Heidelbergcement (HEIG) SWOT Analysis / TOWS Matrix / MBA Resources
Construction - Raw Materials
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Heidelbergcement (Italy)
Based on various researches at Oak Spring University , Heidelbergcement is operating in a macro-environment that has been destablized by – geopolitical disruptions, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%,
increasing household debt because of falling income levels, 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 Heidelbergcement can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Heidelbergcement, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Heidelbergcement 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 Heidelbergcement can be done for the following purposes –
1. Strategic planning of Heidelbergcement
2. Improving business portfolio management of Heidelbergcement
3. Assessing feasibility of the new initiative in Italy
4. Making a Construction - Raw Materials sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Heidelbergcement
Strengths of Heidelbergcement | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Heidelbergcement are -
Organizational Resilience of Heidelbergcement
– The covid-19 pandemic has put organizational resilience at the centre of everthing Heidelbergcement does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Heidelbergcement is present in almost all the verticals within the Construction - Raw Materials industry. This has provided Heidelbergcement 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.
Digital Transformation in Construction - Raw Materials industry
- digital transformation varies from industry to industry. For Heidelbergcement digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Heidelbergcement 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.
High switching costs
– The high switching costs that Heidelbergcement 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.
Ability to recruit top talent
– Heidelbergcement is one of the leading players in the Construction - Raw Materials industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management in the Construction - Raw Materials industry
– Heidelbergcement is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Heidelbergcement comprises – understanding the underlying the factors in the Construction - Raw Materials 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 brand equity
– Heidelbergcement has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Heidelbergcement to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Heidelbergcement has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Heidelbergcement 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.
Effective Research and Development (R&D)
– Heidelbergcement has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Heidelbergcement staying ahead in the Construction - Raw Materials industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Heidelbergcement has one of the best training and development program in Capital Goods 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.
Learning organization
- Heidelbergcement 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 Heidelbergcement is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Heidelbergcement emphasize – knowledge, initiative, and innovation.
Weaknesses of Heidelbergcement | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Heidelbergcement are -
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 Heidelbergcement supply chain. Even after few cautionary changes, Heidelbergcement is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Heidelbergcement vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Heidelbergcement has some of the most successful models in the Construction - Raw Materials industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Heidelbergcement should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative at Heidelbergcement, in the dynamic environment of Construction - Raw Materials industry it has struggled to respond to the nimble upstart competition. Heidelbergcement has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the Construction - Raw Materials industry, Heidelbergcement needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ less understanding of Heidelbergcement strategy
– From the outside it seems that the employees of Heidelbergcement 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.
Capital Spending Reduction
– Even during the low interest decade, Heidelbergcement 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 Construction - Raw Materials 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, Heidelbergcement is slow explore the new channels of communication. These new channels of communication can help Heidelbergcement to provide better information regarding Construction - Raw Materials products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Heidelbergcement is dominated by functional specialists. It is not different from other players in the Construction - Raw Materials industry, but Heidelbergcement needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Heidelbergcement to focus more on services in the Construction - Raw Materials industry rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, Heidelbergcement has high operating costs in the Construction - Raw Materials industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Heidelbergcement lucrative customers.
Low market penetration in new markets
– Outside its home market of Italy, Heidelbergcement needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Heidelbergcement is one of the leading players in the Construction - Raw Materials industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction - Raw Materials industry in last five years.
Heidelbergcement Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Heidelbergcement are -
Manufacturing automation
– Heidelbergcement can use the latest technology developments to improve its manufacturing and designing process in Construction - Raw Materials 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 Heidelbergcement can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Heidelbergcement has opened avenues for new revenue streams for the organization in Construction - Raw Materials industry. This can help Heidelbergcement to build a more holistic ecosystem for Heidelbergcement products in the Construction - Raw Materials industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Heidelbergcement 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 Construction - Raw Materials industry.
Low interest rates
– Even though inflation is raising its head in most developed economies, Heidelbergcement 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.
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 Heidelbergcement 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.
Buying journey improvements
– Heidelbergcement can improve the customer journey of consumers in the Construction - Raw Materials 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.
Loyalty marketing
– Heidelbergcement 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. Heidelbergcement can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Heidelbergcement has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction - Raw Materials sector. This continuous investment in analytics has enabled Heidelbergcement to build a competitive advantage using analytics. The analytics driven competitive advantage can help Heidelbergcement to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Heidelbergcement 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 Heidelbergcement to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Heidelbergcement to increase its market reach. Heidelbergcement 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Heidelbergcement 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 Heidelbergcement to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Heidelbergcement External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Heidelbergcement are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Heidelbergcement 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 Heidelbergcement prominent markets.
Shortening product life cycle
– it is one of the major threat that Heidelbergcement is facing in Construction - Raw Materials sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Heidelbergcement in Construction - Raw Materials industry. The Construction - Raw Materials 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 dependence on third party suppliers
– Heidelbergcement 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.
Environmental challenges
– Heidelbergcement 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. Heidelbergcement can take advantage of this fund but it will also bring new competitors in the Construction - Raw Materials industry.
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 Heidelbergcement.
Stagnating economy with rate increase
– Heidelbergcement 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 Construction - Raw Materials industry.
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.
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 Heidelbergcement business can come under increasing regulations regarding data privacy, data security, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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. Heidelbergcement 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.
Increasing wage structure of Heidelbergcement
– 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 Heidelbergcement.
Regulatory challenges
– Heidelbergcement 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 Construction - Raw Materials industry regulations.
Weighted SWOT Analysis of Heidelbergcement Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Heidelbergcement 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 Heidelbergcement 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 Heidelbergcement 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 Heidelbergcement 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 Heidelbergcement needs to make to build a sustainable competitive advantage.