Herr Foods Inc, Case Study Example

Problem Identification

Herr Foods Inc. has been in operation for quite some time, around sixty years. Although, the company sells a number of food products, potato chips product is the greatest product taking around 50% of the total revenue (Bellury & Guterl, 1995, p.13). When the company was formed, recreational facilities like TVs and videos were not as many as they are today and as a result, children engaged in physical play for the better part of the day. Even though, potato chips product is mainly carbohydrates, it did not have health problems on the consumers because they did physical practice.

Potato chips product is considered junk food “after hamburger and fries” (Redmer, 2010, p. 56). The main problem Herr Foods Inc. is facing is that of health issues raised by the government after several scientists have spent more than a year investigating on the issue. The government with the help of the scientists are emphasizing on “the importance of a healthy lifestyle and eating” (Redmer, 2010, p. 55). In addition, “the fast food industry had especially come under fire even with threats of lawsuits claiming that fast food companies were responsible for individual illnesses and weight problems” (Redmer, 2010, p. 55).

The fact that potato chips product contribute over 50% of the total revenue of the Herr is a threat. The government is fighting against unhealthy feeding styles by the citizens in the country.  Unhealthy feeding is contributed by feeding on foods with high calories and potatoes are considered to be among these foods (Foster, et, al, 2003). Since the government is fighting against feeding on carbohydrates, potato chips will be affected and this will reduce the company’s revenues significantly.

Herr’s management with the help of its founder Jim Herr has been faced with problems of attracting consumers and winning a significant market share. This has been because of the strong competition they face in the market. The greatest challenge the company is facing is that of environmental changes. The company needs to be “proactive to national trends and consumer concerns”. There is no way the company can continue enjoying its business opportunity unless it solves the problems of environmental changes.

SWOT Analysis

This analysis is tremendously beneficial for Herr so that it should be possible to deal with the problems of environmental changes. The firm has to review its opportunities and strengths and use them to deal with the threats and weaknesses it is facing at the moment (Baetz & Beamish, 1993). The strengths are the internal advantages that a company enjoys while the weaknesses are the internal disadvantages that pose threats to the company.

Strengths      

Herr Foods Inc. has a number of strengths that make it succeed in the food industry. To start with, the company has majorly committed management, who are determined to see the company succeed. This is evidenced by the determination shown by Jim as it is said, “Jim was a man of his word, and a simple handshake often closed many complicated agreements between customers and suppliers” (Redmer, 2010, p. 56). This shows that his determination knew no barriers, and he was always determined to see anything he started succeed.

All the other management staff in the company exercises the motto of determination. This is evidenced as they “agree with their father’s philosophy of running the company to maintain a culture of integrity, fairness, and opportunity; to stress quality products and service; and to continue the growth of the company” (Redmer, 2010, p. 56). All these practices were grounded on Christian ethics and values.

Herr’s is competitive as it has won over the other food companies in the industry. Every action taken at Herr should be to the best interest of every part concerned. The company has been able to beat its competitors because it believes in high quality products for consumers. The actions taken incorporated the interests of consumers, and if they are not pleased, all other possible actions are taken. This has enabled the company to win a substantial market share and increase its revenues considerably.

Herr can be considered a market leader because of the large number of customers it serves. It should be noted that, Herr does have over thirty competitors in the local region. However, Herr produces a large number of product lines and with a variety of products in each of the lines provided. This makes it possible to attract a large number of customers since several customer specifications are considered. This is evidenced by the fact that “each of the product lines offered a variety of products with varying sodium, fat, nutrient content, and packaging” (Redmer, 2010, p. 57).

Herr enjoys the fact that its products are of high quality. Each of the employees in the company is determined to produce high quality products. This is evidenced by the motto practiced by every employee that customers’ interests should be put first.

Herr’s management is competent because of their honesty and integrity. This has acted as strength to the company. As the company was doing its marketing, it faced challenges from a large number of competitors with several prominent national companies. In order to make its products go to the market, customer’s loyalty had to be won. However, this was not difficult for the company because customers’ loyalty was earned through the executives’ honesty, integrity and trust.

The company has a well established flow of funds both from the sales revenue, and from loans. It received loans from the banks and never forfeited any loan repayment because it always believes in honoring promises. With religious policies practiced to date by the current management team, the loaning facilities can kindly honor any loan applied for by Herr. The company has shown that it repays loans without any problem, and this guarantees it of securing future loan.

Weaknesses

Herr is faced with the weakness of lack of a clear strategic initiative. This is because the government, and healthy officials are encouraging fast food companies to produce healthy food products while the customers should make healthy decisions. The problem with this move for Herr is the fact that it is not possible to cut on the production of potato chips while the competitors are producing similar products. This will mean that Herr will lose not only its revenue, but most customers will prefer the competitors who are still producing the products they like.

With the move of Herr to adhere to the healthy policies, competitors can easily gain market share. Since Herr is used to taking actions that do not harm any of the stakeholders involved, it is likely that, they will be interested in changing their food products to producing products that are healthy to the consumers. However, this will mean that they will lose customers who are not willing to obey the healthy policies of guidelines given. They will be willing to get “the previous products- healthy or not- and would just purchase a competitor’s product sitting a few feet away on the shelves” (Redmer, 2010, p. 58).

Another weakness faced by Herr is that of space. It is notable that most retailers are willing to stock Herr’s products, but the space that is required to stock a considerable capacity is not available. This implies that no matter how much the retailers are interested in buying from Herr, the limitation of stocking space will force them to purchase in small amounts.

Opportunities

Research and development by Herr acts as an opportunity to it. Through research, Herr has been able to find out that the health department is not interested in healthy foods but healthy diets and, therefore, people need to take certain levels of calories to be strong. Through this research, they are aware that they do not need to discontinue any of their products but only diversify in others to attract more customers with different specifications.

The firm has sufficient finances to fund new product development. This is evidenced by the fact that it has developed Crisp and Olean products, which are healthy but terribly expensive to produce. Even though, they did not do well in the market as expected, the customers tried them. This supports the idea that if any product will be required in the market in the future, irrespective of the production costs, Herr will attempt to bring it to the customers.

Herr is able to penetrate into new markets without establishing new production lines, which are extraordinarily expensive to install. It enjoys it through the engaging in partnerships. Through joint ventures, Herr has been able to produce around four new items every year into the market. Although this meant discontinuation of some products, the production process was less expensive since it was done through partnerships.

Threats

It is extremely hard to produce a entirely healthy snack. Scientific research is still on, and every day comes up with different specifications with snacks linked to obesity (Foster, et al, 2003). As it is noted, “it was low fat, then low carbs, then high protein, next high sugar, and may be next low salt” (Redmer, 2010, p. 59). This means that product development is a continuous process, and this is very expensive for a food producing company like Herr. The intervention of the government at this instance to prohibit fast food companies from producing unhealthy foods is a enormous threat to Herr. They will be forced to switch from customer satisfaction to satisfying the government, while in reality, it would not consume what is produced.

The demographics are shifting and thus placing Herr at a competitive disadvantage. Herr is used to meeting the demands of all the stakeholders. By satisfying the demands of the government, Herr will be dishonoring the wishes of customers, and this will mean a shift of customers to competitors. Initially, customers purchased snacks for lunch, but this trend is changing as snacks are becoming preferable even during supper. This encourages Herr to go against the government’s directives and produce more snacks to meet the ever-increasing demand.

Discussion of Alternatives

The problem of producing a healthy and high quality food product can be solved through increased market share such that the fixed costs are always covered, and, therefore, it will be easy to come up with new products without financial strain. The advantage with this strategy was that once in power, a company could remain there. All that was needed was to satisfy customers in order to maintain loyalty. However, it was exceedingly difficult to gain a sizeable market share in the food industry because of high competition, and presence of the national companies for they were influential due size enjoying economies of scale.

Partnerships and joint ventures is also another alternative that could be used to solve the problem of Herr. Through partnerships, the company will produce new products without having to go through the process of changing its production lines or installing the new and expensive machinery. The disadvantage with this move is the possibility of mistrust between the two companies with the partner failing to adhere to the business agreement and fail to meet customers’ demands and orders.

Potato chips with reduced fats and salt could be used to solve the problem of producing healthy products.  These are products with low qualities and those recommended by the government and healthy officials. The disadvantage here is that of failing to meet customers’ preferences since most need salty fast foods to reduce stress. Another problem of innovating this new product will call for increased product varieties while the stocking space on the shelves is limited.

Another alternative considered solving the problem of changing demographics was to produce new six products into the market each year. This could be produced incorporating the changing demands of customers in order to ensure satisfaction. The problem with this was that due to a large variety of products produced, producing a new one meant discontinuation of another. At first, it will be easy to pick on the items to discontinue. Nevertheless, with time, it will be terribly difficult to pick on the poor performing products and make a decision to discontinue them.

Since producing a health snack was a problem, the management should come up with high quality products, which will ensure the consumers maintain loyalty. The products need to taste delicious and be crunchy. This move will outweigh the directives by the government to produce only healthy snacks. The problem here will be the costs involved since for a new product to meet changing demands, it has to be of high quality and crunchy.

Recommendations

The recommended course of action in this case will be to produce a high quality product that meets the ever-changing demands of the customers. This problem will deal with all the problems identified earlier. Customers are the key stakeholders in any business. In order to ensure success, of a business, customers need to feel satisfied.

The government has become a threat to the fast food industry. However, it is not able to guide the consumers on what they buy and what they should not buy. All what the government does is to advise the customers on what is healthy. Further, the governments arguments that snack foods contribute highly to obesity in the country has turned out to be a rumor. Lack of exercise among other reasons has been identified.

The problem of competition will be solved through customer attraction. Customers will always purchase the products that give them utmost satisfaction. The company with high quality products, on the other hand, attracts customers. Further, customers become loyal to the brand of high quality. This implies that producing high quality products is the only solution to the problems Herr is facing.

Another problem to be solved is that of limited stocking space on the shelves of the vendors. When products are of high quality, they do no stay long on the shelves, and this creates more space for more stock. Customers will be attracted to purchase the high quality products over those of the competitors, and this will mean that more space is created for more products.

Crunchy and high quality products will enable customers stay loyal and attract new customers implying increased sales for Herr’s products. Since Herr has always believed in high quality products, this is not a difficult move to make. All the management staff is committed to high quality, and this will imply cooperation to the strategy and eventually its success.

With increased sales revenues, market share, and sometimes loans, it is remarkably easy for Herr to come up with high quality products. Research will be necessitated by the available funds and consumers tastes and preferences will be included in the new products. Through funding research and development department, the cheapest production methods will be identified and implemented.

The stakeholders involved in this case will be the customers, management, employees, the government, and the country’s healthy department. The management and employees will easily cooperate in this move because they have always believed and adhered to customer satisfaction through high quality products. The customers will also accept the strategy because they love satisfaction and quality products.  The government and the health department through research have learnt that health problems including obesity are caused by other factors rather than fast foods (Field, et al, 2004).  They also believe that customers have a chance to make wise food choices.

The actions should be implemented through cooperation of all employees and the management team. The research and development department will be responsible for collecting all the information regarding customers’ tastes. The production department will be involved in producing high quality products that adhere to the specifications given by the research team. The market team should advertise their products and make sure that they outdo those of the competitors.

References

Berull, P. & Guterl, G. (1995). The History of Herr’s. Herr Food Inc.

Foster, G., Wyatt, H., Hill, J., McGuckin, B., Brill, C., Mohammed, S., Szapary, P., Rader, D., Edman, J. & Klein, S. (2003). “A Randomized Trial of a Low Carbohydrate Diet for Obesity.” New England Journal of Medicine, 348, 2082-90.

Field, A., Austin, S., Gillman, M., Rosner, B., Rocket, H. & Colditz, G. (2004). “Snack Food Intake does not Predict Weight Change among Children and Adolescents.” International Journal of Obesity, 28, 1210-16.

Redmer. (2010). Case Study- Herr’s Food Inc. CBAR Spring. 55-62.