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 – there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy,
talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , 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 -
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.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Henkel AG & Co KGAA 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.
Successful track record of launching new products
– Henkel AG & Co KGAA has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Henkel AG & Co KGAA 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.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Henkel AG & Co KGAA digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Henkel AG & Co KGAA 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.
Superior customer experience
– The customer experience strategy of Henkel AG & Co KGAA in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Organizational Resilience of Henkel AG & Co KGAA
– The covid-19 pandemic has put organizational resilience at the centre of everthing Henkel AG & Co KGAA does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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 -
High dependence on Henkel AG & Co KGAA ‘s star products
– The top 2 products and services of Henkel AG & Co KGAA still accounts for major business revenue. This dependence on star products in industry has resulted into insufficient focus on developing new products, even though Henkel AG & Co KGAA has relatively successful track record of launching new products.
Skills based hiring in industry
– The stress on hiring functional specialists at Henkel AG & Co KGAA 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.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Henkel AG & Co KGAA has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Henkel AG & Co KGAA 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.
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.
Compensation and incentives
– The revenue per employee of Henkel AG & Co KGAA is just above the 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.
High cash cycle compare to competitors
Henkel AG & Co KGAA has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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 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 Henkel AG & Co KGAA supply chain. Even after few cautionary changes, Henkel AG & Co KGAA is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Henkel AG & Co KGAA vulnerable to further global disruptions in South East Asia.
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 -
Buying journey improvements
– Henkel AG & Co KGAA can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Henkel AG & Co KGAA 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 Henkel AG & Co KGAA to hire the very best people irrespective of their geographical location.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Henkel AG & Co KGAA can use these opportunities to build new business models that can help the communities that Henkel AG & Co KGAA operates in. Secondly it can use opportunities from government spending in sector.
Better consumer reach
– The expansion of the 5G network will help Henkel AG & Co KGAA to increase its market reach. Henkel AG & Co KGAA 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.
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.
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.
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.
Manufacturing automation
– Henkel AG & Co KGAA can use the latest technology developments to improve its manufacturing and designing process in 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
– 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.
Creating value in data economy
– The success of analytics program of Henkel AG & Co KGAA has opened avenues for new revenue streams for the organization in industry. This can help Henkel AG & Co KGAA to build a more holistic ecosystem for Henkel AG & Co KGAA products in the industry by providing – data insight services, data privacy related products, data based consulting services, 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 -
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 Henkel AG & Co KGAA.
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.
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.
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.
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.
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.
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.
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.
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.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Henkel AG & Co KGAA can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Henkel AG & Co KGAA 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents Henkel AG & Co KGAA with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.