Posted at 12.30.2018
The Confectioners' intensity of rivalry among existing companies is high even though the industry has partially differentiated products. That is due to many equally balanced competitors, slow growth in the mature market, high storage and fixed costs, and high exit barriers. All of these factors cause price wars, advertising battles, the emergence of new product lines and higher quality of products in the Confectioners industry.
The Bargaining Power of Buyer: LOW to MEDIUM
Although there are several large-volume buyers, such as Wal-Mart, who could bargain to lower the prices, thus reducing the industry's profits, there are other factors that can limit the bargaining power of buyers. The industry's differentiated products, the occurrence of switching costs, the reliance on the industry's product, and the lack of threat by buyers to enter the industry themselves decrease the buyer's bargaining power. Therefore, these factors make the bargaining power of buyers low to medium.
The Bargaining Power of Supplier: MEDIUM
The supplier's bargaining power is decreased because the Confectioners industry is significantly an important buyer to the suppliers and the suppliers cannot threaten to enter the buyer's industry due to numerous barriers of entry. However, the bargaining power of suppliers is medium due to limited volume of suppliers; there are no substitute products that suppliers deal with on the market and the supplier's product is important to the industry.
Threat of Substitutes: HIGH
The threat of substitutes is saturated in the Confectioners industry due to many substitute products that the industry must compete with which can threaten the industry's profitability. Many non-confectionery snacks are available as alternatives such as fruits, poker chips, yogurt, etc. In addition, many customers are willing to substitute confectionery because individuals are shifting towards a far more health conscious trend.
Hershey Company mostly focuses on offering low price products that can be affordable to everyone. Hershey's, however, differentiated in term of quality of its products. The business has provided the best quality products since it has been founded and it is certainly committed in providing that same quality since. Hershey's core brands such as Reese's, Hershey's, and Hershey's Kisses, have been in the market for quite some time plus they still gain popularity because of the same great taste. That's how consumers perceive Hershey's as different and undoubtedly loyal to Hershey's brands.
Business' strategy toward market segmentation
Hershey Company does not segment its market and its products derive from people of all ages or quite simply mass market aimed at everybody. The company has been diversifying its product choices to gratify a large part of chocolate lovers. As stated above, Hershey's core brands are the most well-known products for Hershey on the market. Recently, Hershey has introduced high-end dark and premium chocolate segment for the market that want more premium chocolate. Furthermore, to address medical and well-being of consumer today, Hershey's in addition has offered a variety of products in portion-controlled serving that provide the great things about flavonoid antioxidants and cardiovascular disease prevention (4). Through diversification, Hershey can offer an array of products which allows the company to attain a big customer segment.
In this relatively stable industry, a business may not need a distinctive competence to survive in an extremely competitive environment. Hershey has set a great example for this situation. Given its long existing competency in putting sweet chocolate coatings on caramels in 1894, the company had earned admiration of innovation since Mr. Hershey had that novel idea (1). Following that, Hershey made milk chocolate a mainstream product and products like Hershey's Kisses were true novelties (1). Unfortunately, the products have been on shelves for over a century and Hershey does not have a highly effective innovation for many years. However, individuals are continually buying Hershey's milk chocolate brands, and Hershey is proud to be the largest confectioner in THE UNITED STATES. Hershey has survived due to its strong brand name that Mr. Hershey has earned many years ago, diversifying products, strong customer relationship with distribution channels, and the licensing agreements to market products like Kit Kat in the U. S and joint ventures with various international firms.
Presently, Hershey does not have any anticipate building distinctive competence. According to Hershey CEO, David West, says the business will be concentrating on core brands like Reese's, Hershey's Kisses, and Kit Kat (1). Many analysts fear Hershey's ability to perform when the economy is recovered and individuals are eager for something new (1). Without innovation, Hershey would survive, however the company is frittering away a great brand (1).
Boyle, Matthew. "Hershey's Arrested Developments. " Business Week. Oct, 2009