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 – increasing commodity prices, cloud computing is disrupting traditional business models, wage bills are increasing, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings,
competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
Learning organization
- Herbalife 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 Herbalife is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Herbalife emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Herbalife has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Herbalife staying ahead in the Personal & Household Prods. industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Herbalife in the Consumer/Non-Cyclical sector have low bargaining power. Herbalife has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Herbalife to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Herbalife is one of the most innovative firm in Personal & Household Prods. sector.
Successful track record of launching new products
– Herbalife has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Herbalife 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.
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.
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.
Superior customer experience
– The customer experience strategy of Herbalife in Personal & Household Prods. industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
Weaknesses of Herbalife | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Herbalife are -
No frontier risks strategy
– From the 10K / annual statement of Herbalife, it seems that company is thinking out the frontier risks that can impact Personal & Household Prods. 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.
High operating costs
– Compare to the competitors, Herbalife has high operating costs in the Personal & Household Prods. industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Herbalife lucrative customers.
Employees’ less understanding of Herbalife strategy
– From the outside it seems that the employees of Herbalife don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
Low market penetration in new markets
– Outside its home market of United States, Herbalife needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Herbalife is just above the Personal & Household Prods. 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 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.
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.
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.
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.
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.
Herbalife Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Herbalife are -
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.
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.
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.
Using analytics as competitive advantage
– Herbalife has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Personal & Household Prods. sector. This continuous investment in analytics has enabled Herbalife to build a competitive advantage using analytics. The analytics driven competitive advantage can help Herbalife to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Loyalty marketing
– Herbalife 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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Herbalife can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Herbalife has opened avenues for new revenue streams for the organization in Personal & Household Prods. industry. This can help Herbalife to build a more holistic ecosystem for Herbalife products in the Personal & Household Prods. industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
Learning at scale
– Online learning technologies has now opened space for Herbalife 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.
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.
Threats Herbalife External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Herbalife are -
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.
Stagnating economy with rate increase
– Herbalife 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 Personal & Household Prods. industry.
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.
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.
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.
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.
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. Herbalife needs to understand the core reasons impacting the Personal & Household Prods. industry. This will help it in building a better workplace.
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 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.
Easy access to finance
– Easy access to finance in Personal & Household Prods. industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Herbalife can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
Environmental challenges
– Herbalife 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. Herbalife can take advantage of this fund but it will also bring new competitors in the Personal & Household Prods. industry.
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.
