SWOT Analysis / TOWS Matrix for Hm Sampoerna (Indonesia)
Based on various researches at Oak Spring University , Hm Sampoerna is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing energy prices, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices,
technology disruption, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hm Sampoerna can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hm Sampoerna, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hm Sampoerna operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Hm Sampoerna can be done for the following purposes –
1. Strategic planning of Hm Sampoerna
2. Improving business portfolio management of Hm Sampoerna
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Tobacco sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hm Sampoerna
Strengths of Hm Sampoerna | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hm Sampoerna are -
Ability to recruit top talent
– Hm Sampoerna is one of the leading players in the Tobacco industry in Indonesia. It is in a position to attract the best talent available in Indonesia. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Tobacco industry
– Hm Sampoerna has clearly differentiated products in the market place. This has enabled Hm Sampoerna to fetch slight price premium compare to the competitors in the Tobacco industry. The sustainable margins have also helped Hm Sampoerna to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of Hm Sampoerna comprises – understanding the underlying the factors in the Tobacco industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High switching costs
– The high switching costs that Hm Sampoerna has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Learning organization
- Hm Sampoerna is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Hm Sampoerna is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hm Sampoerna emphasize – knowledge, initiative, and innovation.
High brand equity
– Hm Sampoerna has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hm Sampoerna to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Tobacco industry
- digital transformation varies from industry to industry. For Hm Sampoerna digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hm Sampoerna has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Hm Sampoerna has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hm Sampoerna has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Low bargaining power of suppliers
– Suppliers of Hm Sampoerna in the Consumer/Non-Cyclical sector have low bargaining power. Hm Sampoerna has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hm Sampoerna to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Tobacco industry
– Hm Sampoerna is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Hm Sampoerna are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Tobacco
– Hm Sampoerna is one of the leading players in the Tobacco industry in Indonesia. Over the years it has not only transformed the business landscape in the Tobacco industry in Indonesia but also across the existing markets. The ability to lead change has enabled Hm Sampoerna in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Hm Sampoerna | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hm Sampoerna are -
Interest costs
– Compare to the competition, Hm Sampoerna has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
No frontier risks strategy
– From the 10K / annual statement of Hm Sampoerna, it seems that company is thinking out the frontier risks that can impact Tobacco industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High cash cycle compare to competitors
Hm Sampoerna has a high cash cycle compare to other players in the Tobacco industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Hm Sampoerna has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on Hm Sampoerna ‘s star products
– The top 2 products and services of Hm Sampoerna still accounts for major business revenue. This dependence on star products in Tobacco industry has resulted into insufficient focus on developing new products, even though Hm Sampoerna has relatively successful track record of launching new products.
Employees’ less understanding of Hm Sampoerna strategy
– From the outside it seems that the employees of Hm Sampoerna don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– From the outside it seems that Hm Sampoerna needs to have more collaboration between its sales team and marketing team. Sales professionals in the Tobacco industry have deep experience in developing customer relationships. Marketing department at Hm Sampoerna can leverage the sales team experience to cultivate customer relationships as Hm Sampoerna is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Hm Sampoerna, in the dynamic environment of Tobacco industry it has struggled to respond to the nimble upstart competition. Hm Sampoerna has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Hm Sampoerna supply chain. Even after few cautionary changes, Hm Sampoerna is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hm Sampoerna vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Hm Sampoerna has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Tobacco industry using digital technology.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hm Sampoerna is slow explore the new channels of communication. These new channels of communication can help Hm Sampoerna to provide better information regarding Tobacco products and services. It can also build an online community to further reach out to potential customers.
Hm Sampoerna Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hm Sampoerna are -
Using analytics as competitive advantage
– Hm Sampoerna has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Tobacco sector. This continuous investment in analytics has enabled Hm Sampoerna to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hm Sampoerna to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Hm Sampoerna has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Learning at scale
– Online learning technologies has now opened space for Hm Sampoerna to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Better consumer reach
– The expansion of the 5G network will help Hm Sampoerna to increase its market reach. Hm Sampoerna will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– Hm Sampoerna can use the latest technology developments to improve its manufacturing and designing process in Tobacco sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hm Sampoerna can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Hm Sampoerna can improve the customer journey of consumers in the Tobacco industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Developing new processes and practices
– Hm Sampoerna can develop new processes and procedures in Tobacco industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Tobacco industry, but it has also influenced the consumer preferences. Hm Sampoerna can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hm Sampoerna to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Hm Sampoerna to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Hm Sampoerna can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Tobacco industry.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hm Sampoerna in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Tobacco industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hm Sampoerna can use these opportunities to build new business models that can help the communities that Hm Sampoerna operates in. Secondly it can use opportunities from government spending in Tobacco sector.
Threats Hm Sampoerna External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hm Sampoerna are -
Stagnating economy with rate increase
– Hm Sampoerna can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Tobacco industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Hm Sampoerna business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Hm Sampoerna
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Hm Sampoerna.
Shortening product life cycle
– it is one of the major threat that Hm Sampoerna is facing in Tobacco sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hm Sampoerna can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Hm Sampoerna prominent markets.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Hm Sampoerna in the Tobacco sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hm Sampoerna in Tobacco industry. The Tobacco industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Hm Sampoerna needs to understand the core reasons impacting the Tobacco industry. This will help it in building a better workplace.
Regulatory challenges
– Hm Sampoerna needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Tobacco industry regulations.
Easy access to finance
– Easy access to finance in Tobacco industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hm Sampoerna can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hm Sampoerna may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tobacco sector.
Environmental challenges
– Hm Sampoerna needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Hm Sampoerna can take advantage of this fund but it will also bring new competitors in the Tobacco industry.
Weighted SWOT Analysis of Hm Sampoerna Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hm Sampoerna needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Hm Sampoerna is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Hm Sampoerna is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Hm Sampoerna to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Hm Sampoerna needs to make to build a sustainable competitive advantage.
