Nike the company

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You will work with your instructor to choose a firm for which you can find reliable data and information, both at the firm level and the industry level. The firm you select must be a publicly traded company, must operate in the U.S. market, and must currently be in business. You will need instructor approval before continuing on with your research paper in order to ensure you have met the necessary requirements. Publicly traded companies file reports with a great deal of data that you will find useful for your analysis. Once you have selected a firm for your case study, you will gather information and data relevant to the firm and its industry and use the core microeconomic principles you have learned in class to analyze the information and make a recommendation for your firm.

ECO 201 Final Project Guidelines and Rubric Overview The final project for this course is the creation of a research paper. Every day, millions of economic choices are made by people—from what brand of soap to buy to how many employees to hire for a factory. Microeconomics provides us with the tools, models, and concepts to better understand individual choices in the marketplace and how resource allocation is determined at the micro level. The decisions made by individuals and households impact the market and influence decisions made by firms. Firms use these tools as a way to determine pricing, output, and profit maximization. As a student of economics, you can use the microeconomic principles to gain an understanding of how firms and individuals make decisions and also to make your own conclusions about actions we can take to improve those decisions. Now, imagine that you are a consultant to the firm of your choice. The firm has hired you to advise it on how it can ensure its future success as a company in its current market. To do this, you will write a 7–9-page research paper analyzing market and business data to explain how the core microeconomic principles impact the sustainability of the firm and what actions it can take to ensure success. The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Two, Four, and Five. The final submission will occur in Module Seven. In this assignment, you will demonstrate your mastery of the following course outcomes:     ECO-201-01: ECO-201-02: ECO-201-03: ECO-201-04: Apply microeconomic models to real-world situations for informing effective business decisions Analyze business and market data using microeconomic tools for their impact on business sustainability Evaluate the structure of various markets for informing effective decision-making strategies Assess the behavior and decisions of individuals and firms for their relation to the microeconomic framework Prompt You will work with your instructor to choose a firm for which you can find reliable data and information, both at the firm level and the industry level. The firm you select must be a publicly traded company, must operate in the U.S. market, and must currently be in business. You will need instructor approval before continuing on with your research paper in order to ensure you have met the necessary requirements. Publicly traded companies file reports with a great deal of data that you will find useful for your analysis. Once you have selected a firm for your case study, you will gather information and data relevant to the firm and its industry and use the core microeconomic principles you have learned in class to analyze the information and make a recommendation for your firm. You will compose a 7–9-page research paper in which you will analyze the market and business data to explain how the core microeconomic principles impact the sustainability of the firm, and your recommendation will suggest the actions the firm can take to ensure success. Specifically the following critical elements must be addressed: I. II. III. IV. V. VI. Introduction Work with your instructor to choose a firm that matches the following criteria: a publicly traded company operating in the U.S. market that is currently in business. a) Outline the purpose of this paper and how it will inform your conclusion. b) Summarize the history of the firm, and provide an overview for what the firm does and what goods/services it sells. Explore the supply and demand conditions for your firm’s product. a) Evaluate trends in demand over time, and explain their impact on the industry and the firm. You should consider including annual sales figures for the product your firm sells. b) Analyze information and data related to the demand and supply for your firm’s product(s) to support your recommendation for the firm’s actions. Remember to include a graphical representation of the data and information used in your analysis. Examine the price elasticity of demand for the product(s) your firm sells. a) Analyze the available data and information, such as pricing and the availability of substitutes, and justify how you determine the price elasticity of demand for your firm’s product. b) Explain the factors that affect consumer responsiveness to price changes for this product, using the concept of price elasticity of demand as your guide. c) Assess how the price elasticity of demand impacts the firm’s pricing decisions and revenue growth. Examine the costs of production for your firm. a) Analyze the various costs a firm faces, their trends over time, and how they have impacted your firm’s profitability. b) Apply the concepts of variable and fixed costs to your firm for informing its output decisions. For instance, analyze how different kinds of costs (labor, research and development, raw materials) affect the firm’s level of output. Explore the overall market for your firm. a) Discuss the market share of the firm and its top competitors by providing details on current percentages for each firm and describing the trend over time. You might consider presenting the data graphically. b) Analyze the barriers to entry in this market to illustrate the potential for new competition and its impact on your firm’s future in the market. c) Describe the market structure for this firm, and analyze how this affects the firm’s ability to influence the market. Recommendation a) Develop a recommendation for how the firm can manage its future production by synthesizing the data presented. b) Suggest how the firm’s position within the market and among its competitors will allow it to take your recommended action. c) Describe how the firm can sustain its success going forward by evaluating the findings from demand trends and price elasticity. Milestones Milestone One: Introduction In Module Two, you will submit a draft of the introduction (Section I) of your research paper, including all critical elements of Section I as listed above. In one to two pages, you will detail the purpose of the paper, summarize the history of the firm, and provide an overview of the firm. This milestone is graded with the Milestone One Rubric. Milestone Two: Supply and Demand Conditions and Price Elasticity of Demand In Module Four, you will submit a draft of the supply and demand conditions (Section II) and price elasticity of demand (Section III) of your research paper, including all critical elements as listed above for each of those sections. Each of these sections should be one to two pages in length and should incorporate relevant data and supporting evidence. This milestone is graded with the Milestone Two Rubric. Milestone Three: Costs of Production, Overall Market, and Recommendation In Module Five, you will submit a draft of the costs of production (Section IV), overall market (Section V), and recommendation (Section VI) of your research paper, including all critical elements as listed above for each of those sections. Each of these sections should be one to two pages in length and should incorporate relevant data and supporting evidence. This milestone is graded with the Milestone Three Rubric. Final Submission: Research Paper In Module Seven, you will submit your research paper. It should be a complete, polished artifact containing all of the critical elements of the final project. It should reflect the incorporation of feedback gained throughout the course. This submission will be graded with the Final Project Rubric. Deliverables Milestone 1 2 3 Deliverables Introduction Supply and Demand Conditions and Price Elasticity of Demand Costs of Production, Overall Market, and Recommendation Final Submission: Research Paper Module Due Two Grading Graded separately; Milestone One Rubric Four Graded separately; Milestone Two Rubric Five Graded separately; Milestone Three Rubric Seven Graded separately; Final Project Rubric Final Project Rubric Guidelines for Submission: Your research paper must be 7 to 9 pages in length (plus a cover page and references) and must be written in APA format. Use double spacing, 12-point Times New Roman font, and one-inch margins. Include at least five references cited in APA format. Critical Elements Introduction: Purpose Exemplary (100%) Meets “Proficient” criteria and uses industry-specific language to establish expertise Introduction: History Meets “Proficient” criteria, and and Overview choice of company is well suited to the analysis Conditions: Impact Meets “Proficient” criteria and explains in detail reasons for the trend Conditions: Firm’s Actions Meets “Proficient” criteria and is well qualified with concrete examples Price Elasticity of Demand: Analyze Meets “Proficient” criteria and uses research to illustrate claims Price Elasticity of Meets “Proficient” criteria and Demand: Consumer reviews all factors of elasticity Responsiveness Proficient (85%) Outlines the purpose of the paper and how it will inform the conclusion Comprehensively summarizes the history of the firm and provides an overview for what the firm does and what goods/services it sells Effectively evaluates trends in demand over time and explains their impact on the industry and the firm Analyzes information and data related to the demand and supply for the firm’s product(s) to support recommendation for the firm’s actions and includes graphical representation of data and information Analyzes the available data and information and justifies how the price elasticity of demand for the firm’s product was determined Explains the factors that affect consumer responsiveness to price changes for the product using the concept of price elasticity of demand as a guide Needs Improvement (55%) Outlines the purpose of the paper, but does not explain how it will inform the conclusion Summarizes the history of the firm and provides an overview for what the firm does and what goods/services it sells, but summary is not comprehensive or overview lacks details Evaluates trends in demand over time, but evaluation is ineffective or does not explain their impact on the industry and firm Analyzes information and data related to the demand and supply for the firm’s product(s), but information and data do not support recommendation for the firm’s actions or do not include graphical representation of data and information Analyzes the available data and information, but does not justify how the price of elasticity of demand for the firm’s product was determined Explains the factors that affect consumer responsiveness to price changes for the product, but does not use the concept of price elasticity of demand as a guide Not Evident (0%) Does not outline the purpose of the paper Value 6.5 Does not summarize the history of the firm or provide an overview 6.5 Does not evaluate trends in demand over time 6.5 Does not analyze information and data related to the demand and supply for the firm’s product(s) 6.5 Does not analyze the available data and information to determine the price elasticity of demand 6.5 Does not explain the factors that affect consumer responsiveness to price changes for the product 6.5 Price Elasticity of Demand: Pricing Decisions Meets “Proficient” criteria and uses research to illustrate claims Accurately assesses how the price elasticity of demand impacts the firm’s pricing decisions and revenue growth Assesses how the price elasticity of demand impacts the firm’s pricing decisions and revenue growth, but assessment is inaccurate Costs of Production: Meets “Proficient” criteria and Analyzes the various costs a firm Analyzes the various costs a firm Profitability provides concrete examples to faces, their trends over time, and faces and their trends over time, substantiate claims how they have impacted the but does not discuss how they firm’s profitability have impacted the firm’s profitability Costs of Production: Meets “Proficient” criteria and Accurately applies the concepts Applies the concepts of variable Output Decisions provides insight into how the of variable and fixed costs to the and fixed costs to the firm for firm can manage those costs firm for informing its output informing its output decisions, decisions but applies concepts inaccurately Overall Market: Meets “Proficient” criteria and Discusses the market share of the Discusses the market share of the Market Share presents the data graphically and firm and its top competitors by firm and its top competitors, but over time providing details on current does not provide details on percentages for each firm and current percentages for each firm describing the trend over time or does not describe the trend over time Overall Market: Meets “Proficient” criteria and Analyzes the barriers to entry in Analyzes the barriers to entry in Barriers to Entry provides specific examples of this market to illustrate the this market, but does not successful and/or failed entrants potential for new competition illustrate the potential for new into the market and its impact on the firm’s competition or its impact on the future in the market firm’s future in the market Overall Market: Meets “Proficient” criteria and Describes the market structure Describes the market structure Market Structure provides specific examples to for this firm and accurately for this firm, but does not analyze demonstrate the market analyzes how this affects the how this affects the firm’s ability structure and firm’s influence firm’s ability to influence the to influence the market or market analysis is inaccurate Recommendation: Meets “Proficient” criteria and Effectively develops a Develops a recommendation for Future Production relates recommendation to the recommendation for how the how the firm can manage its economic principles presented in firm can manage its future future production, but the paper production by synthesizing the recommendation is not effective data presented or is not based on a synthesis of the data presented Does not assess how the price elasticity of demand impacts the firm’s pricing decisions and revenue growth 6.5 Does not analyze the various costs a firm faces, their trends over time, or how they have impacted the firm’s profitability 6.5 Does not apply the concepts of variable and fixed costs to the firm for informing its output decisions Does not discuss the market share of the firm and its top competitors 6.5 Does not analyze the barriers to entry in this market 6.5 Does not describe the market structure for this firm 6.5 Does not develop a recommendation 6.5 6.5 Recommendation: Recommended Action Meets “Proficient” criteria and provides advice for how to strengthen its position in the market Recommendation: Sustain its Success Meets “Proficient” criteria and provides specific ideas for how the firm can sustain its success Articulation of Response Suggests how the firm’s position within the market and among its competitors will allow it to take the recommended action Describes how the firm can sustain its success going forward by evaluating the findings from demand trends and price elasticity Submission is free of errors Submission has no major errors related to citations, grammar, related to citations, grammar, spelling, syntax, and organization spelling, syntax, or organization and is presented in a professional and easy-to-read format Suggests how the firm’s position within the market and among its competitors will allow it to take the recommended action, but suggestions are not appropriate Describes how the firm can sustain its success going forward, but does not evaluate the findings from demand trends and price elasticity in the discussion Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Does not suggest how the firm’s position within the market and among its competitors will allow it to take the recommended action Does not describe how the firm can sustain its success going forward 6.5 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Earned Total 2.5 6.5 100%
Running head: THE HERSHEY COMPANY The Hershey Company Student Name Southern New Hampshire University ECO 201 March 16, 2016 1 THE HERSHEY COMPANY 2 The Hershey Company Did you know that the number one flavor in confectionery treats among Americans is chocolate? And the demand for chocolate in the global market is expected to have an “annual growth rate approaching 3 percent. Demand in Asia is a major source in the growth of sales, and is expected to rise to a 20 percent share in the global market by 2016” (Bradford, n.d.). As a consultant for one of the “top ten global confectionery companies” (The Chocolate Industry, 2015) in the industry, it’s essential that the core microeconomic principles be examined to ensure the firm’s sustainability and future growth in the market. As the demand for chocolate grows, so does the demand for cocoa, the key ingredient needed to make chocolate. The cocoa farming industry is struggling to keep up with the rising demand primarily due to the lack of resources and monetary earnings by “small-scale family farmers who grow 90% of the world’s cocoa” (Goodyear, n.d.). As a result, many farmers are leaving the industry for higher-paying work. This is a pressing issue for the chocolate industry, as there is high probability that the company will not be able to sustain future growth in the market if the key ingredient is no longer available. Hershey will need to support and invest in the cocoa farming industry if they want to continue in the chocolate confectionery market. History The founder of the Hershey Chocolate Company, Milton S. Hershey, faced several challenges prior to becoming one of the most successful entrepreneurs around the world. He was born in Derry Township, Pennsylvania. As a teenager with no formal education, he chose to enter a four-year apprenticeship program with a candy maker located in Lancaster, Pennsylvania. In 1876, after completing the apprenticeship program, he opened his own candy business that in the end failed after six years of hard work. He went on to pursue work with a confectioner in THE HERSHEY COMPANY 3 Denver and learned the trade of making caramels using fresh milk (Hershey's History, n.d.). He then moved to New York to open his second candy business, which also failed. Still determined to make a go of the caramel business, he moved back to Lancaster, where he first learned the art of making candy, and in the end he finally found his niche to succeed. In 1893, while attending an exposition in Chicago, he became intrigued by the technique used to make chocolate and purchased some German machinery so he could start producing “chocolate coatings for his caramels” (Hershey's History, n.d.). In recognizing the high demand for just chocolate, he started the Hershey Chocolate Company and eventually sold the caramel business so he could devote all his time to making chocolate. As his empire grew, so did his generosity of giving back to the community by providing “employee housing, schools, parks, recreational facilities, and a trolley system” (Hershey's History, n.d.). He and his wife gave the majority of their fortune—including ownership of his enterprise businesses—to the Hershey Trust that is held for the Hershey Industrial School for orphans. In 1945, after his passing, “the company, town and institutions that bear his name were well positioned to grow” (Hershey's History, n.d.). And today, the “Hershey Chocolate Company has evolved into The Hershey Company” (Hershey's History, n.d.), which offers a large selection of products and notable attractions. Current Goods and Services The company manufactures more than 80 brands of products, with known classics such as Hershey Kisses, Reese’s, Almond Joy, Kit Kat, Mounds, York, and many more. They also produce non-chocolate candy, gum, mints, baking goods, pantry goods, drink mixes, dessert toppings, and snacks. In addition, they make products to meet the dietary needs of consumers who are gluten-free, kosher, or sugar-free (Our Brands, n.d.). THE HERSHEY COMPANY 4 Areas of Operation The company’s manufacturing plants are located in Pennsylvania, Illinois, Virginia, and Guadalajara, Mexico, with each location designed to produce specific brands. They have a global presence with their international retail stores located in Canada, Mexico, Brazil, China, Japan, Korea, and India, as well as their U.S. retail stores located in Times Square, New York, and Chicago (Hershey's Manufacturing, n.d.). But the largest operating facility and famous tourist attraction, Hershey’s Chocolate World, is located right in the heart of Hershey, PA (Hershey's Chocolate World, n.d.). Supply and Demand With the demand for chocolate rising and its growing popularity in the international markets, it’s important that we analyze and understand the supply and demand trends to determine how Hershey can best align its firm’s product to sustain future growth in the confectionery market. In addition, we need to evaluate pricing along with revenue growth to understand the impact it will have on consumer responsiveness by utilizing the price of elasticity of demand as our guide. As noted in my initial introduction, the demand for chocolate in the global market is expected to have an annual rate increase of about 3 percent, with Asia being the major source in the growth of sales and “expected to rise to a 20 percent share in the global market by 2016” (Bradford, n.d.). As illustrated in the graph below, Hershey has shown tremendous growth in sales over the last 5 years and has received much of its growth from “a nearly 10% price increase that was phased in over the last couple of years” (Wismer, 2013). THE HERSHEY COMPANY 5 Figure 1. Hershey’s Revenue and Cost of Goods Sold (COGS incl. D&A) data for the past 5 years. Adapted from HSY Annual Income Statement - Hershey Co. annual financials (n.d.) The company also had a strong, aggressive business strategy that included special promotions, brand extensions, new products, and acquisitions of candy makers that offered diversity in product textures and unique flavors. With a solid rank in the U.S. market, the company is now positioned to expand its operation into key international markets to improve global sales (Wismer, 2013). In 2013, the company expanded into China and acquired 80% of renowned candy maker Shanghai Golden Monkey. The established company is recognized in its home market with supported net sales growth in the double digits, making it the ideal partnership for Hershey to expand its footprint and gain access to an emerging demographic market (De La Merced, 2013). The acquisition resulted in a good deal, with Hershey growing its sales to $7.4 billion in 2014 and China being responsible for 4.5 percent of those earnings. According to Reuters (2015), “the chocolate consumption growth in the emerging markets closely tracks GDP growth, suggesting China’s increasing urban population would drive chocolate consumption.” Based on these facts, the demand for chocolate by the urban population in China is expected to grow to $4.3 billion by THE HERSHEY COMPANY 6 2019. That would be almost a 60 percent increase from the $2.7 billion sales in 2014 (Reuters, 2015). As the popularity of chocolate grows, so does the increased demand for cocoa, which is the main ingredient needed to make chocolate. There are many factors that influence the price of cocoa, with the most serious being lack of resources and monetary earnings by the “small-scale family farmers who grow 90% of the world’s cocoa” (Goodyear, n.d.). This has resulted in low production, with many farmers leaving the industry due to low wages and poverty in their community. “Demand for cocoa is predicted to rise by 30% by 2020 but without . . . investing in small-scale farmers, the industry will struggle to provide sufficient supply” (Goodyear, n.d.). Price Elasticity of Demand A shortage in the supply of cocoa would have a significant impact on the confectionery market and its input costs, leading to a major shift in retail pricing for chocolate. As a result, and with few alternatives, consumers craving the taste of chocolate will not be able to replace the desirable treat with another confectionery product, making the demand for chocolate inelastic. But if a particular brand of chocolate goes up in price, then the consumer could substitute their choice by switching to another brand, such as milk chocolate instead of dark chocolate, making the demand for the brand of product elastic. “The biggest fear surrounding the chocolate industry right now is that the supply situation leads to further retail price increases which create conditions where chocolate is seen as a luxury item” (Maduri, 2014). When a product is viewed as a necessity, such as gas, milk, or bread, the quantity demanded will not change in response to price fluctuations. But when a product is seen as a luxury, the price change will influence the quantity demanded, as consumers with less disposable income will do away with the purchase THE HERSHEY COMPANY 7 altogether. The possible thought behind this fear is that chocolate, once viewed as an affordable treat, could now be considered too expensive by the average consumer (Maduri, 2014). Since 2012, chocolate retail prices have increased by 60%, prompting Hershey to implement a pricing strategy focused on consumer responsiveness (Maduri, 2014). To diminish the shock of rising retail prices, Hershey gradually increased the costs on its retail products by adding a certain percent over time in order to avoid interruptions with consumer demand. Thanks to this strategy, consumers continued to buy their brands instead of avoiding the purchase altogether, leading to increased sales and revenue growth over the last couple of years (Maduri, 2014). As an example, in 2012, the company “increased its prices on products by 6% on average, which resulted in a 2% increase in sales volume, a 140 basis point increase in gross margins, and a 14% year-over-year increase in EPS” (Asad, 2014). In recognizing the impact that the supply cost of cocoa would have on its input costs, Hershey was able to sell its products with less price elasticity by gradually increasing the costs of its retail products by a certain percent over time, making the consumer view the product as still affordable. This approach had a positive impact on sales and company margins. Cost of Production If supply costs increase, so will the cost to manufacture products, which changes the company’s profit margins if costs are not adjusted according to product demand and projected sales. The price of cocoa, the key ingredient needed to make chocolate, has climbed “more than 45% since early 2013” (Ferdman, 2014). Hershey’s pricing strategy is not designed to pass fluctuating supply costs onto the consumer: The company factors “the volatility into their pricing, assuming that pinched profits today will be followed by swollen profits tomorrow” (Ferdman, 2014). The root cause behind the rising cost of cocoa is that farmers are not able to THE HERSHEY COMPANY 8 keep up with the demands from the emerging global market as the popularity and consumption of chocolate grow. In 2014, Hershey had to “[raise] the price of its chocolate to compensate for the abnormally high cocoa prices. . . . The price increase . . . amounted to roughly eight percent” (Ferdman, 2014). The decision was based on the increased cost of production and the influence it would have on the company’s margins, which were already down from the previous year’s quarterly earnings of 46.1% to that year’s earnings of 43.8% (Gasparro & McCarthy, 2014). The company’s fixed costs, such as advertising, insurance, and property taxes, do not change with the level of output. But the variable costs needed to make chocolate, such as commodities, will fluctuate based on production activity. When the output activity is high, supply spending increases, and when the output activity is low, supply spending decreases. When the company foresees a decline in sales, the production schedule is adjusted to reduce output, which decreases the company’s variable costs. The devised plan is meant to maximize profits, and when the company does not adhere to this arrangement, the added costs impact profit margins. This level of error was one of the factors in why the company’s margins dropped from the previous year’s earnings. The company did not “adjust its production schedule as quickly as they should have in light of how sales were changing” (Gasparro & McCarthy, 2014). Overall Market The confectionery market consists of about 150 U.S. candy makers with “Mars and Hershey [controlling] around 75 percent of the national chocolate market, and 60 percent of the US candy market overall” (Kahn, 2013). As illustrated in the graph below, Hershey is shown as the top leader, with 44.2% of the U.S. market share. THE HERSHEY COMPANY 9 Figure 2. U.S. Chocolate Market Share, 2014. Adapted from U.S. market share of chocolate companies, 2014 (n.d.) In the global market, Hershey is one of the top ten leaders, with continuing efforts to expand into the emerging global market to support consumer demand and improve international sales. Figure 3. Top Ten Global Confectionery Companies. The symbol * includes the production of non-confectionery goods. Adapted from The Chocolate Industry (2015) In the 1960s, when consumers wanted to purchase chocolate, they would head down to their local candy maker. The owners had such passion for making chocolate that they would spend long hours coming up with unique, original recipes specific to their shop. As the market grew, so did the pressure to compete against the big players. The neighborhood candy makers THE HERSHEY COMPANY 10 slowly found themselves being bought out by these big companies. In 1963, Hershey purchased Reese’s and then Almond Joy. Nestle jumped on board and bought Goobers and Baby Ruth. The local shops that resisted the takeover were now struggling to stay afloat (Kahn, 2013). In the 1970s, a popular candy named Heath Bar caught Hershey’s interest, and when the company offered to buy them, Health declined. Hershey ended up buying the “original recipe from another company and introduced the Skor Bar to compete head-on” (Kahn, 2013). As a result, Health sales plunged, and in the end, Hershey bought the company. It was through strategic planning and financial leverage that the big players were able to consolidate the market by bringing the number of candy makers down to around 150 producers (Kahn, 2013). Now, with only a few companies dominating the market and little motive to create new products, the confectionery industry is viewed as an oligopoly market structure. It’s not easy for small candy makers to enter the marketplace, mainly because they lack the funds and leverage needed to promote their products on store shelves. Also, they are not in the financial position to offer discounts or deals, which is often expected by the retail chains (Kahn, 2013). Hershey is the dominant player in the U.S. market and is working towards gaining more market share in the international arena. The company is now opening a new facility in Malaysia, one of the fastest-growing regions for its products, and they invested $250 million USD, representing the “single largest investment in Asia during the company’s 18-years history in the region” (“Hershey Building,” 2013). The new facility location was deliberately chosen to provide “easy distribution access to more than 25 markets across Asia” (“Hershey Building,” 2013). To keep up with consumer demand, the company will utilize proprietary equipment and systems designed specifically for their production needs. The company’s strategic plan for global THE HERSHEY COMPANY 11 market success is to “produce high-quality products tailored to local taste preferences and to meet rapidly growing demand” (“Hershey Building,” 2013). Recommendation As Hershey continues to execute its business plan to increase its global market share, there’s growing concern about whether the cocoa farmers will be able to sustain enough supply to meet the company’s needs. Without cocoa, the company will not be able to manufacture chocolate, as there is no other ingredient that can be used to manufacture the product. The majority of the world’s cocoa is supplied by small-scale family farmers who use “out-dated farming methods and lack resources to invest in fertilisers or in replacing ageing trees past their peak productivity” (Goodyear, n.d.). With low wages and inadequate funding for their crops, the farming community is living in poverty. As a result, the farmers are starting to leave the industry, and future generations have no incentive to take over the cocoa farms, so they are moving into jobs in higher-paying industries. Many manufacturing companies are realizing the urgency that “no cocoa farmers = no chocolate bars” (Goodyear, n.d.). The recommendation would be for Hershey to support and invest in Fair Trade certified cocoa organizations, which encourage long-term business relationships with cocoa farmers by ensuring higher wages and proper resources to produce long-term quality products. By aligning with and buying its supplies from Fair Trade certified farmers, the company would be strengthening its business relationships and investing in the most crucial ingredient for the company’s products: cocoa. Without this ingredient, the company would no longer have a functioning chocolate confectionery business. The resources and funding would go towards “investing in replacing old cocoa trees to increase productivity, or investments in better facilities for crop collection, storage, transport, or processing. . . . business or organisational development, THE HERSHEY COMPANY 12 or to support improvements in production and processing” (Goodyear, n.d.). The investment would sustain future growth of cocoa farmers and supply the essential ingredient needed to make chocolate. THE HERSHEY COMPANY 13 References Asad, F. (2014, June 26). Hershey is moving to secure its future. The Motley Fool. Retrieved from http://www.fool.com/investing/general/2014/06/26/hershey-is-moving-to-secure-itsfuture.aspx Bradford, C. (n.d.). How large is the chocolate industry? Chron.com. Retrieved from http://smallbusiness.chron.com/large-chocolate-industry-55639.html China chocolate market seen growing to $4.3 bln by 2019 – Hershey. (2015, February 18). Reuters. Retrieved from http://www.reuters.com/article/2015/02/18/hershey-china-chocolateidUSL1N0VS2MZ20150218 The chocolate industry. (2015, January 23). International Cocoa Organization. Retrieved from http://www.icco.org/about-cocoa/chocolate-industry.html De La Merced, M. J. (2013, December 19). Hershey goes to China for its biggest-ever deal. The New York Times. Retrieved from http://dealbook.nytimes.com/2013/12/19/hershey-goes-tochina-for-biggest-ever-deal/ Ferdman, R. (2014, July 18). Your chocolate addiction is only going to get more (and more, and more) expensive. The Washington Post. Retrieved from http://www.washingtonpost.com/blogs/wonkblog/wp/2014/07/18/your-chocolate-addictionis-only-going-to-get-more-and-more-and-more-expensive/ Gasparro, A., & McCarthy, E. (2014, October 29). Hershey margins hurt by higher costs. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/hershey-sales-rise-5-81414582768 THE HERSHEY COMPANY 14 Goodyear, D. (n.d.). The future of chocolate: Why cocoa production is at risk. The Guardian. Retrieved from http://www.theguardian.com/sustainable-business/fairtrade-partnerzone/chocolate-cocoa-production-risk Hershey building state-of-the-art confectionery plant in Malaysia to serve Asia region. (2013, October 3). AOL. Retrieved from http://www.dailyfinance.com/2013/10/03/hershey-buildingstate-of-the-art-confectionery-pl/ Hershey's Chocolate World. (n.d.). The Hershey Company. Retrieved from https://www.hersheys.com/chocolateworld/ Hershey's history. (n.d.). The Hershey Company. Retrieved from www.thehersheycompany.com/about-hershey/our-story/hersheys-history.aspx Hershey's manufacturing. (n.d.). The Hershey Company. Retrieved from www.thehersheycompany.com/about-hershey/manufacturing-network.aspx HSY Annual Income Statement - Hershey Co. annual financials. (n.d.). Retrieved from http://www.marketwatch.com/investing/stock/hsy/financials Kahn, L. (2013, November 1). Why so little candy variety? Blame the chocolate oligopoly. TIME. Retrieved from http://ideas.time.com/2013/11/01/why-so-little-candy-variety-blamethe-chocolate-oligopoly/ Maduri, F. J. (2014, November 21). Why chocolate prices will continue to rise. UPI. Retrieved from http://www.upi.com/Top_News/Analysis/Outside-View/2014/11/21/Cocoa-crunchThe-worldwide-chocolate-shortage/3631416423327/ Our brands. (n.d.). The Hershey Company. Retrieved from www.thehersheycompany.com/brands.aspx THE HERSHEY COMPANY 15 U.S. market share of chocolate companies, 2014. (n.d.). Statista. Retrieved from http://www.statista.com/statistics/238794/market-share-of-the-leading-chocolate-companiesin-the-us/ Wismer, D. (2013, February 12). Hershey's: 'one of the sweetest stocks on earth' this Valentine's Day? Forbes. Retrieved from http://www.forbes.com/sites/davidwismer/2013/02/12/hersheys-hsy-one-of-the-sweeteststocks-on-earth-this-valentines-day/
Running head: SHORT TITLE OF PAPER (<= 50 CHARACTERS) Title Author Author Affiliation Title of Paper Begin your paper with the introduction. The active voice, rather than passive voice, should be used in your writing. This template is formatted according to APA Style guidelines, with one inch top, bottom, left, and right margins; Times New Roman font in 12 point; double-spaced; aligned flush left; and paragraphs indented 5-7 spaces. The page number appears one inch from the right edge on the first line of each page, excluding the Figures page. In this introduction, you will describe the purpose of your paper (the first rubric element) – in other words, what your paper sets out to do. This video provides some guidance on how to structure an introductory paragraph. In this case, you are providing a microeconomic analysis of a particular company and you will analyze different microeconomic criteria related to your company and the market in which it operates. This analysis will then inform your recommendations for how the company can be successful in the future. Be sure to provide some specifics about what you will be analyzing so the reader knows what to expect – use the outline provided in the Final Project Document as your guide. Lastly, make sure that the company you choose is well suited for this kind of analysis. Please see the suggested list provided in your course for ideas and email your instructor your choice. Any company not on the list will need prior approval. History of the Company Use headings and subheadings to organize the sections of your paper. The first heading level is formatted with initial caps and is centered on the page. Do not start a new page for each heading. This first heading aligns with the second rubric element which gives an overview of the company’s history. Be sure to personalize this heading to reflect your company. In this section, include you will summarize the history of the firm and also provide an overview of what the firm does and what goods/services it sells. Be sure to include sufficient detail here. Your company’s website is the best place to find this information. This section should be about one page long. Supply and Demand Conditions There are two rubric elements to be included in this section and combined they should be about 2 pages in length, perhaps longer if you present more than one graph/table. The first element asks you to evaluate the trends in demand over time and explain their impact on the industry and on the firm. To do this, you can consider market demand. Market demand is the demand by all the consumers of a given good or service. Find out who your customers are and provide detail on them. Use annual sales data to find out how much of the product is purchased. Here is a video explaining each of the following determinants of market demand that you could examine for your company’s market: o Income o Price of related goods o Tastes o Population and Demographics o Expected Future Prices The second rubric element to be included in this section is your analysis of information and data related to the demand and supply for your firm’s product(s) to support your recommendation for the firm’s actions. You have already presented the overall trends in demand in the last element. In this rubric element, you will first collect data specific to your company on demand. To do this, look at the following: • Sales and Revenue. Building on the idea of market demand, consider how the annual sales data changed over time for your company in particular. • Include a graph/table/chart of sales for your company. This may be in dollars, product quantity or number of customers – whichever is most relevant for your firm. You could use more than one, if you think that would give a more detailed picture of demand for your company’s product or service. • Include 5 or more years of data will be enough to show a trend that is supported by your market demand discussion. • Data can be found from the company’s annual reports and revenue can more specifically be found in the company’s income statement. One you have analyzed the demand side, you can now look at the supply side of your company. For this, you will want to watch this video on the determinants of supply, just as we examined the determinants of demand in the last rubric element. Here, some of the pieces you could explore and provide data on are: • Input costs • Technological Improvement • Prices of substitutes • Number of firms in the market • Expected future prices Price Elasticity of Demand This section has three elements and should be 1-2 pages long. The first element asks that you analyze information and data to justify how the price elasticity of demand for your product is determined. Here, you will have to use pricing of your product, the trend in the price over time and comparison to similar products to justify whether you find the price elasticity of demand to be either elastic or inelastic. You may not be able to calculate a specific price elasticity of demand (video), depending on your company and the available information. However, looking at pricing data should help you justify whether demand is inelastic or elastic. You will then take your justification one step further in the second rubric element and explain the factors that affect consumer responsiveness to price changes. You can learn more about these factors from this video on the determinants of price elasticity of demand. Explore the following determinants as they relate your company’s product(s): • Availability of substitutes • Passage of time • Luxury or necessity • Definition of the market • Share of budget The third and last element in this section ask you to assess how the price elasticity of demand impacts the firm’s pricing decisions. As you read in Chapter 6 in our textbook, there is a relationship between elasticity of demand and revenue. You can watch this video to review the relationship between price elasticity of demand and total revenue and explain how this relationship influences the company’s pricing decisions. For instance, if a company sells a product that has very elastic demand, meaning customers are very responsive to a price change, then increasing their price means that their total revenue will decrease. This could explain why, in such a situation, the company may decide to not raise prices, even if their costs are going up. This is just one example so be sure to make your analysis relevant to your company’s specific situation. Costs of Production This section of your paper has two rubric elements and will be between 1-2 pages long, depending on your use of graphs or tables. The first element in this section asks you to analyze the various costs your company faces, their trends over time and how they have impacted the company’s profitability. To gather data on this, you will want to go to your company’s annual report and look at their income statement. Here is a helpful video to help you understand how to read an income statement. You will notice that there are two section that deal with costs – the first is Cost of Goods Sold which is essentially the cost of the inputs, such as raw material and direct labor. For clothing manufacturer, that would include the cost of the cloth; for an auto manufacturer, it would include the cost of the steel. Then, there is the section called expenses and these are the costs beyond buying the raw materials. These include things like rent, insurance and overhead and other indirect expenses. For this section, you should include: • Past 5 years (or more) of COGS, in a table or graph • Past 5 years (or more) of Operating Expenses, in a table or graph (can be combined with table/graph of COGS) • Explanation of any observed trends in either (ie: why is COGS increasing?) such as: o Pricing history of major inputs, such as cotton for a clothing company, as applicable o Change in how goods/services are produced – for instance, a change in major input such as moving from steel to aluminum • Your analysis of how changes in either or both of these affected profitability – remember that accounting profit, which is what we are looking at here, is simply Revenue – Costs The next rubric element in this section asks you to apply the concepts of variable and fixed costs to company for informing their output decisions. Chapter 11 examines the differences between variable and fixed costs, and you can review in this video the details about fixed and variable costs and how they apply to business output decisions. In this video, our textbook presents an example that shows how costs are distinguished between fixed and variable. This example will help shed light on how you can similar distinctions for your company. Also, you have already done some of this work in your previous rubric element. There you presented data on COGS and Operating Expenses. Generally, variable costs will show up in COGS and fixed costs will show up in Operating Expenses, so this gives you a head start. You can then use the data and your knowledge of fixed, variable and total costs from Chapter 11 to explain how your company will base their production level on the costs they face. Overall Market In this section, you will be examining three different aspects of the overall market in which your company operates. By overall market, we mean the market selling the product or service. For instance, there is a market for mobile phones or a market for jeans. Whatever product your company sells determines what market it is in. Note that the term market here does not refer to the stock market. In total, this section should be 1-2 pages long. The first rubric element of this section asks you to discuss the market share for your company and its top competitors by providing details on current percentages for each company and describing the trend over time. The best way to show this would be to use some type of graph or table to show for the past few years (5 would show any trends, if you can find the data going that far back). To do this, you will need to find data on the market as a whole – for instance, if the market is computers, you will need to find the total value of computer sales in the US. From there, you can determine that share (the percentage) your company and the other top companies get from that total. For an example of how to do this, check out this video on calculating market shares. You may also find that industry magazines or other market researchers have compiled this information, so do look for those resources as well, to make your data collection easier. Once you have the data, you will want to see how your company has been doing. Having 80% of the market might sound great but if you see that the company had 90% of the market two years ago, then we have a different story. This is why showing the trend is so important. The second rubric element in this section asks you to analyze the barriers to entry for your firm’s industry. This concept is explored in detail in Chapter 14 and you can review in this video the types of barriers to entry and their impact on the market. For the market your company operates in, you will detail the barriers to entry – some markets have more than other and some barriers are weaker than others. Your specific situation will allow you to explain how the existing barriers will either help insulate your company from competition or allow for competitors to break into the market. The last rubric element in this section asks you to describe the market structure for your firm and analyze how this affects their ability to influence the overall market. Recall from Chapter 12 that there are 4 different market structures: Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly. You need to categorize your company’s market into one of these four. Use the criteria listed in Table 12.1 on page 392 of the textbook and any supporting evidence you have presented so far. You can also use the four-firm concentration ratio and/or the Herfindahl-Hirschman Index (HHI) to support your conclusion. Here is a video showing you how to calculate both the four-firm concentration and the HHI*, and you can also review this on pages 453 and 497, respectively. Once you have determined the market structure, you can then analyze your company’s ability to influence the whole market based on this and their position within the market. *this example uses the top 50 firms – you will not necessarily have to use that many. Recommendation This last section of your paper contains three rubric elements, where you will provide your recommendations for future actions based on the three different criteria. This section will be about one page long. In the first element, you will develop a recommendation for how the firm can manage it future production by synthesizing the data presented. This essentially is asking you to look at the data and analysis done in the supply and costs sections and make a suggestion how the company should produce in the future. The determinants of supply and specific costs trends that the company faces will determine what you suggest for their production moving forward, in terms of quantity and types of products. The second element asks you to suggest how the firm’s position within the market and among its competitors will allow it to take the recommended action. This follows closely from your last element in the Overall Market section and you should use the evidence presented there to inform your recommendation here. Specifically, consider how the firm’s market power would allow them to make the suggested changes to production you mention above. You should also include here advice for how your firm can become stronger within their market. The last rubric element asks you to describe how the firm can sustain its success going forward by evaluating trends in demand and price elasticity. Here you will revisit your analysis in the demand and price elasticity section to further provide suggestions for how your company can stay profitable. From pricing decisions to responding to changes in demand, your suggestions here should reflect your findings in those earlier sections. Be sure to include specific ideas for how the firm can remain successful, like new products to offer based on changing tastes, or a different pricing strategy to remain competitive. Your ideas should of course align with the rest of your analysis and the microeconomic concepts. Citations This is not a particular section of your paper, but rather guidance on how to use APA format in-text citations throughout your paper. Source material must be documented in the body of the paper by citing the authors and dates of the sources. The full source citation will appear in the list of references that follows the body of the paper (see last page). When the names of the authors of a source are part of the formal structure of the sentence, the year of the publication appears in parenthesis following the identification of the authors, for example, Smith (2001). When the authors of a source are not part of the formal structure of the sentence, both the authors and years of publication appear in parentheses, separated by semicolons, for example (Smith and Jones, 2001; Anderson, Charles, & Johnson, 2003). When a source that has three, four, or five authors is cited, all authors are included the first time the source is cited. When that source is cited again, the first author’s surname and “et al.” are used. See the example in the following paragraph. Use of this standard APA style “will result in a favorable impression on your instructor” (Smith, 2001). This was affirmed again in 2003 by Professor Anderson (Anderson, Charles & Johnson, 2003). When a source that has two authors is cited, both authors are cited every time. If there are six or more authors to be cited, use the first author’s surname and “et al.” the first and each subsequent time it is cited. When a direct quotation is used, always include the author, year, and page number as part of the citation. A quotation of fewer than 40 words should be enclosed in double quotation marks and should be incorporated into the formal structure of the sentence. A longer quote of 40 or more words should appear (without quotes) in block format with each line indented five spaces from the left margin. References Entries are organized alphabetically by surnames of first authors and are formatted with a hanging indent. Most reference entries have three components: 1. Authors: Authors are listed in the same order as specified in the source, using surnames and initials. Commas separate all authors. When there are seven or more authors, list the first six and then use “et al.” for remaining authors. If no author is identified, the title of the document begins the reference. 2. Year of Publication: In parenthesis following authors, with a period following the closing parenthesis. If no publication date is identified, use “n.d.” in parenthesis following the authors. 3. Source Reference: Includes title, journal, volume, pages (for journal article) or title, city of publication, publisher (for book). Here is a link to a video to walk you through creating a reference list in APA format.

Tutor Answer

paula9
School: Duke University

Attached.

Running head: NIKE COMPANY

Nike Company
Student’s Name
Institution
Course
Instructor
Date

NIKE COMPANY

1
Introduction

Undeniably, Nike Inc. is one of the biggest multinational companies in the US. The
company dominates the footwear and sporting equipment industry dominating locally and
internationally. Its economies of scale and branding make it grow at a faster rate positioning
itself as one of the market leader in that sportswear industry in the US and the word. The
company has been in the market for years with its name growing famous all over the world. The
company is fully involved in the foot and sportswear industry right from research, design,
development, manufacturing, marketing, and sale of that product commanding and controlling
the line processes of its products. This paper focuses on Nike Inc. summarizing the overview of
the company's history, goods, and services it provides and market it operates to help the final
project development on the effectiveness of decision making in the business organization.
History
Philip K Knight is the founder behind the idea of this innovative athletic and sports-gear
company. The idea behind the initiation of this company come up when he went to Japan and
later imported the first 200 pairs of a sports shoe in the following year (Nike Inc., 2018). His
quest for a better athlete’s sportswear made him believe that Japan’s shoes would do better than
the German products domination the US market by this time. His track coach Bowerman, with
the same idea of improving the athlete sportswear, joined him and later become the co-founder of
this innovative company. The company's' incorporation was in 1964 as Blue Ribbon Sports
importing running shoes from Japan (Nike Inc., 2018). Bowerman innovativeness and quest for
technology saw the company grow over time. The company's first designed and home
manufacture products known as Cortez emerged as a brand product giving it a big sale by early
1970s. The company changed its name later in 1972 to Nike Inc. The company has its

NIKE COMPANY

2

headquarters are in Oregon Portland metropolitan in the US. The company ventured into
manufacturing of its line products through independent contractors and importing them to the
US. In its quest to expand that markets the market, the company went international opening its
market in Canada in 1972 and Australia in 1974 (Nike Inc., 2018). Through the aggressive
marketing, survey, and development of new products to match the market demand, Nike grown
revenue and market shares surpassing their products whose origin was in German. The principal
Nike subsidiaries include Bauer Nike Hockey Inc, Converse Inc. Hurley International LLC and
the most recent Exeter Brands Group LLC (Nike Inc., 2018). The company growth and
acquisitions of firms make it one of the fastest growing multinational companies in the US.
Nike is the core market leader in footwear and sportswear in the US market. The
company controls almost 38% of the market in the US (Reference for Business, 2018). The wellknown brands and robust marketing strategies make the company grow strong in the market. The
company sales products in over 162 countries worldwide with over 2200 outlets (Referenc...

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