SWOT Analysis / TOWS Matrix for Hero Supermarket (Indonesia)
Based on various researches at Oak Spring University , Hero Supermarket is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices,
geopolitical disruptions, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hero Supermarket can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hero Supermarket, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hero Supermarket 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 Hero Supermarket can be done for the following purposes –
1. Strategic planning of Hero Supermarket
2. Improving business portfolio management of Hero Supermarket
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Retail (Grocery) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hero Supermarket
Strengths of Hero Supermarket | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hero Supermarket are -
Successful track record of launching new products
– Hero Supermarket has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hero Supermarket 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 Hero Supermarket in the Services sector have low bargaining power. Hero Supermarket has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hero Supermarket to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Hero Supermarket has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hero Supermarket to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Hero Supermarket
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hero Supermarket does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Hero Supermarket 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.
Effective Research and Development (R&D)
– Hero Supermarket has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hero Supermarket staying ahead in the Retail (Grocery) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Retail (Grocery)
– Hero Supermarket is one of the leading players in the Retail (Grocery) industry in Indonesia. Over the years it has not only transformed the business landscape in the Retail (Grocery) industry in Indonesia but also across the existing markets. The ability to lead change has enabled Hero Supermarket in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Hero Supermarket 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 Hero Supermarket is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hero Supermarket emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Hero Supermarket is present in almost all the verticals within the Retail (Grocery) industry. This has provided Hero Supermarket 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.
High switching costs
– The high switching costs that Hero Supermarket 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.
Operational resilience
– The operational resilience strategy of Hero Supermarket comprises – understanding the underlying the factors in the Retail (Grocery) 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.
Highly skilled collaborators
– Hero Supermarket has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Grocery) industry. Secondly the value chain collaborators of Hero Supermarket have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Hero Supermarket | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hero Supermarket are -
Capital Spending Reduction
– Even during the low interest decade, Hero Supermarket 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 (Grocery) industry using digital technology.
Low market penetration in new markets
– Outside its home market of Indonesia, Hero Supermarket needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Hero Supermarket is one of the leading players in the Retail (Grocery) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Grocery) industry in last five years.
High dependence on Hero Supermarket ‘s star products
– The top 2 products and services of Hero Supermarket still accounts for major business revenue. This dependence on star products in Retail (Grocery) industry has resulted into insufficient focus on developing new products, even though Hero Supermarket has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that Hero Supermarket needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Grocery) industry have deep experience in developing customer relationships. Marketing department at Hero Supermarket can leverage the sales team experience to cultivate customer relationships as Hero Supermarket is planning to shift buying processes online.
High operating costs
– Compare to the competitors, Hero Supermarket has high operating costs in the Retail (Grocery) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hero Supermarket lucrative customers.
Need for greater diversity
– Hero Supermarket 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 bargaining power of channel partners in Retail (Grocery) industry
– because of the regulatory requirements in Indonesia, Hero Supermarket 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 (Grocery) industry.
Increasing silos among functional specialists
– The organizational structure of Hero Supermarket is dominated by functional specialists. It is not different from other players in the Retail (Grocery) industry, but Hero Supermarket needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hero Supermarket to focus more on services in the Retail (Grocery) industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Hero Supermarket has a high cash cycle compare to other players in the Retail (Grocery) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow decision making process
– As mentioned earlier in the report, Hero Supermarket 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 (Grocery) industry over the last five years. Hero Supermarket 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.
Hero Supermarket Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hero Supermarket are -
Learning at scale
– Online learning technologies has now opened space for Hero Supermarket 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Grocery) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hero Supermarket 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. Hero Supermarket 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.
Better consumer reach
– The expansion of the 5G network will help Hero Supermarket to increase its market reach. Hero Supermarket 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.
Loyalty marketing
– Hero Supermarket 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.
Building a culture of innovation
– managers at Hero Supermarket 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 (Grocery) industry.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hero Supermarket 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 Hero Supermarket to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hero Supermarket can use these opportunities to build new business models that can help the communities that Hero Supermarket operates in. Secondly it can use opportunities from government spending in Retail (Grocery) sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hero Supermarket is facing challenges because of the dominance of functional experts in the organization. Hero Supermarket can utilize new technology in the field of Retail (Grocery) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hero Supermarket 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 Hero Supermarket to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Hero Supermarket can improve the customer journey of consumers in the Retail (Grocery) 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Hero Supermarket to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Hero Supermarket has opened avenues for new revenue streams for the organization in Retail (Grocery) industry. This can help Hero Supermarket to build a more holistic ecosystem for Hero Supermarket products in the Retail (Grocery) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions in Retail (Grocery) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hero Supermarket in the Retail (Grocery) industry. Now Hero Supermarket can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Hero Supermarket External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hero Supermarket are -
Regulatory challenges
– Hero Supermarket 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 Retail (Grocery) industry regulations.
Easy access to finance
– Easy access to finance in Retail (Grocery) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hero Supermarket can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Hero Supermarket.
Technology acceleration in Forth Industrial Revolution
– Hero Supermarket has witnessed rapid integration of technology during Covid-19 in the Retail (Grocery) industry. As one of the leading players in the industry, Hero Supermarket needs to keep up with the evolution of technology in the Retail (Grocery) 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.
Stagnating economy with rate increase
– Hero Supermarket 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 (Grocery) industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hero Supermarket 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 Hero Supermarket prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hero Supermarket 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 (Grocery) sector.
Shortening product life cycle
– it is one of the major threat that Hero Supermarket is facing in Retail (Grocery) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Hero Supermarket 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.
Increasing wage structure of Hero Supermarket
– 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 Hero Supermarket.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Grocery) industry are lowering. It can presents Hero Supermarket with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Grocery) sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hero Supermarket in Retail (Grocery) industry. The Retail (Grocery) 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.
Consumer confidence and its impact on Hero Supermarket demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Grocery) industry and other sectors.
Weighted SWOT Analysis of Hero Supermarket Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hero Supermarket 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 Hero Supermarket 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 Hero Supermarket 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 Hero Supermarket 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 Hero Supermarket needs to make to build a sustainable competitive advantage.