Herbalife (HLF) SWOT Analysis / TOWS Matrix / MBA Resources
Personal & Household Prods.
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Herbalife (United States)
Based on various researches at Oak Spring University , Herbalife is operating in a macro-environment that has been destablized by – technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, there is backlash against globalization,
digital marketing is dominated by two big players Facebook and Google, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Herbalife can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Herbalife, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Herbalife 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 Herbalife can be done for the following purposes –
1. Strategic planning of Herbalife
2. Improving business portfolio management of Herbalife
3. Assessing feasibility of the new initiative in United States
4. Making a Personal & Household Prods. sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Herbalife
Strengths of Herbalife | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Herbalife are -
Organizational Resilience of Herbalife
– The covid-19 pandemic has put organizational resilience at the centre of everthing Herbalife does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Herbalife 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.
Ability to recruit top talent
– Herbalife is one of the leading players in the Personal & Household Prods. 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 Personal & Household Prods.
– Herbalife is one of the leading players in the Personal & Household Prods. industry in United States. Over the years it has not only transformed the business landscape in the Personal & Household Prods. industry in United States but also across the existing markets. The ability to lead change has enabled Herbalife in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Herbalife has one of the best training and development program in Consumer/Non-Cyclical 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.
Operational resilience
– The operational resilience strategy of Herbalife comprises – understanding the underlying the factors in the Personal & Household Prods. 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.
Analytics focus
– Herbalife 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 Personal & Household Prods. 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.
Digital Transformation in Personal & Household Prods. industry
- digital transformation varies from industry to industry. For Herbalife digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Herbalife 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.
High switching costs
– The high switching costs that Herbalife 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.
Strong track record of project management in the Personal & Household Prods. industry
– Herbalife 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
– Herbalife is present in almost all the verticals within the Personal & Household Prods. industry. This has provided Herbalife 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.
Highly skilled collaborators
– Herbalife has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Personal & Household Prods. industry. Secondly the value chain collaborators of Herbalife have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Herbalife | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Herbalife are -
Increasing silos among functional specialists
– The organizational structure of Herbalife is dominated by functional specialists. It is not different from other players in the Personal & Household Prods. industry, but Herbalife needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Herbalife to focus more on services in the Personal & Household Prods. industry rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the Personal & Household Prods. industry, Herbalife 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.
Ability to respond to the competition
– As the decision making is very deliberative at Herbalife, in the dynamic environment of Personal & Household Prods. industry it has struggled to respond to the nimble upstart competition. Herbalife has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Herbalife products
– To increase the profitability and margins on the products, Herbalife needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– From the outside it seems that Herbalife needs to have more collaboration between its sales team and marketing team. Sales professionals in the Personal & Household Prods. industry have deep experience in developing customer relationships. Marketing department at Herbalife can leverage the sales team experience to cultivate customer relationships as Herbalife is planning to shift buying processes online.
Skills based hiring in Personal & Household Prods. industry
– The stress on hiring functional specialists at Herbalife 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.
Interest costs
– Compare to the competition, Herbalife 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.
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 Herbalife supply chain. Even after few cautionary changes, Herbalife is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Herbalife vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Herbalife 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.
Products dominated business model
– Even though Herbalife has some of the most successful models in the Personal & Household Prods. industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Herbalife should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Herbalife 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 Personal & Household Prods. industry using digital technology.
Herbalife Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Herbalife are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Herbalife 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 Herbalife to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Herbalife is facing challenges because of the dominance of functional experts in the organization. Herbalife can utilize new technology in the field of Personal & Household Prods. industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Herbalife can develop new processes and procedures in Personal & Household Prods. 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.
Better consumer reach
– The expansion of the 5G network will help Herbalife to increase its market reach. Herbalife 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. Herbalife can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Herbalife 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Herbalife can use these opportunities to build new business models that can help the communities that Herbalife operates in. Secondly it can use opportunities from government spending in Personal & Household Prods. sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Herbalife 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 Herbalife to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Personal & Household Prods. industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Herbalife 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. Herbalife 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, Herbalife 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
– Herbalife can improve the customer journey of consumers in the Personal & Household Prods. 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.
Use of Bitcoin and other crypto currencies for transactions in Personal & Household Prods. industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Herbalife in the Personal & Household Prods. industry. Now Herbalife can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Herbalife 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 Personal & Household Prods. industry.
Threats Herbalife External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Herbalife are -
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 Herbalife in the Personal & Household Prods. 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 Herbalife in Personal & Household Prods. industry. The Personal & Household Prods. 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.
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 Herbalife business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Herbalife is facing in Personal & Household Prods. sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Herbalife may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Personal & Household Prods. sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Personal & Household Prods. industry are lowering. It can presents Herbalife with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Personal & Household Prods. sector.
Consumer confidence and its impact on Herbalife 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 Personal & Household Prods. industry and other sectors.
Regulatory challenges
– Herbalife 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 Personal & Household Prods. industry regulations.
High dependence on third party suppliers
– Herbalife 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Herbalife 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 Herbalife prominent markets.
Technology acceleration in Forth Industrial Revolution
– Herbalife has witnessed rapid integration of technology during Covid-19 in the Personal & Household Prods. industry. As one of the leading players in the industry, Herbalife needs to keep up with the evolution of technology in the Personal & Household Prods. 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.
Increasing wage structure of Herbalife
– 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 Herbalife.
Weighted SWOT Analysis of Herbalife Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Herbalife 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 Herbalife 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 Herbalife 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 Herbalife 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 Herbalife needs to make to build a sustainable competitive advantage.