Heineken (0O26) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Heineken (United Kingdom)

Based on various researches at Oak Spring University , Heineken is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing energy prices, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, there is backlash against globalization, there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of Heineken

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Heineken can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Heineken, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Heineken 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Heineken can be done for the following purposes –
1. Strategic planning of Heineken
2. Improving business portfolio management of Heineken
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Beverages (Alcoholic) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Heineken

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Strengths of Heineken | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Heineken are -

Sustainable margins compare to other players in Beverages (Alcoholic) industry

– Heineken has clearly differentiated products in the market place. This has enabled Heineken to fetch slight price premium compare to the competitors in the Beverages (Alcoholic) industry. The sustainable margins have also helped Heineken to invest into research and development (R&D) and innovation.

Highly skilled collaborators

– Heineken has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Beverages (Alcoholic) industry. Secondly the value chain collaborators of Heineken have helped the firm to develop new products and bring them quickly to the marketplace.

Cross disciplinary teams

– Horizontal connected teams at the Heineken 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.

Successful track record of launching new products

– Heineken has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Heineken 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.

Digital Transformation in Beverages (Alcoholic) industry

- digital transformation varies from industry to industry. For Heineken digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Heineken 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.

Ability to lead change in Beverages (Alcoholic)

– Heineken is one of the leading players in the Beverages (Alcoholic) industry in United Kingdom. Over the years it has not only transformed the business landscape in the Beverages (Alcoholic) industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Heineken in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Training and development

– Heineken has one of the best training and development program in Consumer/Non-Cyclical 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.

Innovation driven organization

– Heineken is one of the most innovative firm in Beverages (Alcoholic) sector.

Analytics focus

– Heineken is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Beverages (Alcoholic) industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Organizational Resilience of Heineken

– The covid-19 pandemic has put organizational resilience at the centre of everthing Heineken does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Effective Research and Development (R&D)

– Heineken has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Heineken staying ahead in the Beverages (Alcoholic) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

High switching costs

– The high switching costs that Heineken 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.

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Weaknesses of Heineken | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Heineken are -

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Heineken is slow explore the new channels of communication. These new channels of communication can help Heineken to provide better information regarding Beverages (Alcoholic) products and services. It can also build an online community to further reach out to potential customers.

High operating costs

– Compare to the competitors, Heineken has high operating costs in the Beverages (Alcoholic) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Heineken lucrative customers.

Employees’ less understanding of Heineken strategy

– From the outside it seems that the employees of Heineken 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.

Workers concerns about automation

– As automation is fast increasing in the Beverages (Alcoholic) industry, Heineken 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.

Slow to strategic competitive environment developments

– As Heineken is one of the leading players in the Beverages (Alcoholic) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Beverages (Alcoholic) industry in last five years.

Ability to respond to the competition

– As the decision making is very deliberative at Heineken, in the dynamic environment of Beverages (Alcoholic) industry it has struggled to respond to the nimble upstart competition. Heineken has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Low market penetration in new markets

– Outside its home market of United Kingdom, Heineken needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow decision making process

– As mentioned earlier in the report, Heineken has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Beverages (Alcoholic) industry over the last five years. Heineken 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.

Lack of clear differentiation of Heineken products

– To increase the profitability and margins on the products, Heineken needs to provide more differentiated products than what it is currently offering in the marketplace.

Increasing silos among functional specialists

– The organizational structure of Heineken is dominated by functional specialists. It is not different from other players in the Beverages (Alcoholic) industry, but Heineken needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Heineken to focus more on services in the Beverages (Alcoholic) industry rather than just following the product oriented approach.

Skills based hiring in Beverages (Alcoholic) industry

– The stress on hiring functional specialists at Heineken has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

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Heineken Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Heineken are -

Buying journey improvements

– Heineken can improve the customer journey of consumers in the Beverages (Alcoholic) 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Beverages (Alcoholic) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Heineken 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. Heineken 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.

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 Heineken 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.

Loyalty marketing

– Heineken 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 Heineken 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 Heineken to increase its market reach. Heineken 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Beverages (Alcoholic) industry, but it has also influenced the consumer preferences. Heineken can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Use of Bitcoin and other crypto currencies for transactions in Beverages (Alcoholic) industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Heineken in the Beverages (Alcoholic) industry. Now Heineken can target international markets with far fewer capital restrictions requirements than the existing system.

Developing new processes and practices

– Heineken can develop new processes and procedures in Beverages (Alcoholic) 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Heineken 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Heineken can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Building a culture of innovation

– managers at Heineken 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 Beverages (Alcoholic) industry.

Manufacturing automation

– Heineken can use the latest technology developments to improve its manufacturing and designing process in Beverages (Alcoholic) 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.

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Threats Heineken External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Heineken are -

Shortening product life cycle

– it is one of the major threat that Heineken is facing in Beverages (Alcoholic) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

High dependence on third party suppliers

– Heineken 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.

Consumer confidence and its impact on Heineken 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 Beverages (Alcoholic) industry and other sectors.

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 Heineken in the Beverages (Alcoholic) sector and impact the bottomline of the organization.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Beverages (Alcoholic) industry are lowering. It can presents Heineken with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Beverages (Alcoholic) sector.

Environmental challenges

– Heineken 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. Heineken can take advantage of this fund but it will also bring new competitors in the Beverages (Alcoholic) industry.

Technology acceleration in Forth Industrial Revolution

– Heineken has witnessed rapid integration of technology during Covid-19 in the Beverages (Alcoholic) industry. As one of the leading players in the industry, Heineken needs to keep up with the evolution of technology in the Beverages (Alcoholic) 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.

Increasing wage structure of Heineken

– 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 Heineken.

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 Heineken.

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 Heineken 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.

Regulatory challenges

– Heineken 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 Beverages (Alcoholic) industry regulations.

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.

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Weighted SWOT Analysis of Heineken Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Heineken 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 Heineken 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 Heineken 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 Heineken 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 Heineken needs to make to build a sustainable competitive advantage.

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