Steinhoff Int (SNHJ) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Steinhoff Int (South Africa)

Based on various researches at Oak Spring University , Steinhoff Int is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, technology disruption, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, geopolitical disruptions, etc

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Introduction to SWOT Analysis of Steinhoff Int

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Steinhoff Int can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Steinhoff Int, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Steinhoff Int 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 Steinhoff Int can be done for the following purposes –
1. Strategic planning of Steinhoff Int
2. Improving business portfolio management of Steinhoff Int
3. Assessing feasibility of the new initiative in South Africa
4. Making a Retail (Specialty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Steinhoff Int

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

The strengths of Steinhoff Int are -

Strong track record of project management in the Retail (Specialty) industry

– Steinhoff Int 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 switching costs

– The high switching costs that Steinhoff Int 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.

Effective Research and Development (R&D)

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

Ability to lead change in Retail (Specialty)

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

Cross disciplinary teams

– Horizontal connected teams at the Steinhoff Int 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.

Highly skilled collaborators

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

Innovation driven organization

– Steinhoff Int is one of the most innovative firm in Retail (Specialty) sector.

High brand equity

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

Superior customer experience

– The customer experience strategy of Steinhoff Int in Retail (Specialty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Sustainable margins compare to other players in Retail (Specialty) industry

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

Learning organization

- Steinhoff Int 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 Steinhoff Int is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Steinhoff Int emphasize – knowledge, initiative, and innovation.

Analytics focus

– Steinhoff Int 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 Retail (Specialty) industry. The technology infrastructure of South Africa 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.

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

The weaknesses of Steinhoff Int are -

Capital Spending Reduction

– Even during the low interest decade, Steinhoff Int 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 Retail (Specialty) industry using digital technology.

Employees’ less understanding of Steinhoff Int strategy

– From the outside it seems that the employees of Steinhoff Int 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.

Slow decision making process

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

Workers concerns about automation

– As automation is fast increasing in the Retail (Specialty) industry, Steinhoff Int 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.

Compensation and incentives

– The revenue per employee of Steinhoff Int is just above the Retail (Specialty) 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.

Ability to respond to the competition

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

Aligning sales with marketing

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

Interest costs

– Compare to the competition, Steinhoff Int 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.

Slow to strategic competitive environment developments

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

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

Skills based hiring in Retail (Specialty) industry

– The stress on hiring functional specialists at Steinhoff Int 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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Steinhoff Int Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Steinhoff Int are -

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 Steinhoff Int 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.

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

Leveraging digital technologies

– Steinhoff Int 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.

Building a culture of innovation

– managers at Steinhoff Int 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 Retail (Specialty) industry.

Learning at scale

– Online learning technologies has now opened space for Steinhoff Int 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Steinhoff Int can use these opportunities to build new business models that can help the communities that Steinhoff Int operates in. Secondly it can use opportunities from government spending in Retail (Specialty) sector.

Redefining models of collaboration and team work

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

Loyalty marketing

– Steinhoff Int 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.

Better consumer reach

– The expansion of the 5G network will help Steinhoff Int to increase its market reach. Steinhoff Int 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.

Reforming the budgeting process

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

Developing new processes and practices

– Steinhoff Int can develop new processes and procedures in Retail (Specialty) 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Steinhoff Int 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 Steinhoff Int to hire the very best people irrespective of their geographical location.

Low interest rates

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

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

The threats of Steinhoff Int are -

Environmental challenges

– Steinhoff Int 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. Steinhoff Int can take advantage of this fund but it will also bring new competitors in the Retail (Specialty) industry.

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 Steinhoff Int.

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. Steinhoff Int needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.

Increasing wage structure of Steinhoff Int

– 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 Steinhoff Int.

High dependence on third party suppliers

– Steinhoff Int 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.

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.

Technology acceleration in Forth Industrial Revolution

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

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.

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 Steinhoff Int business can come under increasing regulations regarding data privacy, data security, etc.

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. Steinhoff Int 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.

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 Steinhoff Int in the Retail (Specialty) sector and impact the bottomline of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Steinhoff Int in Retail (Specialty) industry. The Retail (Specialty) 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.

Learning curve for new practices

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

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Weighted SWOT Analysis of Steinhoff Int Template, Example

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

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