M&M's Case Study

Case study, Pages 9 (2160 words)

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1. Introduction and Background

The major purposes of effective leadership and management consist in timely monitoring of organisational environment, development of adequate responses to environmental challenges and further strategic planning and changes[1]. Relevant leadership strategies and implications can solve numerous business challenges and help organisations to overcome diverse external as well as internal pressures and crises[2]. This strategic report is aimed at the identification of the key business challenges of M&M’s through external and internal analysis and further development of solutions and specific recommendations on how effective leadership can meet these challenges in this organisation.

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M&M’s is a popular confectionary brand, which belongs to Mars Incorporated. The brand’s name is an abbreviation for its creators such as Mars and Murrie. The main products of M&M’s are chocolate and peanut colourful candies with the letter ‘m’ on one side[3]. The product was firstly launched during the World War II, and the main customer of M&M’s was the US army.

In 1980, the firm began its foreign market expansion[4]. Nowadays, Mars Inc., the parent company, is one of the biggest confectionery manufacturers in the world. M&M’s chocolate beans are sold in more than 70 countries around the world. The company employs more than 40,000 people all over the globe. It should be noted that M&M’s is a private firm, which started from a family business. In 2010, total revenue of the parent company, Mars, constituted $30 billion[5]. M&M’s uses flat organisation structure, which makes the company very responsive to the needs of its employees as well as customer.

The main competitors of M&M’s are Hershey, Nestle, Cadbury and Kraft Foods[6]. M&M’s business strategy consists in maintaining high quality of the production alone with high volume and low prices.

2. Environment Monitoring

Research and development (R&D) department has always been of great importance for M&M’s. It has been mentioned in the background that multi-level efficiency is one the main principles of the firm. To achieve this efficiency, the company relies on its own market research and general industry publications and analyses[7]. The company’s success formula consists in in-depth customer engagement practices, through which tastes and preferences of customers are studied and analyses. For instance, in 2002, M&M’s monitored customer environment through the internet survey method, when the target population was proposed to select a new colour if candies. As a result, purple candies were added to M&M’s production[8].

Furthermore, it should be noted that in the early 2000s, the external environment began to rapidly change. In response, M&M’s needed to develop adequate measures and strategies in order to remain competitive the market. In this case, M&M’s decided to implement the ‘launch and learn’ approach, which can be considered another successful method of monitoring the environment[9]. As a result, ‘My M&M’s’ brand was introduced to the customers. The main idea of the new brand consisted in customisation. Customers could order chocolate beans, but instead of the letter ‘m’, they could request their names or even images. In-depth market research and monitoring were also made after the launch of the new sub-brand. The new product turned out to be successful and appreciated by customers. In addition, it should be noted that M&M’s uses the benchmarking method when new marketing strategies are tested in smaller focus groups[10].

3. External and Internal Analysis

In order to understand external environment of a company, the PESTEL framework is frequently implemented. It should be noted that PESTEL is an acronym, which stands for political, economic, social, technological, environmental and legal environmental factors[11].

Political • M&M’s sells its chocolate beans in more than 70 countries all over the world[12]. If the government of a country is unstable, it can negatively affect the firm and its sales. For instance, quotas on imports and other restrictions may be introduced. In these conditions, M&M’s will be able to bring only a specific amount of chocolate beans to the local market. The main examples of such countries are Serbia, Thailand, China, etc.[13]. • The main M&M’s markets of presence are the US and the UK, which are characterised by low political risks[14].

Economic • The global economic crisis has negatively affected customers’ buying capacity. However, it should be mentioned, that chocolate beans are a fast-moving consumer good. Thus, it can be sold quickly even during economically pressing times and at low prices unlike cars and electronics, which are durable and high-priced commodities[15]. • As a multinational company, M&M’s opens new factories in different countries. The company hires employees and helps to decrease unemployment in developing economies such as Brazil, Kazakhstan, Mexico, etc. In turn, M&M’s also suffers from unemployment and other macroeconomic conditions in these economies. • The market has reached maturity yet, neither in the US, nor in other countries[16].

Social • The company produces chocolate beans, which are demanded by wide categories of buyers, from kids to adults. • The company’s products are very popular with special events such as weddings and birthdays. • The public is worried about the quality standards used in the company[17].

Technological • Contemporary marketing strategies require from M&M’s using online sales and online customer involvement. Customer engagement marketing methods are also required where the internet serves as the playground[18].

Environmental factors • Chocolate beans production cannot be classified as highly damaging to the environment and employees’ health. • However, M&M’s depends on the production of cocoa beans and weather conditions in which they are cultivated. Such input material as cocoa beans are unlikely to run out[19].

Legal factors • M&M’s has to follow the regulations of the US Department of Agriculture (USDA), Environmental Protection Agency (EPA) and Food Drug Administration (FDA) on the chocolate candies production[20]. • M&M’s has to follow the legislation in all countries where it operates. • M&M’s has to protect its employees’ rights and freedoms.

The next step of environmental scanning is SWOT analysis. This analytical framework will help to identify the company’s internal, including strengths (S), weaknesses (W), opportunities (O) and threats (T)[21]. The SWOT analysis also helps to determine whether the company’s resources and capabilities are enough to compete with other organisations in the marker[22].

Strengths • Strong and well-known brand name; • Belonging to the family of the largest confectionary firm; • M&M’s operates in over 65 countries around the globe[23]; • Good reputation among customers and suppliers; • High operational efficiency; • High-quality products[24]; • M&M’s chocolate beans are the best selling candies in the market; • New brand ‘My M&M’s’, which offers customisation; • Strong leadership and teamwork; • Good resource allocation; • Ability to listen to employees’ and customers’ ideas[25].

Weaknesses • M&M’s promotional campaigns require considerable funding; • Employees are resistant to change; • Complex business environment, which causes interest conflicts; • Flat organisational structure has some disadvantages. For example, one employee may have a few bosses. Furthermore, this structure type may limit the company’s growth. • Mars Incorporated was criticised for contracting with low-cost African suppliers of cocoa beans, who used child labour[26]; • Lack of innovative ideas and no recent innovations in the product range.

Opportunities • Further market expansion; • Wider diversification of products in the foreign markets; • To meet customer demand; • Technology improvement and development[27]; • Innovation; • Creation of brand-new goods; • Elimination of disadvantages related to flat structure[28].

Threats • Lack of innovations can cause shifts in consumer tastes. To be more specific, customers can stop buying old and outmoded candies and start buying new candies with innovated product and package design. • The number of competitors may increase[29];

• Further growth of trade barriers; • Decrease in consumer demand; • M&M’s rivals’ innovated design can give competitive advantage.

The Cultural Web analysis helps to see a more comprehensive and bigger picture of the company’s culture[30]. The framework consists of 6 separate dimensions, which are stories, symbols, power structures, organisational structures, control systems and rituals and routines[31].

Stories Mars Incorporated, the owner of M&M’s, is one of the greatest examples of the so-called ‘American dream’ realisation. Founded in 1911, Mars became a multi-national company with more than 50,000 employees very quickly. Workers of the firm are viewed as the most valuable asset. This idea is one of the main company’s focuses. Employees work in a highly motivating and inspiring environment[33]. They are given bonuses for coming to work on time, which stimulates their performance and productiveness[34].

Symbols Small panned chocolate candies covered with coloured edible shell, which does not allow chocolate to melt in one’s hands, prove to be the major symbol of the company. Furthermore, the letter ‘m’, which stands for M&M’s name is a highly recognisable symbol. In addition, excellent quality and great taste have made M&M’s the world’s best selling candies[35].

Power Structure Mars Incorporated, the parent company of M&M’s, was established as a family business. It was founded by Frank Mars in 1911 in Tacoma. Today, John Mars, a grandson of Frank Mars, is the chairman of the company. Paul Michaels is the company’s CEO at the moment. All the serious decisions in the company are made by the members of the Mars family[36]. Middle managers are given less power in the organisation. They are responsible for ‘insider’ management, and do not participate in taking strategic decisions.

Organisational Structure The company has a flat organisational structure. This means that the number of intermediates between top managers and employees is reduced to a minimum. Hence, the role of middle managers is nearly eliminated[37]. Employees are actively involved the corporate decision-making process and can easily access the senior management. This type of organisational structure allows improving communication between management and workers. The company is teamwork oriented, which is another benefit of the flat structure type[38].

Control Systems It has been mentioned that one of the major corporate values and principles in Mars and M&M’s is efficiency. The company’s aim is to generate the maximum revenue using minimum input materials and resources. Another important value is quality, which needs to be given considerable attention and accurately controlled. The company relies on an internal control system, which guarantees achievement of such objectives, as efficiency and compliance with the relevant laws and regulations. Other departments of the organisation are manufacturing, marketing, sales, human resource, research and development, supply, communications and finance[39].

Rituals and Routines Unchanged design of chocolate beans since 1941 may be viewed as one of the key rituals of M&M’s. The firm regularly organises informal events for its employees, which improve communication between organisational members and facilitate learning in the workplace. The slogan of the company illustrates the main distinctive feature of M&M’s chocolate beans: “Melt in your mouth, not in your hands”[40], which builds strong associations with M&M’s candies. This slogan stimulates customers to test the firm’s promise. Hence, eating chocolate beans that do not melt in hands has become another important ritual.

Another important analytical framework, which helps to understand the overall degree of rivalry in the industry where the company operates, is Porter’s Five Forces[41]. According to this model, each industry is influenced by five forces, namely supplier power, buyer power, threats of new entrants, threats of substitutes and degree of rivalry.

Supplier power There are plenty of suppliers all over the world that sell cocoa beans. M&M’s buys considerable amount of cocoa beans and is dependent on prices set by the suppliers. Even insignificant growth of prices can result in increase in the prices for the final production by M&M’s. On the other hand, M&M’s can easily switch suppliers since it does not have long-term obligations. Thus, supplier power is low[42].

Buyer power M&M’s is presented in more than 70 countries. This means that the firm’s customers are many and they are highly fragmented. No single customer can significantly impact M&M’s and their pricing policy. It can be concluded that the buyer power is low[43].

Threats of new entrants New entrants in the confectionery market are possible. However, new market players need to meet huge capital requirements in order to enter the market and start accumulating large market share. For this reason, it may be assumed that the threats of new entrants are medium[44].

Threats of substitutes There are plenty of other large multinational companies and highly recognisable brands in the confectionary market (e.g. Kraft Foods, Nestle, Hershey Co and Cadbury). If M&M’s will demonstrate weak innovativeness and creativeness in product range, customers can easily switch to alternative manufacturers and their goods. Threats of substitutes may be evaluated as high[45].