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 – challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing energy prices, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation,
wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, etc
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- 100% Plagiarism Free
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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.
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
Strengths of Heineken | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Heineken are -
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.
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.
– 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.
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.
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.
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.
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.
- Heineken 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 Heineken is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Heineken emphasize – knowledge, initiative, and innovation.
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.
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.
Superior customer experience
– The customer experience strategy of Heineken in Beverages (Alcoholic) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Weaknesses of Heineken | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Heineken are -
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
– Compare to the competition, Heineken has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Heineken Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Heineken are -
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Heineken 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 Heineken to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
– 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.
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.
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.
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.
– 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Heineken can use these opportunities to build new business models that can help the communities that Heineken operates in. Secondly it can use opportunities from government spending in Beverages (Alcoholic) sector.
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.
Threats Heineken External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Heineken are -
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Heineken in Beverages (Alcoholic) industry. The Beverages (Alcoholic) 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
– 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.
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.
– 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.
Easy access to finance
– Easy access to finance in Beverages (Alcoholic) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Heineken can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Heineken 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 Heineken prominent markets.
– 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.
– 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.
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.
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.