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Hershey's Current Situation and Corporate Strategies

Explore Hershey's current mission statement, long-term objectives, and corporate strategies to understand its market position and plans for growth. Analyze its market segments and product groups.

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Hershey's Current Situation and Corporate Strategies

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  1. AGENDA Week 3 • Hypercompetition • Current Situation • Break • Intel • Practice Individual Case • Hershey

  2. Current Situation What is current mission statement?

  3. Purposes of Mission Statement • Communication Tool • External • Internal • Decision-Making Tool • Long-term Objectives • Corporate Strategies • Business Objectives & Strategies • Functional Strategies & Strategies • Operating Decisions

  4. What are current long termobjectives? • Specific results - more than one year. • Challenging, measurable, reasonable, clear. • Established for overall corporation and each business/division.

  5. Quantitative (“Hard”)Areas • Profitability Net profit margin; ROI; ROE • Productivity • Lower costs (% of sales CGS, S&A) • Activity ratios • Growth • Increases in sales, assets, net income • Competitive Position • Market Share • Shareholder Wealth • EPS; Dividends; Shareholder Value

  6. Qualitative Areas (“Soft” ) • Employee Relations • Social Responsibility • Reputation • Technological Leadership

  7. What are the current Corporate Strategies? The overall managerial game plan Specifies: • Organization’s orientation toward growth • Industries or markets in which it will compete. • Multi-business corporations it also involves decisions regarding position of that business in the organization.

  8. Existing Market New Market Existing Product Market Penetration Market Development Diversification Related Unrelated Product Development New Product

  9. Alternatives for Growth Changes of product, market geographical scope Expansion into existing Businesses Vertical Integration expanding the Value Chain Alternatives for Growth Related Diversification into new Businesses Unrelated

  10. Expansion into existing businesses • Existing products and markets • Market Penetration Changes of product, market geographical scope • Existing products into new markets • Expansion of uses and applications • Market Development • New Products into existing markets • Product Development • Expanding the breadth of product lines Vertical Integration expanding the Value Chain Forward: Getting closer to customers Backward: Getting closer to suppliers

  11. Diversification into new businesses Bases for relatedness Federal Gov’t looks at Standard Industrial Classification (SIC) Product Technology Process Technology Procurement Basic raw materials Processes or fabricated materials Fabricated components Assembled products Testing Distribution Marketing and sales Retailing Service Related Unrelated

  12. Rationales for Diversification • Economies of Scope • Electronic calculators and digital watches • Financial Synergies • Economizing on Transaction Costs • Managerial or Behavioral

  13. Financial Synergies • Diversification is need for adequate and stable cash flow • Use profits from one business to subsidize another • Underlies BCG Matrix • Smooth cash flows and prop up expanding or troubled businesses • Investors can smooth out (PM & Kraft) • Other sources of expansion funds

  14. Economizing on Transactions Costs • Multiproduct firm is efficient choice when coordination between independent firms is complicated by transaction costs, and • When the self-interested behavior of independent firms jeopardizes the value of investments, integration is option • similar with vertical integration

  15. Managerial/Behavioral Reasons • Maintaining or enhancing the position of executives making diversification decisions. • Efficient for managers, but not for shareholders. • Divergence between management action and shareholder interests. • Pursuit of growth • easier to acquire new sales than internal develop

  16. To avoid getting fired • reducing the risk of poor performance • The persistence of diversification despite • vigorous antitrust enforcement • evidence of poor performance • suggest that managerial rationales help explain diversification activity.

  17. If managers do entrench themselves at shareholder expense, • Shareholders must be more vigorous • Use outsiders • Revise compensation

  18. Modes of Expansion • Internal development • Acquiring • Horizontal Integration • Collaborative arrangements • Strategic Alliances • Joint Ventures • Licensing

  19. Other Types of Corporate Strategies

  20. Repositioning Strategies • Retrenchment • Assets and/or costs • Divestiture • Spin-offs

  21. Termination Strategies • Liquidation • Merger • Being acquired

  22. Market Segment and Product GroupAnalysis What markets do we currently serve with what product group? What is the contribution to sales, operating income; net profit, etc.?

  23. HUDSON FOODS Market Segments: Retail Food Service Club Store International Other • Group of Consumers served • Geographical Location

  24. Hudson Foods - Product Groups Chicken Turkey Portioned Luncheon Beef Other Entrees Meats HUDSON FOODS PRODUCTS

  25. Chicken Turkey Portioned Luncheon Beef Other Entrees Meats Retail Food Service Club Store Int’l Other

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