External Factors Evaluation Matrix for Hershey Company
- Introduction
Milton S. Hershey founded the Hershey Company in 1876. The company graduated from its first candy bar to a caramel recipe and finally, the widely appreciated and endeared Hershey milk chocolate bar. The company has undergone significant transformations to include a variety of offerings from the first candy and chocolate bars. The Hershey Company is located in Derry, Pennsylvania, and is now the largest chocolate manufacturer in America with a sizeable global reach. The company has also diversified its product line to include baked products such as cakes, cookies, milkshake, and a variety of drinks. The company now has over 80 brands to its name, notable among them Hershey Kisses, Twizzlers, Ice Breakers, Goodbar, and Jolly Ranchers, among other popular products. The 21st Century has seen Hershey add several products from its basket of happiness, such as Kit Kat White Minis, Reese’s Spreads Snacksters, and Graham Dippers, to serve the increasing market coverage. The Hershey Company, despite their immense success, has to adapt to the changing world and face hurdles born by the external environment to remain strategic in a highly competitive market as summarized in an external factor evaluation matrix (EFE)
- External Factors
Making an EFE matrix and subsequent analysis for Hershey Company involves an in-depth understanding of opportunities and threats impacting the strategic management of the company. These factors cut across social, economic, environmental, cultural, technological, legal, political, and demographic factors, among others, that directly and indirectly affect business operations. Evaluating these factors help the management respond to each element accordingly and assess the position of the company in the market and among other confectionaries. The average weighted score is a sum of the product of factor ratings and weight to determine the position of the company against external threats.
- Political Factors
The politics of a country or region dramatically affects the operations of both domestic and foreign companies operating within the jurisdiction. The Hershey Company operates in dozens of countries and is, therefore, exposed to different political environments and system risks. The political wellness in a country is critical in determining Hershey’s long-term profitability in the various regions the company operates. For the company to remain competitive, the management has to devise a model that diversifies the systematic risks provided by different companies and initiate a strategic approach tailored for each operating environment. Political stability means ease of conducting business operations and generally lower risks. The levels of bureaucracy, corruption, trade regulations and tariffs, intellectual property rights, pricing, and taxation are significant factors to consider before market penetration. The risk of military invasion in warring regions makes business impossible by creating tension and poor economic support infrastructure. Wage legislation, mandatory employee benefits, and anti-trust laws for confectioners directly affect the operations of Hershey.
- Economic Factors
Macro environment factors such as interest rates, inflation, foreign exchange rates, aggregate demand, and investment inform investment ideas for any economy. The competitive advantage of Hershey is also subject to competitive norms in different economic environments. The company, therefore, engages in a thorough analysis of a country’s growth rate, inflation, and key economic indicators such as consumer spending and the growth rate of the confectionary industry to forecast a growth trajectory and determine the feasibility of different ventures. The commercial systems of a country, government intervention in free markets, and the efficiency of financial markets are significant factors that potentially affect the growth and success of Hershey. The comparative advantage of a host country and the level of labor productivity, skilled or otherwise, also affect the efficiency of economic markets.
- Social Factors
Every society has a definite model of how things are conducted. This fact impacts Hershey’s organizational culture across different environments. The shared attitude and belief inclinations affect the marketing capabilities at Hershey Company, and they have to brand their products and redefine their product promotion methods to align them to the target population. Class culture, gender roles, and interests in a given society impact marketing in numerous ways. The education level of a society and standard levels of the company have to be weighed to ensure the continuity of efficiency and brand quality. The skill levels also influence decisions on labor in the company and the basis for hiring.
- Environmental Factors
Environmental considerations have been highlighted and assimilated into the ethical conduct of business operations. Ecological disasters and their prevalence have pushed governments to formulate liability laws and environmental legislation. Weather and climate change are essential in decision making at the Hershey Company. This organization has taken a leading stance in promoting environmental conservation, recycling, and waste management systems that are efficient and user-oriented. Attitude towards eco-friendly products and pollution regulations within the confectionery industry also impacts the growth and expansions of the Hershey Company.
- Technological Factors
Technology has consistently thrived on being the norm in modern society. A firm must have the ability to cope with the fast speed of technological disruptions for it to be profitable and remain in operations. Hershey competitors also have room for technological advancement, and the company has to keep a close eye to see what the competitors are doing, and there most recent improvements and learn from them to develop better mechanisms. Additionally, technology has the potential to impact cost and value chain analysis in the consumer goods sector.
- Legal Factors
Legal factors differ from one jurisdiction to the next. Some may not be efficient enough to protect intellectual property rights, therefore, discouraging investment. Some legal environments might leave Hershey Company vulnerable to theft and duplication of their property rights. Discrimination and employment laws also affect business operations in the company. Some statutory provisions provide for criteria for sourcing labor and employee training programs, which are costly. Health and safety laws are also enforced and maintained as supported by different enactments and in varying severity. Data protection laws also allow the company to retain and share un-infiltrated data among the management, employees, and consumers.
- Opportunities for Hershey Company
The Hershey Company stands a better ground to its joint ventures outside the USA. People appreciate the health benefits of chocolate, and there is considerable growth in the demand for coffee-based and healthier products. The Hershey company has also bought off various companies in foreign markets, given the company a competitive advantage. The organic food market is also growing to create better opportunities for the global giant.
- Threats
The production of cocoa is rapidly declining as farmers shift to other crops given trees take longer to mature, and there is a need to educate farmers on best agricultural practices and invest in research for more efficient crop versions. Health-conscious customers are shunning confectioneries citing obesity and other health concerns. The price of sugar is rising amid unfavorable exchange rates and the availability of substitutes. Natural disasters also affect the growth of products, which sparks losses for the company.