overhead.
Reduce: Which factors should be reduced well below industry standards'
- Sugar Content: Significantly reduce sugar levels in core products to address health concerns.
- Over-Delivering: Overemphasis on overly sweet flavors that mask the natural taste of cocoa.
- Premium Features for Small Segment: Investment in niche flavor combinations that appeal to a limited customer base.
- Non-Driving Features: Resources allocated to artificial colors and flavors that do not significantly impact purchasing decisions.
Raise: Which factors should be raised well above industry standards'
- Sustainable Sourcing: Increase transparency and ethical sourcing of cocoa beans.
- Persistent Pain Points: Lack of transparency regarding cocoa farming practices and environmental impact.
- Substantial New Value: Enhanced traceability and fair trade certifications to appeal to ethically conscious consumers.
- Inevitable Limitations: The perception that sustainable sourcing is inherently more expensive and difficult to implement.
- Health & Wellness: Develop healthier alternatives with natural sweeteners and functional ingredients.
- Persistent Pain Points: Limited availability of genuinely healthy chocolate options that still deliver a satisfying taste experience.
- Substantial New Value: Products that cater to specific dietary needs (vegan, gluten-free, keto-friendly) without compromising taste.
- Inevitable Limitations: The belief that healthy chocolate cannot taste as good as traditional chocolate.
Create: Which factors should be created that the industry has never offered'
- Personalized Chocolate Experiences: Offer customizable chocolate bars with tailored ingredients and flavor profiles.
- New Sources of Value: The ability to create unique chocolate combinations based on individual preferences and dietary needs.
- Unaddressed Needs: The desire for personalized and customized food experiences.
- Adjacent Industry Capabilities: Leveraging technology from the food tech industry to create personalized nutrition profiles and recommend optimal chocolate combinations.
- Integrated Solutions: Integrating personalized chocolate creation with online ordering and subscription services.
Part 3: ERRC Grid Development
| Factor | Eliminate | Reduce | Raise | Create |
|---|---|---|---|---|
| Mass Production Focus | Over-reliance on standardized products | Complexity of promotional schemes | Sustainable Sourcing (Transparency, Ethics) | Personalized Chocolate Experiences (Customization, Subscriptions) |
| Sugar Content | Artificial Colors & Flavors | Sugar Levels in Core Products | Health & Wellness (Natural Sweeteners) | |
| Estimated Cost Impact | -5% (Streamlined Production) | -3% (Reduced Ingredient Costs) | +7% (Sourcing & Certification) | +5% (Technology & Customization) |
| Estimated Customer Value | +2% (Focus on Quality) | +5% (Healthier Options) | +10% (Ethical Consumption) | +15% (Personalization & Uniqueness) |
| Implementation Difficulty | 3 (Moderate) | 2 (Low) | 4 (High) | 5 (Very High) |
| Projected Timeframe | 12 Months | 6 Months | 24 Months | 36 Months |
Part 4: New Value Curve Formulation
The new value curve for Hershey’s Chocolate Business Unit would emphasize:
- High: Sustainable Sourcing, Health & Wellness, Personalized Chocolate Experiences.
- Moderate: Brand Recognition, Distribution Reach.
- Low: Sugar Content, Mass Production Focus.
This curve would diverge significantly from competitors by prioritizing ethical and health-conscious consumers while offering a unique level of personalization.
- Focus: Emphasizes sustainability, health, and personalization.
- Divergence: Clearly differentiates from competitors by moving beyond traditional chocolate offerings.
- Compelling Tagline: “Hershey’s: Chocolate That’s Good for You, Good for the Planet, and Made Just for You.”
- Financial Viability: Reduces costs through streamlined production and ingredient optimization while increasing value through premium offerings and personalized experiences.
Part 5: Blue Ocean Opportunity Selection & Validation
Opportunity Identification:
- Personalized Chocolate Experiences: High market potential, aligns with core competencies (chocolate manufacturing), high barriers to imitation (technology, customization), moderate implementation feasibility, high profit potential, synergies with existing online sales channels.
- Sustainable Chocolate Line: Moderate market potential, aligns with core competencies, moderate barriers to imitation (certification, sourcing), high implementation feasibility, moderate profit potential, synergies with existing brand image.
- Health-Focused Chocolate Line: High market potential, aligns with core competencies, moderate barriers to imitation (formulation, taste), high implementation feasibility, moderate profit potential, synergies with existing product development capabilities.
Validation Process (Personalized Chocolate Experiences):
- Minimum Viable Offering: Launch an online platform allowing customers to customize chocolate bars with a limited selection of ingredients and flavors.
- Key Assumptions: Customers are willing to pay a premium for personalized chocolate, the online platform is user-friendly, and the customization process is efficient.
- Experiments: A/B testing different pricing models, user interface designs, and ingredient combinations.
- Metrics: Website traffic, conversion rates, customer satisfaction scores, and average order value.
- Feedback Loops: Collect customer feedback through surveys, reviews, and social media to iterate on the platform and product offerings.
Risk Assessment:
- Obstacles: High initial investment in technology and infrastructure, complex supply chain management, potential for customer dissatisfaction with personalized creations.
- Contingency Plans: Secure additional funding, develop robust quality control processes, and offer refunds or replacements for unsatisfactory products.
- Cannibalization Risks: Potential cannibalization of existing chocolate bar sales. Mitigation: Target a different customer segment (premium, personalized) and position the offering as a complementary product.
- Competitor Response: Competitors may launch similar personalized chocolate offerings. Mitigation: Focus on continuous innovation, superior customer service, and building a strong brand reputation.
Part 6: Execution Strategy
Resource Allocation (Personalized Chocolate Experiences):
- Financial: Allocate $5 million for technology development, marketing, and supply chain infrastructure.
- Human: Hire a team of software developers, food scientists, marketing specialists, and customer service representatives.
- Technological: Invest in a robust e-commerce platform, a customizable product configurator, and a data analytics system.
- Resource Gaps: Expertise in personalized nutrition and food technology. Acquisition Strategy: Partner with a food tech startup or hire experienced professionals.
- Transition Plan: Gradually transition existing production lines to accommodate personalized chocolate orders while maintaining production of core products.
Organizational Alignment:
- Structural Changes: Create a dedicated team responsible for the personalized chocolate business unit.
- Incentive Systems: Reward employees based on customer satisfaction, revenue growth, and innovation metrics.
- Communication Strategy: Communicate the new strategy to internal stakeholders through town hall meetings, newsletters, and training programs.
- Resistance Points: Potential resistance from employees who are comfortable with the existing mass production model. Mitigation: Emphasize the growth potential of the new strategy and provide opportunities for employees to develop new skills.
Implementation Roadmap:
- Month 1-3: Develop the e-commerce platform and product configurator.
- Month 4-6: Secure partnerships with ingredient suppliers and establish a supply chain infrastructure.
- Month 7-9: Launch a beta version of the personalized chocolate platform to a select group of customers.
- Month 10-12: Collect customer feedback and iterate on the platform and product offerings.
- Month 13-15: Launch the personalized chocolate platform to the general public.
- Month 16-18: Expand the product selection and customization options.
- Review Processes: Conduct monthly reviews to track progress against key milestones and identify areas for improvement.
- Early Warning Indicators: Monitor website traffic, conversion rates, customer satisfaction scores, and average order value.
- Scaling Strategy: Gradually expand production capacity and distribution channels as demand increases.
Part 7: Performance Metrics & Monitoring
Short-term Metrics (1-2 years):
- New customer acquisition in the personalized chocolate segment.
- Customer feedback on the personalized chocolate experience.
- Cost savings from streamlined production and ingredient optimization.
- Revenue from personalized chocolate sales.
- Market share in the personalized chocolate market.
Long-term Metrics (3-5 years):
- Sustainable profit growth from the personalized chocolate business unit.
- Market leadership in the personalized chocolate space.
- Brand perception shifts towards a more innovative and customer-centric image.
- Emergence of new industry standards for personalized food experiences.
- Competitor response patterns to Hershey’s personalized chocolate offering.
Conclusion
By embracing a Blue Ocean Strategy, The Hershey Company can move beyond the confines of the highly competitive confectionery market and create new demand by offering personalized, sustainable, and health-conscious chocolate experiences. This strategic shift requires a fundamental rethinking of the company’s value proposition, a willingness to invest in new technologies and capabilities, and a commitment to continuous innovation. The potential rewards are significant: increased customer loyalty, higher profit margins, and a sustainable competitive advantage in the evolving food landscape.
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