HOSP 4060 Final Exam Essay One 4 points Pr.docx
- 1. HOSP 4060 Final Exam Essay One 4 points Provide basic background information about this company. Critique the mission and vision statements of this company using the tools and techniques presented in this class. Conversely, if they do not have either of these tools, suggest a sample mission and sample vision statement for this company then critique each. Include an analysis of their current goals. Hostess began in Manhattan as the Ward Baking Company in 1849. It grew regionally and changed its name to Continental Bakeries in 1925 and bought Wonder Bread. In 1930 the iconic Twinkie was created. The company changed hands several
- 2. times, and in 1995 Hostess was sold to Interstate Bakeries and became the largest bakery in the United States, with $3.2 billion in sales, 58 factories, 1,250 outlet stores and 10,500 delivery routes. Eventually consumer tastes changed toward more health conscious snacks, the price of flour and sugar rose, and costs for things such as pensions for unionized workers lead Hostess to file for bankruptcy in 2004. The company emerged from bankruptcy in 2009, with a new owner but with many of its old problems – high pension expenses, inefficient manufacturing, shipping and delivery systems, and still high debt. Despite union concessions to save the company money, Hostess filed again for bankruptcy in 2012. It was in liquidation when Andy Jhawar and C. Dean Metropoulos purchased the company and began to rebuild and reinvent the Hostess brand. Because of the liquidation, many of the problems that plagued the company previously were gone – pension costs, union contracts, debt, outdated factories and
- 3. unprofitable routes. Mr. Jhawar and Mr. Metropoulos had a brand and saw opportunity. They re-built the Hostess brand from the ground up. They modernized the factories, invested in software to manage inventory and logistics, and invested in research and development to lengthen the shelf life of the Hostess products. They developed a marketing plan to announce the comeback of Twinkies and demand skyrocketed. Future plans for Hostess include targeting new markets, creating updated versions of the Hostess classic products with new flavors, and perhaps there is a sale or an IPO possible for the company. Mission and Vision statements for Hostess brands were not available but they may be something like this: Vision Statement: Hostess brands will continue to grow and change to provide future generations the snack products they desire. Mission Statement: Our mission is to offer value to all our
- 4. stakeholders – our investors, employees and consumers – by producing quality bakery and snack products in a cost- effective manner that is safe for our employees and the environment. We are proud to have served generations of consumers the products they desire and our goal is to change and update our products to match the changing needs and desires of our customers nationwide. The vision statement above addresses the company’s desire to stay competitive in the industry by continuing to change their products as their customers’ tastes change. It also inspires by mentioning serving future generations, a valuable reminder that they have done so for past generations. The mission statement addresses customers, products, market, concern for employee safety and desire to provide value for all stakeholders and mentions a desire to be environmentally conscious in regard to their production methods. It does mention
- 5. self-concept – that they are proud to have served generations of consumers. The concern for survival is seen in that their goal is to adapt their products to serve the changing needs and desire of their customers. Perhaps more information on technology could included as well as more on the company philosophy Essay Two 4 points Using Porter’s four quadrant theory, identify and explain this company’s position in the marketplace, include analysis of competitors for the other three quadrants. Include in your analysis a discussion of the five forces model and its impact on this company and industry segment. Note: Visuals can be beneficial to communicate your analysis. Competitive Advantage Scope of
- 6. Operations In the above Porter’s 4-quadrant chart, Hostess brands have a broader target range, perhaps because of their brand recognition nation-wide and age of the company. They can be found in most every grocery store, pharmacy, gas station and convenience store. The Little Debbie brand, whose products mimic Hostess products, are less expensive than the Hostess products in general and are found in more low-end stores such as Dollar General, although they are found in grocery stores, usually priced below similar Hostess brands. The Sara Lee brand is known for higher quality, higher priced items, including their baked goods. Weight Watchers snack and baked goods are relatively new to the market. Weight Watchers differentiates its items by marketing to followers of COST UNIQUENESS BROAD TARGET
- 7. Hostess Sara Lee NARROW TARGET Little Debbie Weight Watchers the Weight Watchers diet plan, by lowering the fat and calories and assigning a point value to their products in conjunction with their point-based diet plan. Porter’s 5 Forces Model, in addition to industry rivalry, considers the bargaining power of buyers, the threat of substitutes, the bargaining power of suppliers and the threat of entry of new companies. In this situation the threat of entry of new competitors is
- 8. relatively low. This is because a large amount of capital is required to enter the market, existing firms have patents, trademarks and strong existing brand reputation and recognition (such as with Hostess). There can also be strong customer loyalty (think of the “panic” that resulted when Hostess products such as Twinkies, would no longer be available). There has been some differentiation of products recently, with Weight Watchers offering diet-friendly products and companies like Quaker offering granola bars to appeal to the more health conscious consumers. The bargaining power of suppliers is high. In the baked goods industry, flour and sugar are top priorities. The suppliers have the upper hand against bakeries, there are few substitutes (such as perhaps artificial sweetener) because they know flour and sugar are necessities and high quality is important to produce a product the consumer will want to buy.
- 9. The bargaining power of buyers is relatively high, because there are many choices of baked goods in the market at different prices points. If buyers are price sensitive and there are many substitutes, then the buyers will exert bargaining power on the industry. One thing that will lower the bargaining power of the buyer is simple brand or product loyalty. If a customer likes Hostess Twinkies and doesn’t like the taste of the similar and lower priced Little Debbie product, that customer will stay loyal to the Hostess product. The threat of substitutes is high for Hostess Brands. Consumers can easily switch from Hostess to another similar brand with little or no cost and may even spend less. The only thing that tempers this threat is the loyalty customers may feel toward Hostess. Rivalry among existing competitors is high because firms are aggressively competing for market share, and many are doing this by offering products that are healthier. There are many competitors in the field and the
- 10. industry growth is slow. The products can be easily substituted and are not differentiated to a great degree. To remain competitive, Hostess should offer lower calorie or healthier products. Again, what helps them with rivalry among existing competitors is the loyalty of customers to the brand. Essay Three 4 points Create a brief problem statement for this company. Next, conduct a SWOT analysis for them including as many of the PESTEL external factors and internal factors as possible in your assessment. Based on your SWOT analysis suggest three strategies they could pursue to more firmly establish their competitive position. Be sure to define the strategy and provide an appropriate example for this particular company. Problem Statement: Hostess Brands profits depend to a great degree on brand
- 11. recognition from the past. The company has made strides to modernize the company and has corrected some of its mistakes from the past. It has streamlined its technology, changed its recipes for a longer shelf life, dropped its expensive delivery routes, switched to a warehousing system, and has not hired union workers since the new owners took control. All of these steps were necessary to maximize profits, but the company is not doing enough to keep pace with the competition with what the new generation of consumers is looking for in the market. SWOT Analysis Internal Environment Strengths Weakness Man scratch” modernize equipment - around of food companies
- 12. stay with the company long-term tomer loyalty generation Finance and Investment streamline production system prolong shelf life ment in R & D of new products. question
- 13. External Environment Opportunities Threats -conscious economy, market product in low-budget stores production costs enough in a sinking economy to offer lower prices. for food will grow. May lead to higher costs and tighter profile margins. for more health- already saturated the market conscious consumers
- 14. demographics with health-conscious snack choices. Consumers may not be able to relate Hostess brand to a healthy snack choice hnology/social media to increase marketing efforts generation may not use social media to a great degree “green” company – discontinued ecologically detrimental delivery routes. company can do to be
- 15. environmentally friendly. and health standards for production and delivery of product -free workforce to avoid previous issues detrimental to company the workforce again. Essay Four 4 points Discuss this company’s current financial stability (include financial ratios and stock information, if applicable, to demonstrate your assessment). In other words, are they financially stable and how do you know? Note: Visuals can be beneficial to communicate your analysis. In 2012 Hostess was in Chapter 11 bankruptcy proceedings for
- 16. the second time, operating at a loss of $1.06 billion, with sales of $2.47 billion and liabilities of $2.5 billion. Pension expenses for unionized employees were over $930 million. Hostess was in the process of liquidation, when Andy Jhawar and C. Dean Metropoulos decided to re- build the Hostess brand and bid $410 million for the cake plans, the recipes and five factories. Not included in the sale were all the problems that had help to bankrupt the company – the pension costs, the union contracts, the expensive delivery routes and the huge debt. Mr. Jhawar’s company Apollo put in $140 million in equity and Mr. Metropoulos put in $40 million. A $500 million debt offering covered the rest. The new owners predicted earnings before interest, taxes, depreciation and amortization (EBITDA) in the first year would be $100 million; however, EBITDA reached $178 million at the end of the first year of operations. Estimates show potential
- 17. EBITDA in its second year of operation under the new leadership to be over $200 million. In 2015, the estimated value of Hostess is $2.5 billion. If Mr. Jhawar and Mr. Metropoulos decided to sell the company at this price, they will realize a $2 billion profit. $ 2,500,000,000 estimated August 2015 value - 180,000,000 equity investment in 2013 purchase 2,320,000,000 - 500,000,000 repayment of 2013 loan debt $ 1,820,000,000 potential profit from 2015 sale Based on the estimated value of the company in 2015, the
- 18. finances of the redesigned Hostess are very stable. Consumers are still buying Hostess brands in great numbers, even though the cost of Hostess products is greater than the competition. Essay Five 4 points If you were a strategic consultant presenting the above analysis to the company, what advice would you offer? Incorporate (and credit) the theories of some of the experts presented in class as part of your recommendations. Draw from the Expert Presentations and/or the Position Papers to select theories applicable to your analysis. In all the research I did on Hostess brands and the turnaround that was orchestrated by Mr. Jhawar and Mr. Metropoulos, I found very little business strategy in regard to employees. So my advice I would offer to Hostess Brands starts with attention
- 19. to employees: 1. Happy employees lead to happy customers. Herb Kelleher of Southwest Airlines recognized the value of employees who felt like they were part of the culture of the company, and were empowered to solve problems and make suggestions for success. This can lead to employees who are motivated to work to develop new/better products for customers, which in turn will lead to higher profits. And as Bruce Poon Tip believes, a business model is based on freedom – freedom of employees to contribute suggestions for the success of the brand. 2. Invent new markets and products to satisfy the future needs of customers. Gary Hamel writes about core competencies and future success of a corporation. A few companies have proven themselves skilled at inventing new markets, quickly entering emerging markets, and dramatically shifting patterns of customer choice in
- 20. established markets. The critical task for management is to create an organization capable of developing products that customers need to fit the lifestyles of the future. As the owners are considering selling the company in 2015 or perhaps considering an IPO, they are also considering updating Hostess classics by offering new flavors, such as red velvet and sea salt/caramel. They are also considering targeting the fast-growing Hispanic market. 3. Continue co-branding and promotions. Hostess is a sponsor of a summer promotion celebrating the “Minions” movie in theatres. They have created a “Twinkie Minion Selfie” sweepstakes and limited-edition Twinkie Minion decorating kits with both classic flavor and limited edition banana flavor Twinkies. Promotions of this sort should be ongoing based on current popular culture. Combine these promotions with opportunities for social media exposure.
- 21. 4. Develop related products to keep the Hostess name relevant in the marketplace. For example, Hostess has just introduced The Twinkies Cookbook, Twinkies 85th Anniversary Edition. Related product development should be ongoing.
- 22. WORKS CITED Bertoni, Steven. “The Twinkie Miracle”. Forbes. May 5, 2015. Web. August 10, 2015. Kosman, Josh. “Owners to Collect Massive Profit From Buying Hostess”. The New York Post, August 1, 2015. Web. August 10, 2015. Shedlock, Mike. “Miracle Twinkies Comeback”. Mishi’s Global Economic Trend Analysis. May 2, 2015. Web. August 10, 2015.