a. Societal Environment

i. Natural

 The natural environment includes natural resources required as inputs or influenced by

marketing. Renewable resources such as trees, food must be used carefully, while non-
renewable resources such as oil, coal, and various minerals pose a serious issue. As a result,
companies that produce goods using scarce resources face a high cost of production. This form
of situation also prevents companies from continuing to manufacture, as the rate of return and
profit becomes volatile and ultimately unsuccessful.

 Beyond ordinary course operating and capital expenditures, Hershey tries to comply with
environmental laws and regulations. They have made some commitments to protect and reduce
the impact on the environment they made in recent years, including efforts to protect forests
and forested habitats and reduce emissions across their supply chain. 

ii. Demographic

 The demographic topography is of critical interest to companies because it affects people, which
in turn makes up the markets. Thus when Hershey Foods develops a marketing strategy, they
consider the population and other corresponding factors, such as population size, age of
customers who purchase Hershey Chocolates, and occupation-as these factors affect sales
quantity, price, quality, market demand, etc.

iii. Political-Legal

 Developments in the political climate have a significant effect on marketing decisions. The
political environment consists of rules, government agencies, and interest groups that control or
restrict different groups and individuals within a particular society.

 Changes in laws and regulations in their interpretation or application may alter the business
environment. These negative impacts could result from changes in food and drug laws, laws
related to advertising and marketing practices, accounting standards, taxation requirements,
competition laws, employment laws, import/export requirements, and environmental laws,
among others. It is possible to have become subject to additional liabilities in the future
resulting from changes in laws and regulations that could result in an adverse effect on their
financial condition and results of operations. 

iv. Economic

 Consumer spending levels and impulse purchases impacted their operations. Subsequently,
affected by general macroeconomic conditions, consumer confidence, employment levels, the
availability of consumer credit and interest rates on that credit, consumer debt levels, energy
costs, and other factors. Volatility in food and energy costs sustained global recessions, large
political instability, rising unemployment, a pandemic outbreak of disease, weather, natural and
other disasters, and declines in personal spending could adversely impact their revenues,
profitability, and financial condition.

v. Social-Cultural
  The social and cultural forces are factors that lead to changes in the actions, values, norms,
customs, and lifestyles of a society and its cultures. These forces have a profound impact on how
people live and how and when people purchase goods. Socio-cultural influence presents both
challenges and opportunities to marketers. As a result, Hershey Foods Company has an extra
emphasis on the topics of demographic and diversity characteristics, cultural values, and the
movement of customers to achieve its objectives.

 Hershey prioritizes upholding ethical business conduct and being transparent. Through their
commitment to live their values, they have developed robust policies and procedures to act
responsibly across their operations and supply chain. They regularly review their approach to
align with the changing regulatory landscape.

vi. Technology

 Hershey Foods Company is a food producer and distributor that is also reliant on technological
advances. For instance, consumers may have ideas about the product, including its quality,
price, and availability, by checking their website. On the other side, consumers can use credit
cards to purchase their food or chocolate goods. They also use a different protection system to
deter snack robbery.

 Information technology is critically important to their business operations. They use information
technology to manage all business processes, including manufacturing, financial, logistics, sales,
marketing, and administrative functions. These processes collect, interpret, and distribute
business data and communicate internally and externally with employees, suppliers, customers,
and others. 

 Hershey is regularly the target of attempted cyber and other security threats. Therefore, they
continuously monitor and update their information technology networks and infrastructure to
prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses,
and other events that could have a security impact. They invest in industry-standard security
technology to protect their data and business processes against the risk of data security
breaches and cyber-attack. Their data security management program includes identity, trust,
vulnerability, and threat management business processes, as well as the adoption of standard
data protection policies. They measure their data security effectiveness through industry-
accepted methods and remediate significant findings. Also, they certify their major technology
suppliers and any outsourced services through accepted security certification standards. They
maintain and routinely test backup systems and disaster recovery, along with external network
security penetration testing by an independent third party as part of their business continuity
preparedness. They also have processes in place to prevent disruptions resulting from the
implementation of new software and systems of the latest technology. 

b. Task Environment

i. Competitors

 Many of their confectionery brands enjoy wide consumer acceptance and are among the leading
brands sold in the marketplace in North America and definite markets in Latin America. They sell
their brands in highly competitive markets with many other global multinational, national,
 regional, and local firms. Some of their competitors are large companies with significant
resources and substantial international operations. The basis of competition in their product
categories is on product innovation, product quality, price, brand recognition and loyalty, the
effectiveness of marketing and promotional activity, the ability to identify and satisfy consumer
preferences, as well as convenience and service. They also have experienced increased
competition from other snack items, which they are focused on expanding the boundaries of
their core confection brands to capture new snacking occasions. 

ii. Suppliers

 Hershey is committed to sustainably sourcing their ingredients and helping to ensure human
rights protections across their entire value chain. They source a 100% Roundtable on Sustainable
Palm Oil and will achieve 100% responsible and sustainable sugar by the end of 2020.
Additionally, they are strengthening their human rights due diligence across their supply chain,
launching a revised Tier 1 Supplier program, enrolling 100% of their high-risk suppliers by 2021. 

iii. Distributors

 In conjunction with the sales and marketing efforts, their efficient product distribution network
helps them maintain sales growth and provide superior customer service by facilitating the
shipment of their products from their manufacturing plants to strategically located distribution
centers. They primarily use common carriers to deliver their products from these distribution
points to their customers. 

 Hershey owns and operates ten principal confectionery manufacturing plants in North America
that support its U.S. and Canada operations.

iv. Creditors

 Hershey assesses their liquidity in terms of their ability to generate cash to fund their operating,
investing, and financing activities. Significant factors affecting liquidity include cash flows
generated from operating activities, capital expenditures, acquisitions, dividends, repurchases of
outstanding shares, the adequacy of available commercial paper and bank lines of credit, and
the ability to attract long-term capital with satisfactory terms. They generate substantial cash
from operations and remain in a strong financial position, with sufficient liquidity available for
capital reinvestment, strategic acquisitions, and the payment of dividends.

 They maintain debt levels they consider prudent based on their cash flow, interest coverage
ratio, and percentage of debt to capital. They use debt financing to lower their overall cost of
capital and increases their return on stockholder's equity. 

 They believe that their existing sources of liquidity are adequate to meet anticipated funding
needs at comparable risk-based interest rates for the foreseeable future. Acquisition spending
and share repurchases could potentially increase their debt. They expect to satisfy their various
cash flow requirements, including acquisitions and capital expenditures through operating cash
flow and accessing capital markets.

v. Customers
   Their clients are generally bulk distributors, chain grocery stores, mass merchandisers, chain
drug stores, vending companies, wholesale clubs, convenience stores, dollar stores, retailers,
and department stores.

 The majority of their customers, except for wholesale distributors, resell their products to end-
consumers in retail outlets in North America and other locations worldwide. In 2019, Hershey
approximately made 30% of their consolidated net sales from McLane Company, Inc., one of the
largest wholesale distributors in the United States to convenience stores, drug stores, wholesale
clubs, and mass merchandisers and the primary distributor of their products to Wal-Mart Stores,
Inc. 

vi. Employees

 As of December 31, 2019, Hershey employed approximately 14,520 full-time and 1,620 part-
time employees worldwide. Collective bargaining agreements covered roughly 5,500 employees,
or around 34% of their employees worldwide. In 2020, contracts will be negotiated for fixed
employees at three facilities outside of the United States and one United States facility,
comprising approximately 74% of total employees under collective bargaining agreements.
Hershey believes that its employee relations are generally good.

vii. Communities

 Their commitment to sustainability started with the belief of its founder in responsible
citizenship. He was a purpose-driven leader who believed they could use chocolate to create
goodness in the world. This belief resulted in firm investment in local communities and the
establishment of the Milton Hershey School for disadvantaged kids. Hershey continued that
legacy today through their sustainability strategy, "The Shared Goodness Promise," and
operating the business with sustainable practices, sourcing ingredients responsibly, protecting
the environment, making a difference in their communities, and helping kids globally reach their
full potential.

viii. Managers

 In recent years, Hershey has co-created a culture of development with the enthusiastic support
of its employees. Through individual development plans, learning opportunities, feedback, and
coaching, employees build careers. They have also focused on initiating more leader-led
dialogues through town halls and other engagement initiatives to make sure every person
within them understands their strategy and objectives. Their efforts resulted in a highly engaged
workforce, a strong belief among employees that they value employee safety, and the co-
creation and roll-out of new Leader Standards. These standards seek to help Hershey managers
grow from good leaders to great leaders who can inspire the energy and potential of all their
employees.

ix. Stockholders

 Hershey remains focused on driving long-term stockholder value through balanced, accelerated
growth. At the same time, they recognize they must continue to adapt, move quickly, and invest
in their brands, capabilities, and people to fuel their advantage. 
x. Labor Unions

 Hershey has a proud history of producing world-class commodities, and the workforce at its
production facilities enjoy competitive wages, benefits, and highly skilled employees. They also
report strong engagement with their work. Labor organizations represent their manufacturing
employees and operate under collective bargaining agreements at some facilities. They
developed these arrangements in a spirit of collaboration for the sake of workers and the firm.

xi. Government

 The manufacture and sale of consumer food products are highly regulated. In the United States,
their activities are subject to regulation by various government agencies, including the Food and
Drug Administration, the Department of Agriculture, the Federal Trade Commission, the
Department of Commerce, and the Environmental Protection Agency, as well as various state
and local agencies. Similar agencies also regulate their businesses outside of the United States.

 Various government agencies and third-party firms, as well as their quality assurance staff,
conduct audits of all facilities that manufacture their products to assure effectiveness and
compliance with their program and applicable laws and regulations.

xii. Trade Associations

 Every year, Hershey buys thousands of tons of cocoa, sugar, dairy, nuts, and other ingredients
and raw materials from all over the world. Each presents unique sourcing challenges since
environmental, social, and labor practices vary by region. Regardless, they strive every day to
safeguard human rights and use their scale to implement sound agricultural practices and
protect the people and ecosystems behind the ingredients that make their iconic, delicious
snacks. 

 Hershey expects all suppliers to abide by the Supplier Code of Conduct. They work with credible
sustainability certification organizations from UTZ, Rainforest Alliance, Fair Trade USA, Bonsucro,
and the Roundtable on Responsible Palm Oil (RSPO) to make sure environmental and social
conditions along their supply chain meet a high standard. Hershey uses independent
sustainability standards because they inform best practices in their industry, and consumers and
other external stakeholders trust it.

xiii. Special Interest Groups

  CLMRS is the leading method of detection and remediation of child labor among children ages 5
to 17 years old and developed through the International Cocoa Initiative (ICI). It leverages both
supply chain structures and community-based groups to identify child labor and to monitor and
remediate found cases. Reporting results is a critical component of building local capacity to
deliver a robust CLMRS program. Under CLMRS, both members of local farmer groups and their
suppliers become facilitators that receive training and build skills to detect and report instances
of child labor. As trusted community members, both these groups are in the best position to
raise community awareness, identify cases of child labor, and implement the most appropriate
child safeguarding practices to remediate those cases.
  In 2012, Hershey committed to sourcing 100 percent certified and sustainable cocoa by 2020,
which they achieved at the start of the year. In 2018, they further strengthened their cocoa
sustainability efforts with their Cocoa For Good program that holistically addresses systemic
social and environmental issues in their cocoa supply chain. Child labor, poor nutrition, and
deforestation are all symptoms of poverty. Through Cocoa For Good, Hershey aims to disrupt
the cycle of poverty while also addressing each of these symptoms directly. The program works
to increase the profitability of cocoa farming as well as diversify incomes at the household level,
educate families on the value of savings, empower communities, foster leadership among
women, and improve the quality of nutrition and access to education.

xiv. Products

 Their principal product offerings include chocolate and non-chocolate confectionery products;
gum and mint refreshment products; pantry items, such as baking ingredients, toppings, and
beverages; and snack items such as spreads, meat snacks, bars, and snack bites and mixes,
popcorn and protein bars and cookies. 

xv. Markets

 Hershey designed their organizational structure to ensure continued focus on North America,
coupled with an emphasis on profitable growth in their focus on international markets. They
primarily organized their business around geographic regions, which enables them to build
processes for repeatable success in their global markets. As a result, they have defined their
operating segments on a geographic basis, as this aligns with how their Chief Operating Decision
Maker manages their business, including resource allocation and performance assessment.

 In the United States, the company has its core operations and markets. For its firms outside the
U.S, the share of overall combined net sales amounted to 15.8% for 2019, 16.1% for 2018, and
16.7% for 2017. The proportion of overall long-lived assets outside the United States was 20.2%
as of December 31, 2019, and 21.7% as of December 31, 2018.

 Hershey market, sell, and distribute their products under more than 80 brand names in
approximately 85 countries worldwide.

c. Industry Analysis

i. Nature of the Industry

 The global packaged goods confectionery market is highly competitive, and the development in
this market continues. Some of their rivals are multinational corporations with significant
foreign resources and operations. They continue to experience substantial levels of in-store
service for other snack products, which have experienced pressure to expand the category of
confectionery. They expect to increase marketing and advertisement spending and to strive to
launch and develop new products to maintain their current market share or grow market share
in this highly competitive retail market. Due to inherent market risks associated with advertising
and the introduction of new products, including uncertainty about trade and customer
acceptance, increased costs may not prove beneficial in sustaining or improving their market
 share and result in lower sales and profits. They could also lead to increased credit and other
corporate risks, as they function in a fiercely competitive global market.

 Due to inherent risks in the marketplace associated with advertising and new product
introductions, including uncertainties about trade and consumer acceptance, increased
expenditures may not prove successful in maintaining or enhancing their market share and
result in lower sales and profits. Also, they may incur increased credit and other business risks
because they operate in a highly competitive retail environment. 

 The U.S. confectionery industry totaled approximately $25.4 billion retail sales in the IRI
MULO+C (Expanded All Outlets Combined Plus Convenience Store) channels for the 52 weeks
ended December 31, 2018. Hershey is the market leader in chocolate confectionery in the
United States. Using IRI MULO+C data, the total U.S. confectionery industry demonstrates a 4-
year compound annual growth rate of 1.7%.

 Over 1,200 brands and approximately 1,000 companies compose the confectionery industry.
However, only 15 to 20 companies have national distribution, while others enjoy only local or
regional distribution. The following market share data for the food, drug, mass merchandiser,
Walmart, partial dollar, partial club, military, and convenience store classes of trade [MULO+C]
represents approximately 90% of The Hershey Company's retail sales. 

ii. Competitive Forces

Threats of New Entrants

 New entrants in the confectionery industry introduce change, new ways of doing things, and put
pressure on Hershey through cheaper price approach, cost reduction, and delivery of new value
proposals to its consumers. Hershey must handle these obstacles and establish successful
barriers to preserve its competitive advantage.

Bargaining Power of Suppliers

 Most of the companies in the Confectioners industry buy their raw materials from a range of
suppliers. Suppliers in a dominant position can minimize the margins that the Hershey Company
can gain on the market. Effective consumer goods manufacturers use their bargaining ability to
secure higher prices from Confectioner businesses. The net effect of higher supplier bargaining
power is that it decreases the overall profitability of the Confectioners.

Bargaining Power of Buyers

 Buyers are quite demanding. They want to buy the best available offerings by paying the lowest
price possible, and this has placed pressure on the sustainability of the Hershey Company in the
long run. The smaller and stronger the customer base of Hershey, the greater the purchasing
power of the customers, then the more they desire to pursue more discounts and offers.

Threats of Substitute Products or Services

 When a new product or service satisfies the same needs of a customer differently, the
profitability of the industry is affected. If the value of the product launched is quite different
 from present products or services in the industry, the threat to an alternative product or service
is high.

Rivalry among the Existing Competitors

 If the current market competition is high, the price will fall while reducing the industry's overall
profitability. In a highly competitive market share, where Hershey Company operates, this rivalry
has an impact on the overall long-term sustainability of the company.