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 commodity prices, there is backlash against globalization, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, geopolitical disruptions, increasing transportation and logistics costs,
wage bills are increasing, technology disruption, 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 -
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.
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.
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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Henkel AG & Co KGAA in the sector have low bargaining power. Henkel AG & Co KGAA has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Henkel AG & Co KGAA to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
Interest costs
– Compare to the competition, Henkel AG & Co KGAA 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.
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.
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 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.
Aligning sales with marketing
– From the outside it seems that Henkel AG & Co KGAA needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department at Henkel AG & Co KGAA can leverage the sales team experience to cultivate customer relationships as Henkel AG & Co KGAA is planning to shift buying processes online.
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 -
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.
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.
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Henkel AG & Co KGAA in the industry. Now Henkel AG & Co KGAA can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Henkel AG & Co KGAA 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.
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.
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.
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 -
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.
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.
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.
Regulatory challenges
– Henkel AG & Co KGAA 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 industry regulations.
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.
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.
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.
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.
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.
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 Henkel AG & Co KGAA in the sector and impact the bottomline of the organization.
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.
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.
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.