SWOT Analysis / TOWS Matrix for Ace Hardware (Indonesia)
Based on various researches at Oak Spring University , Ace Hardware is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , wage bills are increasing,
increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Ace Hardware can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ace Hardware, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ace Hardware 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 Ace Hardware can be done for the following purposes –
1. Strategic planning of Ace Hardware
2. Improving business portfolio management of Ace Hardware
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Retail (Home Improvement) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ace Hardware
Strengths of Ace Hardware | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ace Hardware are -
Organizational Resilience of Ace Hardware
– The covid-19 pandemic has put organizational resilience at the centre of everthing Ace Hardware does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Retail (Home Improvement) industry
– Ace Hardware has clearly differentiated products in the market place. This has enabled Ace Hardware to fetch slight price premium compare to the competitors in the Retail (Home Improvement) industry. The sustainable margins have also helped Ace Hardware to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Ace Hardware has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ace Hardware 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.
Diverse revenue streams
– Ace Hardware is present in almost all the verticals within the Retail (Home Improvement) industry. This has provided Ace Hardware a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Ace Hardware is one of the leading players in the Retail (Home Improvement) 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.
Cross disciplinary teams
– Horizontal connected teams at the Ace Hardware 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.
Digital Transformation in Retail (Home Improvement) industry
- digital transformation varies from industry to industry. For Ace Hardware digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ace Hardware 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.
Strong track record of project management in the Retail (Home Improvement) industry
– Ace Hardware is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Ace Hardware has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ace Hardware to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Retail (Home Improvement)
– Ace Hardware is one of the leading players in the Retail (Home Improvement) industry in Indonesia. Over the years it has not only transformed the business landscape in the Retail (Home Improvement) industry in Indonesia but also across the existing markets. The ability to lead change has enabled Ace Hardware in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Ace Hardware has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Home Improvement) industry. Secondly the value chain collaborators of Ace Hardware have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Ace Hardware has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses of Ace Hardware | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Ace Hardware are -
High dependence on Ace Hardware ‘s star products
– The top 2 products and services of Ace Hardware still accounts for major business revenue. This dependence on star products in Retail (Home Improvement) industry has resulted into insufficient focus on developing new products, even though Ace Hardware has relatively successful track record of launching new products.
Lack of clear differentiation of Ace Hardware products
– To increase the profitability and margins on the products, Ace Hardware needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Ace Hardware 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 Retail (Home Improvement) industry using digital technology.
Employees’ less understanding of Ace Hardware strategy
– From the outside it seems that the employees of Ace Hardware 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.
High operating costs
– Compare to the competitors, Ace Hardware has high operating costs in the Retail (Home Improvement) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Ace Hardware lucrative customers.
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 Ace Hardware supply chain. Even after few cautionary changes, Ace Hardware is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ace Hardware vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Ace Hardware has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Home Improvement) industry over the last five years. Ace Hardware even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to strategic competitive environment developments
– As Ace Hardware is one of the leading players in the Retail (Home Improvement) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Home Improvement) industry in last five years.
High cash cycle compare to competitors
Ace Hardware has a high cash cycle compare to other players in the Retail (Home Improvement) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High bargaining power of channel partners in Retail (Home Improvement) industry
– because of the regulatory requirements in Indonesia, Ace Hardware is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Retail (Home Improvement) industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ace Hardware is slow explore the new channels of communication. These new channels of communication can help Ace Hardware to provide better information regarding Retail (Home Improvement) products and services. It can also build an online community to further reach out to potential customers.
Ace Hardware Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Ace Hardware are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ace Hardware can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Ace Hardware 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.
Buying journey improvements
– Ace Hardware can improve the customer journey of consumers in the Retail (Home Improvement) 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ace Hardware in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Home Improvement) industry, and it will provide faster access to the consumers.
Loyalty marketing
– Ace Hardware 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Ace Hardware can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ace Hardware can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Ace Hardware to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Home Improvement) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ace Hardware can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Ace Hardware can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Building a culture of innovation
– managers at Ace Hardware 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 Retail (Home Improvement) industry.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ace Hardware can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ace Hardware 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 Ace Hardware to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions in Retail (Home Improvement) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Ace Hardware in the Retail (Home Improvement) industry. Now Ace Hardware can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Ace Hardware can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats Ace Hardware External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Ace Hardware are -
Easy access to finance
– Easy access to finance in Retail (Home Improvement) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ace Hardware can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Ace Hardware in the Retail (Home Improvement) sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Ace Hardware high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Home Improvement) industry are lowering. It can presents Ace Hardware with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Home Improvement) sector.
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 Ace Hardware business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Ace Hardware has witnessed rapid integration of technology during Covid-19 in the Retail (Home Improvement) industry. As one of the leading players in the industry, Ace Hardware needs to keep up with the evolution of technology in the Retail (Home Improvement) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Ace Hardware.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Ace Hardware may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Home Improvement) sector.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Ace Hardware will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Ace Hardware 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 Retail (Home Improvement) industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ace Hardware in Retail (Home Improvement) industry. The Retail (Home Improvement) 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. Ace Hardware needs to understand the core reasons impacting the Retail (Home Improvement) industry. This will help it in building a better workplace.
Increasing wage structure of Ace Hardware
– 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 Ace Hardware.
Weighted SWOT Analysis of Ace Hardware Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Ace Hardware 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 Ace Hardware 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 Ace Hardware 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 Ace Hardware 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 Ace Hardware needs to make to build a sustainable competitive advantage.