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 – increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, increasing government debt because of Covid-19 spendings, increasing commodity prices, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, 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 -

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.

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.

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.

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.

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.

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.

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 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.

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.

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.

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.

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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 -

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.

High bargaining power of channel partners in Beverages (Alcoholic) industry

– because of the regulatory requirements in Malaysia, Heineken is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Beverages (Alcoholic) industry.

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.

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.

Interest costs

– 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.

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.

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.

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.

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.

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.

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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 -

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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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 -

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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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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