Henkel AG & Co KGAA (HENKY) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Henkel AG & Co KGAA (United States)
Based on various researches at Oak Spring University , Henkel AG & Co KGAA is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, technology disruption, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing government debt because of Covid-19 spendings,
cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Henkel AG & Co KGAA
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Henkel AG & Co KGAA can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Henkel AG & Co KGAA, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Henkel AG & Co KGAA 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 Henkel AG & Co KGAA can be done for the following purposes –
1. Strategic planning of Henkel AG & Co KGAA
2. Improving business portfolio management of Henkel AG & Co KGAA
3. Assessing feasibility of the new initiative in United States
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Henkel AG & Co KGAA
Strengths of Henkel AG & Co KGAA | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Henkel AG & Co KGAA are -
Strong track record of project management in the industry
– Henkel AG & Co KGAA is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Henkel AG & Co KGAA has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of Henkel AG & Co KGAA have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of Henkel AG & Co KGAA comprises – understanding the underlying the factors in the 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
– Henkel AG & Co KGAA is present in almost all the verticals within the industry. This has provided Henkel AG & Co KGAA 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
– Henkel AG & Co KGAA is one of the leading players in the industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in
– Henkel AG & Co KGAA is one of the leading players in the industry in United States. Over the years it has not only transformed the business landscape in the industry in United States but also across the existing markets. The ability to lead change has enabled Henkel AG & Co KGAA in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in industry
– Henkel AG & Co KGAA has clearly differentiated products in the market place. This has enabled Henkel AG & Co KGAA to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Henkel AG & Co KGAA to invest into research and development (R&D) and innovation.
Learning organization
- Henkel AG & Co KGAA 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 Henkel AG & Co KGAA is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Henkel AG & Co KGAA emphasize – knowledge, initiative, and innovation.
Analytics focus
– Henkel AG & Co KGAA 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 industry. The technology infrastructure of United States 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.
Effective Research and Development (R&D)
– Henkel AG & Co KGAA has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Henkel AG & Co KGAA staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Henkel AG & Co KGAA has one of the best training and development program in 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.
High brand equity
– Henkel AG & Co KGAA has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Henkel AG & Co KGAA to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Henkel AG & Co KGAA | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Henkel AG & Co KGAA are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Henkel AG & Co KGAA is slow explore the new channels of communication. These new channels of communication can help Henkel AG & Co KGAA to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, Henkel AG & Co KGAA has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Henkel AG & Co KGAA lucrative customers.
Products dominated business model
– Even though Henkel AG & Co KGAA has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Henkel AG & Co KGAA should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Henkel AG & Co KGAA is one of the leading players in the industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative at Henkel AG & Co KGAA, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Henkel AG & Co KGAA 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
– Henkel AG & Co KGAA 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.
No frontier risks strategy
– From the 10K / annual statement of Henkel AG & Co KGAA, it seems that company is thinking out the frontier risks that can impact 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.
Increasing silos among functional specialists
– The organizational structure of Henkel AG & Co KGAA is dominated by functional specialists. It is not different from other players in the industry, but Henkel AG & Co KGAA needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Henkel AG & Co KGAA to focus more on services in the industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of United States, Henkel AG & Co KGAA needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners in industry
– because of the regulatory requirements in United States, Henkel AG & Co KGAA 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 industry.
Lack of clear differentiation of Henkel AG & Co KGAA products
– To increase the profitability and margins on the products, Henkel AG & Co KGAA needs to provide more differentiated products than what it is currently offering in the marketplace.
Henkel AG & Co KGAA Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Henkel AG & Co KGAA are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Henkel AG & Co KGAA 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 Henkel AG & Co KGAA to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Henkel AG & Co KGAA 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.
Developing new processes and practices
– Henkel AG & Co KGAA can develop new processes and procedures in 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
– Henkel AG & Co KGAA has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Henkel AG & Co KGAA to build a competitive advantage using analytics. The analytics driven competitive advantage can help Henkel AG & Co KGAA to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Henkel AG & Co KGAA in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Henkel AG & Co KGAA can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Henkel AG & Co KGAA can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Henkel AG & Co KGAA 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. Henkel AG & Co KGAA 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
– Henkel AG & Co KGAA 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Henkel AG & Co KGAA is facing challenges because of the dominance of functional experts in the organization. Henkel AG & Co KGAA can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Henkel AG & Co KGAA can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Henkel AG & Co KGAA 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 industry.
Loyalty marketing
– Henkel AG & Co KGAA 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.
Threats Henkel AG & Co KGAA External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Henkel AG & Co KGAA are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Henkel AG & Co KGAA 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 Henkel AG & Co KGAA prominent markets.
Technology acceleration in Forth Industrial Revolution
– Henkel AG & Co KGAA has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Henkel AG & Co KGAA needs to keep up with the evolution of technology in the 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.
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. Henkel AG & Co KGAA 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.
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. Henkel AG & Co KGAA needs to understand the core reasons impacting the 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 Henkel AG & Co KGAA business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Henkel AG & Co KGAA is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Henkel AG & Co KGAA 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 industry.
Increasing wage structure of Henkel AG & Co KGAA
– 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 Henkel AG & Co KGAA.
Environmental challenges
– Henkel AG & Co KGAA 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. Henkel AG & Co KGAA can take advantage of this fund but it will also bring new competitors in the industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Henkel AG & Co KGAA may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
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.
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.
Consumer confidence and its impact on Henkel AG & Co KGAA 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 industry and other sectors.
Weighted SWOT Analysis of Henkel AG & Co KGAA Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Henkel AG & Co KGAA 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 Henkel AG & Co KGAA 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 Henkel AG & Co KGAA 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 Henkel AG & Co KGAA 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 Henkel AG & Co KGAA needs to make to build a sustainable competitive advantage.
