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 – increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, there is backlash against globalization, central banks are concerned over increasing inflation, technology disruption, cloud computing is disrupting traditional business models, increasing commodity prices, talent flight as more people leaving formal jobs, 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 -

Diverse revenue streams

– Heineken is present in almost all the verticals within the Beverages (Alcoholic) industry. This has provided Heineken 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

– Heineken is one of the leading players in the Beverages (Alcoholic) industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.

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.

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.

Innovation driven organization

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

Strong track record of project management in the Beverages (Alcoholic) industry

– Heineken 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

– Heineken has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Heineken to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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.

Low bargaining power of suppliers

– Suppliers of Heineken in the Consumer/Non-Cyclical sector have low bargaining power. Heineken has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Heineken to manage not only supply disruptions but also source products at highly competitive prices.

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.

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.

Operational resilience

– The operational resilience strategy of Heineken comprises – understanding the underlying the factors in the Beverages (Alcoholic) 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.

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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 -

No frontier risks strategy

– From the 10K / annual statement of Heineken, it seems that company is thinking out the frontier risks that can impact Beverages (Alcoholic) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

Aligning sales with marketing

– From the outside it seems that Heineken needs to have more collaboration between its sales team and marketing team. Sales professionals in the Beverages (Alcoholic) industry have deep experience in developing customer relationships. Marketing department at Heineken can leverage the sales team experience to cultivate customer relationships as Heineken is planning to shift buying processes online.

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.

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.

Products dominated business model

– Even though Heineken has some of the most successful models in the Beverages (Alcoholic) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Heineken should strive to include more intangible value offerings along with its core products and services.

Need for greater diversity

– Heineken 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.

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.

High dependence on Heineken ‘s star products

– The top 2 products and services of Heineken still accounts for major business revenue. This dependence on star products in Beverages (Alcoholic) industry has resulted into insufficient focus on developing new products, even though Heineken has relatively successful track record of launching new products.

High cash cycle compare to competitors

Heineken has a high cash cycle compare to other players in the Beverages (Alcoholic) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Compensation and incentives

– The revenue per employee of Heineken is just above the Beverages (Alcoholic) industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

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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 -

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.

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.

Creating value in data economy

– The success of analytics program of Heineken has opened avenues for new revenue streams for the organization in Beverages (Alcoholic) industry. This can help Heineken to build a more holistic ecosystem for Heineken products in the Beverages (Alcoholic) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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.

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Heineken is facing challenges because of the dominance of functional experts in the organization. Heineken can utilize new technology in the field of Beverages (Alcoholic) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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.

Using analytics as competitive advantage

– Heineken has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Beverages (Alcoholic) sector. This continuous investment in analytics has enabled Heineken to build a competitive advantage using analytics. The analytics driven competitive advantage can help Heineken 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 Heineken 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 Heineken to hire the very best people irrespective of their geographical location.

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.

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.

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.

Leveraging digital technologies

– Heineken 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.

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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 -

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.

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.

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.

Stagnating economy with rate increase

– Heineken 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 Beverages (Alcoholic) industry.

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.

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. Heineken needs to understand the core reasons impacting the Beverages (Alcoholic) industry. This will help it in building a better workplace.

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.

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.

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. Heineken 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.

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.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Heineken may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Beverages (Alcoholic) sector.

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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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