Heineken (HEIN) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Heineken (Malaysia)

Based on various researches at Oak Spring University , Heineken is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, 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 Malaysia
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 -

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.

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.

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.

Ability to lead change in Beverages (Alcoholic)

– Heineken is one of the leading players in the Beverages (Alcoholic) industry in Malaysia. Over the years it has not only transformed the business landscape in the Beverages (Alcoholic) industry in Malaysia 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.

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.

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 Malaysia. It is in a position to attract the best talent available in Malaysia. The firm has a robust talent identification program that helps in identifying the brightest.

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.

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.

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.

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.

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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 -

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.

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.

Capital Spending Reduction

– Even during the low interest decade, Heineken 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 Beverages (Alcoholic) industry using digital technology.

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.

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.

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 Heineken supply chain. Even after few cautionary changes, Heineken is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Heineken vulnerable to further global disruptions in South East Asia.

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.

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.

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.

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.

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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 -

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.

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. Heineken can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

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.

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.

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.

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.

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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Heineken in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Beverages (Alcoholic) industry, and it will provide faster access to the consumers.

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.

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.

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 -

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.

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.

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.

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.

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.

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 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.

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.

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.

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.

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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