Hershey Case study
Briefly describe the market and client business you are focusing on and lay out key dynamics in your client’s industry.
What are your initial hypotheses about the top three opportunities and threats facing the industry? Could you pick one or two specific trends that in your opinion could significantly impact your client’s industry in the future? Finally, what questions would you be looking to ask the top management in your first meeting?
Now that you understand the importance of value creation and value capture, let’s bring these concepts back to your client. Please provide brief answers to the following questions:
What are your client’s key products or services?
Who are your client’s key customers?
How does your client address its customer’s needs through its product and service offerings?
How much value has your client created for its customers? How much value does your client capture?
What are the three key challenges that your client faces in value creation and capture? How are they planning to grow their business?
Analyze the value creation of one of your client’s key products/services considering the drivers of 1) buyer’s willingness-to-pay (WTP) and 2) total suppliers’ costs (TSC).
What is the impact of the key trend(s) that you identified in Week 1 on value creation in the industry? Consider both shifts in TSC and WTP. What are the specific impacts on your client? How well positioned are they for these shifts in value creation?
Based on the analysis of value and the trends you chose to focus on, identify a potential business opportunity for your client leveraging the trend(s) to create an enhanced value proposition for their customers.
Financial sheet:
For your client’s organisation, what assets are most significant on the balance sheet? What are the risks involved in managing these assets?
How has this asset make-up changed over the recent past? Ideally, use five years of data, but if fewer years are available then make do with that, be sure to include specific quantitative movements where necessary.
Why do you think the investment intensity in the various assets has evolved in this way?
How is the organisation financed – primarily equity, primarily debt, or a mix of both? Has this changed over the time period under evaluation? Please include a quantitative analysis. What are the risks involved with this approach?
Analyse the income statement with a focus on sales revenue, gross profit, and operating income. How and why have these figures changed over the period? Please include a quantitative analysis.
For the years presented in the Cash Flow Statements, how has the cash flow from the major categories (operating, investing and financing) behaved?
How do you interpret your client’s results from a cash flow perspective? How do you relate this to their results from an income perspective? What does this tell you about future risks and opportunities for the firm?
How would the potential business opportunity influence the operating and capitalising expenditures?
Now you have learned industry value chain and drivers of market size. Let’s go back to your client and answer the following questions:
Do an analysis of the CURRENT industry value chain, highlighting the impact from current trends in the industry. Conduct an additional analysis on the potential changes and impact on it by trend(s) you have chosen in Week One.
Who is your client’s top supplier? Has that changed in the past 5 years? Will that change given the trends in the industry?
What are the direct substitutes of your client’s products or services?
What are the distant substitutes coming from other industry or sector? What will make them become real threats to your client’s business?
What is the size of your client’s industry and what drives its market size?
Now you have developed a better understanding of your client’s industry, what are the three key opportunities which could help your client strengthen their position in their industry? Are they in line with the potential business opportunity you identified in week 2?
What are the two potential threats that may challenge the position of your client?
Share your thoughts on the potential market size for the chosen trend and the business opportunity that could be created thanks to it. (Hint: identify the measurements or indicators you could suggest to size the potential market).
Now you have learned industry value chain and drivers of market size. Let’s go back to your client and answer the following questions:
Do an analysis of the CURRENT industry value chain, highlighting the impact from current trends in the industry. Conduct an additional analysis on the potential changes and impact on it by trend(s) you have chosen in Week One.
Who is your client’s top supplier? Has that changed in the past 5 years? Will that change given the trends in the industry?
What are the direct substitutes of your client’s products or services?
What are the distant substitutes coming from other industry or sector? What will make them become real threats to your client’s business?
What is the size of your client’s industry and what drives its market size?
Now you have developed a better understanding of your client’s industry, what are the three key opportunities which could help your client strengthen their position in their industry? Are they in line with the potential business opportunity you identified in week 2?
What are the two potential threats that may challenge the position of your client?
Share your thoughts on the potential market size for the chosen trend and the business opportunity that could be created thanks to it. (Hint: identify the measurements or indicators you could suggest to size the potential market).
What are the key assumptions underlying your forecast? Identify four or five crucial ones. These can involve customer demand, competitors’ reactions, supplier factors, macro-economic forces that might vary globally, etc. Be creative, and do not limit yourself. What will their quantitative impact be?
Now, what are the two most crucial assumptions underlying your forecast?
For these two assumptions, calculate both optimistic and pessimistic scenarios.
Now is the final push! Based on an analysis of your client’s environment and trends prepare a strategic response for your client by identifying a business opportunity that would help them enhance the value proposition for their customers and differentiate themselves from their competitors in the future.
Please include the following to support your recommendation:
A brief description of your client’s current business.
What options can your client consider to differentiate? (industry and technology trends, challenges)
What is your recommendation? (identified business opportunity)
How would your recommendation help them achieve superior value creation and capture? (WTP, TSC, Five Forces analysis, market size etc.)
How would it fit your client’s overall strategy?
What is the expected financial impact of the recommendation on the client?
What is the expected non-financial impact of the recommendation on the client?
The next steps for your client to execute on your strategic plan.