Henkel Ag A (HENOY) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Henkel Ag A (United States)
Based on various researches at Oak Spring University , Henkel Ag A is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation,
there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Henkel Ag A can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Henkel Ag A, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Henkel Ag A 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 A can be done for the following purposes –
1. Strategic planning of Henkel Ag A
2. Improving business portfolio management of Henkel Ag A
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 A
Strengths of Henkel Ag A | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Henkel Ag A are -
Learning organization
- Henkel Ag A 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 A is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Henkel Ag A emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Henkel Ag A 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 A have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Henkel Ag A in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Henkel Ag A has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Henkel Ag A staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Henkel Ag A 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.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Henkel Ag A digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Henkel Ag A 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.
Cross disciplinary teams
– Horizontal connected teams at the Henkel Ag A 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.
High brand equity
– Henkel Ag A has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Henkel Ag A to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the industry
– Henkel Ag A is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Henkel Ag A is present in almost all the verticals within the industry. This has provided Henkel Ag A 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.
Training and development
– Henkel Ag A 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.
Innovation driven organization
– Henkel Ag A is one of the most innovative firm in sector.
Weaknesses of Henkel Ag A | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Henkel Ag A are -
Skills based hiring in industry
– The stress on hiring functional specialists at Henkel Ag A 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.
Ability to respond to the competition
– As the decision making is very deliberative at Henkel Ag A, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Henkel Ag A 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 A 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.
Increasing silos among functional specialists
– The organizational structure of Henkel Ag A is dominated by functional specialists. It is not different from other players in the industry, but Henkel Ag A needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Henkel Ag A to focus more on services in the industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Henkel Ag A is slow explore the new channels of communication. These new channels of communication can help Henkel Ag A to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– From the outside it seems that Henkel Ag A 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 A can leverage the sales team experience to cultivate customer relationships as Henkel Ag A is planning to shift buying processes online.
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 A supply chain. Even after few cautionary changes, Henkel Ag A is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Henkel Ag A vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Henkel Ag A 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.
Compensation and incentives
– The revenue per employee of Henkel Ag A 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.
Low market penetration in new markets
– Outside its home market of United States, Henkel Ag A 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 A 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.
Henkel Ag A Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Henkel Ag A are -
Loyalty marketing
– Henkel Ag A 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.
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 A can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Henkel Ag A is facing challenges because of the dominance of functional experts in the organization. Henkel Ag A 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.
Better consumer reach
– The expansion of the 5G network will help Henkel Ag A to increase its market reach. Henkel Ag A 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Henkel Ag A 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 A to hire the very best people irrespective of their geographical location.
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 Henkel Ag A 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.
Developing new processes and practices
– Henkel Ag A 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.
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 A 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 A 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Henkel Ag A 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.
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 A in the industry. Now Henkel Ag A can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Henkel Ag A 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.
Learning at scale
– Online learning technologies has now opened space for Henkel Ag A 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.
Creating value in data economy
– The success of analytics program of Henkel Ag A has opened avenues for new revenue streams for the organization in industry. This can help Henkel Ag A to build a more holistic ecosystem for Henkel Ag A products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Henkel Ag A External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Henkel Ag A are -
Technology acceleration in Forth Industrial Revolution
– Henkel Ag A has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Henkel Ag A 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Henkel Ag A 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 A in the sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Henkel Ag A is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Henkel Ag A 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.
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 A.
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.
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 A 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 A needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents Henkel Ag A with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 A business can come under increasing regulations regarding data privacy, data security, etc.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Henkel Ag A 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 A prominent markets.
Weighted SWOT Analysis of Henkel Ag A Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Henkel Ag A 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 A 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 A 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 A 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 A needs to make to build a sustainable competitive advantage.
