External Factors Evaluation (EFE) Matrix Key External Factors Weig ht 0.12 0.07 0.1 0.09 0.12 0.

06 0.13 0.12 0.07 0.12 1 Ratin g 3 2 3 3 3 2 4 3 2 3 Weight ed Score 0.36 0.14 0.3 0.27 0.36 0.12 0.52 0.36 0.14 0.36 2.93

OPPORTUNITIES

1. Increased demand from emerging markets 2. Ethical labor and environmental brand exposure 3. New opportunities for marketing in a varied media environment 4. Diversity among consumer tastes spurring new products 5. Increase in global market space for products

THREATS

1. Continued slow economic growth 2. Increased price on main ingredients 3. An increase in Health conscious consumer purchasing 4. Further fragmentation of the industry 5. Increase in conversion of sugar to ethanol TOTAL

The average total weighted score is above average at 2.93. Hershey is well suited to maintain profitability, increase sales and expand globally. They are selling a majority of their products at mass merchant establishments as well as supermarkets. They are number two in America for confectionery sales, number one for chocolate sales in the US, number two in non-chocolate sales in the US and number one in the US for breath freshener sales. They operate in over 70 countries including India, China, Brazil, South Korea, the Philippines, Canada and all of Europe. The only weak spot is in gum sales controlling only 2.8 percent of the US market share and the continued increase in the cost of the raw commodities they use to produce their products.

Explanation on External Opportunities 1. Increased demand from emerging markets Although Hershey sales are still predominantly America based, they now have operating segments in Canada, Mexico, Brazil, India, Japan and China. These countries now have sizable middle class communities with access to Hershey products and the potential sustained demand for Hershey products. 2. Ethical labor and environmental brand exposure Hershey is actively working with the International Cocoa Initiative Foundation, the World Cocoa Foundation, and the Roundtable on Sustainable Oil and encourages sustainable farming practices. These organizations seek to eliminate child labor, facilitate the purchase of supplies that have less of an impact on the environment and are produced with fewer chemicals. 3. New opportunities for marketing in a varied media environment New opportunities for Hershey to market its products include, movie tie-ins, online, on television, through their interactive website and through social media sites. Although television advertising is not new to Hershey the large increase in channels and the ability to record shows 4. Diversity among consumer tastes spurring new products Consumers desire a variety of chocolate candies and are also seeking alternative treats that are healthier than traditional sweets. There is an increased desire for different types of chocolate products such that the market can support those types; people will buy new and varied products if they are offered to the public. Consumers are also more health conscious wanting to snack healthier than they had in the past. These factors create and opportunity for Hershey to gain market share by creating new chocolate products as well as diverge from chocolate into healthy snacks. 5. Increase in global market space for products Hersheys products are sold in millions of retail outlets as well as a variety of national chain stores. These chain stores are themselves expanding globally, which can offer new shelf space for Hershey products in these new countries.

Explanation on External Threats 1. Continued slow economic growth Continued slow economic growth here in the US and globally may slow their sales, and lower expected profits from Hershey Food Investments. This could in turn put pressure on the company to decrease costs by cutting personnel, investments in manufacturing, research, development and marketing of their products. 2. Increased price on main ingredients Cocoa and Sugar both commodities needed to produce Hershey products suffer from price fluctuations, which can only be partly mitigated by futures contracts. The price of both of these commodities has increased from 2007 to 2009 necessitating an increase in the final cost of Hershey confectionaries paid at consumer outlets. 3. An increase in Health conscious consumer purchasing Nationally Americans are more health conscious. This is in part due to a significant increase in diabetes but also the aging of Americans, who as they become older are required to increase their healthy activities in order to decrease their statistical chances of chronic disease. Health conscious Americans are purchasing healthier foods and snacks while decreasing their purchasing of high fat, high calorie foods. Hershey must invest in new healthier foods if they are to maintain profitability. 4. Further fragmentation of the industry American consumer tastes are varied and so too are their food buying habits. As the variety of consumer products has increased, so too has the consumers desire for new and varied products has increased. This cycle is reflected in most consumer industries but no more so than in the processed food industry. Hersheys market share can in part increase or decrease with the number of successful brand extensions they create in the next several years. 5. Increase in conversion of sugar to ethanol Sugar is produced from sugar cane and alternately high fructose corn syrup. Hershey products by their nature require large amounts of sugar or alternate forms of sugar making the cost of manufacturing these products vulnerable to conversion to ethanol. If more ethanol is produced from sugar cane and corn then there is less available for food products increasing the scarcity of these commodities increasing their costs on the market. If the costs of these commodities rise because Brazil is converting more of its sugar cane into ethanol, the result will be an increase in the cost of manufacturing food products for Hershey.

Internal Factors Evaluation (IFE) Matrix Key Internal Factors Weig ht 0.12 0.07 0.1 0.09 0.12 0.06 0.13 0.12 0.07 0.12 1 Ratin g 3 2 3 3 3 2 4 3 2 3 Weight ed Score 0.36 0.14 0.3 0.27 0.36 0.12 0.52 0.36 0.14 0.36 2.93

STRENGTHS

1. Brand Recognition 2. Consumer good will 3. Strategic acquisitions and joint ventures 4. Research and development 5. Employee empowerment

WEAKNESSES

1. Dependent board members 2. Hedged futures contracts necessary 3. Dependent on suppliers and shippers 4. Lower manufacturing costs 5. Heavily dependent on domestic markets TOTAL