Mckinsey 7S The Hershey Company Analysis

The Hershey Company McKinsey 7S Analysis| Assignment Help

The Hershey Company McKinsey 7S Analysis

Part 1: The Hershey Company Overview

The Hershey Company, founded in 1894 by Milton Hershey in Hershey, Pennsylvania, remains headquartered there today. The company operates under a corporate structure with distinct business divisions, primarily focusing on confectionery, snacks, and pantry items. Hershey’s portfolio includes iconic brands such as Hershey’s, Reese’s, Kit Kat (in the United States), and Ice Breakers. In fiscal year 2023, Hershey reported total revenues of approximately $11.2 billion and maintains a market capitalization of roughly $45 billion. The company employs approximately 19,000 individuals globally.

Hershey’s geographic footprint extends across North America, with a growing international presence in markets like Mexico, Brazil, India, and China. The company holds a dominant market position in the North American confectionery sector, competing with global players such as Mars and Nestlé. Hershey’s corporate mission centers on bringing goodness to the world through delicious snacks and creating moments of joy. The company’s stated values emphasize integrity, respect, excellence, and community.

Key milestones in Hershey’s history include the development of mass production techniques for chocolate, the establishment of the Milton Hershey School Trust, and strategic brand acquisitions. Recent major acquisitions include Dot’s Pretzels and Pretzels Inc., expanding Hershey’s presence in the snacking category. Current strategic priorities focus on driving organic growth through innovation, expanding its snacking portfolio, and enhancing its digital capabilities. Challenges include managing supply chain disruptions, navigating inflationary pressures, and adapting to evolving consumer preferences for healthier snacks.

Part 2: The 7S Framework Analysis - Corporate Level

1. Strategy

Corporate Strategy

Hershey’s corporate strategy centers on portfolio diversification beyond traditional confectionery, with a focus on high-growth snacking categories. This is evidenced by the acquisitions of Dot’s Pretzels and Pretzels Inc., which contributed approximately $1 billion to net sales in 2023, representing a 9% increase in overall revenue.
The portfolio management approach prioritizes brands with strong market positions and growth potential, allocating capital towards marketing and innovation initiatives for these brands. Capital allocation philosophy emphasizes investments in high-return projects, with a target ROI of 15% or higher.
Growth strategies combine organic innovation with strategic acquisitions. Organic growth is driven by new product launches and line extensions, such as the Hershey’s Kisses Milk Chocolate Filled with Caramel, which generated $50 million in first-year sales.
International expansion strategy focuses on emerging markets with high growth potential, such as India and China. Market entry approaches vary by region, ranging from direct investment to joint ventures and strategic partnerships.
Digital transformation strategy aims to enhance consumer engagement and optimize supply chain operations. E-commerce sales grew by 15% in 2023, accounting for 8% of total revenue.
Sustainability and ESG considerations are integrated into the corporate strategy, with a focus on responsible sourcing, environmental stewardship, and community engagement. Hershey has committed to sourcing 100% certified and sustainable cocoa by 2025.
The corporate response to industry disruptions and market shifts involves continuous monitoring of consumer trends and proactive adaptation of product offerings and marketing strategies.

Business Unit Integration

Strategic alignment across business units is achieved through shared strategic goals and performance metrics. Key performance indicators (KPIs) are cascaded down from the corporate level to individual business units.
Strategic synergies are realized through shared resources and capabilities, such as centralized procurement and supply chain management. Centralized procurement initiatives resulted in cost savings of $25 million in 2023.
Tensions between corporate strategy and business unit autonomy are managed through clear communication of strategic priorities and collaborative decision-making processes.
Corporate strategy accommodates diverse industry dynamics by allowing business units to tailor their strategies to specific market conditions and competitive landscapes.
Portfolio balance and optimization approach involves regular reviews of business unit performance and strategic fit, with potential divestitures or acquisitions to optimize the overall portfolio.

2. Structure

Corporate Organization

The Hershey Company operates under a hierarchical organizational structure with distinct business units reporting to corporate leadership. The corporate governance model includes a board of directors with independent members and specialized committees.
Reporting relationships are clearly defined, with a well-established chain of command. Span of control varies depending on the level of the organization, with wider spans of control at lower levels.
The degree of centralization vs. decentralization varies by function, with centralized functions such as finance and legal and decentralized functions such as marketing and sales.
Matrix structures and dual reporting relationships are limited, primarily used for cross-functional project teams.
Corporate functions provide shared services and support to business units, while business unit capabilities are focused on specific product categories and markets.

Structural Integration Mechanisms

Formal integration mechanisms across business units include cross-functional teams, steering committees, and shared service centers.
Shared service models are used for functions such as finance, IT, and HR, providing economies of scale and standardization.
Structural enablers for cross-business collaboration include common IT platforms, shared data repositories, and collaborative workspaces.
Structural barriers to synergy realization include siloed organizational structures, conflicting priorities, and lack of communication.
Organizational complexity is managed through clear roles and responsibilities, streamlined processes, and effective communication channels.

3. Systems

Management Systems

Strategic planning and performance management processes are formalized and data-driven, with annual strategic planning cycles and quarterly performance reviews.
Budgeting and financial control systems are centralized and rigorous, with detailed budget forecasts and variance analysis.
Risk management and compliance frameworks are comprehensive and proactive, with regular risk assessments and compliance audits.
Quality management systems and operational controls are implemented across all manufacturing facilities, ensuring product quality and safety.
Information systems and enterprise architecture are modern and integrated, with a focus on data analytics and business intelligence.
Knowledge management and intellectual property systems are in place to protect and leverage the company’s proprietary knowledge and innovations.

Cross-Business Systems

Integrated systems spanning multiple business units include enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, and supply chain management (SCM) systems.
Data sharing mechanisms and integration platforms enable seamless data exchange and collaboration across business units.
Commonality vs. customization in business systems varies depending on the function, with common systems for core functions such as finance and customized systems for business-specific needs.
System barriers to effective collaboration include data silos, incompatible systems, and lack of integration.
Digital transformation initiatives across the conglomerate aim to modernize and integrate business systems, improve data analytics capabilities, and enhance customer engagement.

4. Shared Values

Corporate Culture

The stated core values of The Hershey Company include integrity, respect, excellence, and community. These values are communicated through various channels, including employee training programs, internal communications, and corporate social responsibility initiatives.
The strength and consistency of corporate culture vary across business units, with some units exhibiting stronger adherence to core values than others.
Cultural integration following acquisitions is a key focus, with efforts to assimilate acquired companies into the Hershey culture.
Values translate across diverse business contexts through consistent messaging and reinforcement of core principles.
Cultural enablers to strategy execution include a strong sense of purpose, a commitment to innovation, and a collaborative work environment.

Cultural Cohesion

Mechanisms for building shared identity across divisions include company-wide events, employee recognition programs, and shared communication platforms.
Cultural variations between business units reflect differences in industry dynamics, geographic location, and employee demographics.
Tension between corporate culture and industry-specific cultures is managed through open communication and mutual respect for diverse perspectives.
Cultural attributes that drive competitive advantage include a customer-centric focus, a commitment to quality, and a strong sense of community.
Cultural evolution and transformation initiatives are ongoing, with a focus on fostering a more inclusive, innovative, and agile culture.

5. Style

Leadership Approach

The leadership philosophy of senior executives emphasizes collaboration, empowerment, and accountability.
Decision-making styles and processes are data-driven and inclusive, with input from various stakeholders.
Communication approaches are transparent and frequent, with regular updates on company performance and strategic initiatives.
Leadership style varies across business units, reflecting differences in industry dynamics and organizational culture.
Symbolic actions, such as executive visits to manufacturing facilities and employee town halls, reinforce the company’s values and priorities.

Management Practices

Dominant management practices across the conglomerate include performance-based compensation, continuous improvement initiatives, and customer-centricity.
Meeting cadence and collaboration approaches are structured and efficient, with clear agendas and action items.
Conflict resolution mechanisms are in place to address disagreements and ensure fair treatment of employees.
Innovation and risk tolerance in management practice are encouraged, with support for experimentation and new ideas.
Balance between performance pressure and employee development is maintained through regular feedback, coaching, and training opportunities.

6. Staff

Talent Management

Talent acquisition and development strategies focus on attracting, retaining, and developing top talent across all functions and business units.
Succession planning and leadership pipeline programs are in place to ensure a smooth transition of leadership roles.
Performance evaluation and compensation approaches are aligned with company goals and individual performance, with merit-based pay and bonus incentives.
Diversity, equity, and inclusion initiatives are a priority, with efforts to create a more diverse and inclusive workforce.
Remote/hybrid work policies and practices are evolving, with a focus on flexibility and employee well-being.

Human Capital Deployment

Patterns in talent allocation across business units reflect strategic priorities and business needs, with high-growth areas receiving more resources.
Talent mobility and career path opportunities are encouraged, with internal job postings and cross-functional assignments.
Workforce planning and strategic workforce development initiatives are in place to ensure the company has the skills and capabilities needed to achieve its strategic goals.
Competency models and skill requirements are defined for key roles, with training programs to develop and enhance employee skills.
Talent retention strategies and outcomes are monitored, with efforts to address employee turnover and improve employee satisfaction.

7. Skills

Core Competencies

Distinctive organizational capabilities at the corporate level include brand management, supply chain management, and innovation.
Digital and technological capabilities are growing, with investments in data analytics, e-commerce, and digital marketing.
Innovation and R&D capabilities are strong, with a focus on developing new products and improving existing ones.
Operational excellence and efficiency capabilities are a priority, with continuous improvement initiatives to reduce costs and improve productivity.
Customer relationship and market intelligence capabilities are enhanced through data analytics and customer feedback mechanisms.

Capability Development

Mechanisms for building new capabilities include training programs, external partnerships, and acquisitions.
Learning and knowledge sharing approaches are encouraged, with internal knowledge repositories and communities of practice.
Capability gaps relative to strategic priorities are identified through regular assessments and gap analyses.
Capability transfer across business units is facilitated through cross-functional teams and knowledge sharing platforms.
Make vs. buy decisions for critical capabilities are evaluated based on cost, expertise, and strategic importance.

Part 3: Business Unit Level Analysis

For brevity, I will focus on three major business units:

North America Confectionery: This is Hershey’s core business, encompassing iconic brands like Hershey’s, Reese’s, and Kit Kat (US).
Snacking: This unit includes recent acquisitions like Dot’s Pretzels and Pretzels Inc., representing Hershey’s expansion into savory snacks.
International: This unit focuses on expanding Hershey’s presence in markets outside North America.

North America Confectionery:

7S Analysis: This unit is highly aligned with the corporate strategy of driving organic growth and maintaining market leadership. The structure is relatively centralized, with strong systems for quality control and supply chain management. Shared values emphasize brand heritage and customer satisfaction. Leadership style is focused on operational efficiency and innovation. Staffing focuses on maintaining expertise in confectionery manufacturing and marketing. Skills include brand management, product development, and efficient distribution.
Unique Aspects: This unit benefits from strong brand recognition and established distribution channels.
Alignment: Highly aligned with corporate strategy and values.
Industry Context: Operates in a mature market with intense competition from other confectionery giants.
Strengths: Brand equity, efficient operations, strong distribution. Opportunities: Innovation in healthier confectionery options, expansion into adjacent categories.

Snacking:

7S Analysis: This unit is aligned with the corporate strategy of portfolio diversification. The structure is more decentralized than the confectionery unit, allowing for greater agility and responsiveness to market trends. Systems are being integrated with Hershey’s existing infrastructure. Shared values emphasize innovation and customer-centricity. Leadership style is entrepreneurial and growth-oriented. Staffing focuses on attracting talent with expertise in the snacking industry. Skills include product innovation, marketing, and distribution.
Unique Aspects: This unit operates in a faster-growing market with different competitive dynamics than the confectionery market.
Alignment: Aligned with corporate strategy but requires further integration of systems and processes.
Industry Context: Operates in a dynamic market with a wide range of competitors, including both large and small players.
Strengths: Growth potential, innovative products, strong brand recognition (Dot’s Pretzels). Opportunities: Further expansion into the snacking category, leveraging Hershey’s distribution network.

International:

7S Analysis: This unit is aligned with the corporate strategy of international expansion. The structure is decentralized, with regional teams responsible for adapting products and marketing strategies to local markets. Systems are being developed to support international operations. Shared values emphasize cultural sensitivity and local market knowledge. Leadership style is adaptive and collaborative. Staffing focuses on recruiting local talent with expertise in international markets. Skills include market research, international marketing, and supply chain management.
Unique Aspects: This unit faces challenges related to cultural differences, regulatory requirements, and competition from local players.
Alignment: Aligned with corporate strategy but requires further development of systems and processes to support international operations.
Industry Context: Operates in diverse markets with varying levels of economic development and consumer preferences.
Strengths: Growth potential, access to new markets, diversified revenue streams. Opportunities: Expansion into new geographic regions, development of products tailored to local tastes.

Part 4: 7S Alignment Analysis

Internal Alignment Assessment:

Strongest Alignment: Strategy and Shared Values are generally well-aligned across the company. The emphasis on growth, innovation, and customer satisfaction permeates all business units.
Key Misalignments: Systems and Structure can be misaligned, particularly in the Snacking and International units. Integrating acquired companies and adapting systems to different market contexts can be challenging.
Impact of Misalignments: Misalignments can lead to inefficiencies, communication breakdowns, and slower decision-making.
Variation Across Business Units: Alignment is strongest in the North America Confectionery unit, which has a long history and established processes. The Snacking and International units require more attention to ensure alignment.
Alignment Consistency Across Geographies: Alignment is generally consistent across geographies within the North America Confectionery unit. However, alignment can vary in the International unit due to cultural differences and regulatory requirements.

External Fit Assessment:

Fit with Market Conditions: The 7S configuration is generally well-suited to the current market conditions. The focus on innovation, portfolio diversification, and international expansion aligns with the evolving needs of consumers and the changing competitive landscape.
Adaptation to Different Industry Contexts: Hershey adapts its 7S configuration to different industry contexts by decentralizing decision-making, tailoring products and marketing strategies to local markets, and investing in new capabilities.
Responsiveness to Changing Customer Expectations: Hershey is responsive to changing customer expectations by investing in R&D, monitoring consumer trends, and developing new products that meet evolving needs.
Competitive Positioning: The 7S configuration enables Hershey to maintain a strong competitive position in the confectionery market and expand its presence in the snacking category.
Impact of Regulatory Environments: Regulatory environments can impact Hershey’s 7S configuration by requiring changes to product formulations, labeling, and marketing practices.

Part 5: Synthesis and Recommendations

Key Insights:

Hershey’s strategic shift towards snacking and international markets presents both opportunities and challenges.
Maintaining alignment between corporate strategy and business unit operations is critical for success.
Integrating acquired companies and adapting systems to different market contexts requires careful planning and execution.
Investing in talent development and fostering a culture of innovation are essential for long-term growth.

Strategic Recommendations:

Strategy: Continue to diversify the portfolio through strategic acquisitions and organic innovation, focusing on high-growth snacking categories and emerging markets.
Structure: Streamline the organizational structure to improve communication and collaboration between business units. Consider creating a dedicated integration team to manage acquisitions.
Systems: Invest in integrated systems that support global operations and enable data-driven decision-making. Standardize key processes across business units while allowing for customization where necessary.
Shared Values: Reinforce the company’s core values through employee training programs and internal communications. Foster a culture of innovation, collaboration, and customer-centricity.
Style: Encourage a leadership style that is collaborative, empowering, and data-driven. Promote transparency and open communication across all levels of the organization.
Staff: Invest in talent development programs to build the skills and capabilities needed to support the company’s strategic goals. Focus on attracting and retaining top talent in key areas such as innovation, marketing, and supply chain management.
Skills: Develop core competencies in areas such as digital marketing, data analytics, and international market expansion. Invest in R&D to drive product innovation and maintain a competitive edge.

Implementation Roadmap:

Prioritize Recommendations: Focus on initiatives that have the greatest impact on organizational effectiveness and are feasible to implement.
Outline Sequencing: Start with initiatives that lay the foundation for future success, such as streamlining the organizational structure and investing in integrated systems.
Identify Quick Wins: Implement quick wins to build momentum and demonstrate the value of the 7S framework.
Define KPIs: Establish key performance indicators to measure progress and track the impact of the recommendations.
Outline Governance: Establish a governance structure to oversee the implementation of the recommendations and ensure accountability.

Conclusion and Executive Summary

The Hershey Company’s current state of 7S alignment is generally strong, particularly in its core North America Confectionery business. However, challenges exist in integrating acquired companies and adapting systems to different market contexts, especially within the Snacking and International units.

The most critical alignment issues revolve around systems integration, structural streamlining, and cultural cohesion across diverse business units.

Top priority recommendations include:

Investing in integrated systems to support global operations and enable data-driven decision-making.
Streamlining the organizational structure to improve communication and collaboration between business units.
Reinforcing the company’s core values and fostering a culture of innovation, collaboration, and customer-centricity.

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