Hennes & Mauritz AB (HNNMY) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hennes & Mauritz AB (United States)
Based on various researches at Oak Spring University , Hennes & Mauritz AB is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption,
there is backlash against globalization, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Hennes & Mauritz AB
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hennes & Mauritz AB can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hennes & Mauritz AB, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hennes & Mauritz AB 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 Hennes & Mauritz AB can be done for the following purposes –
1. Strategic planning of Hennes & Mauritz AB
2. Improving business portfolio management of Hennes & Mauritz AB
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 Hennes & Mauritz AB
Strengths of Hennes & Mauritz AB | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hennes & Mauritz AB are -
Successful track record of launching new products
– Hennes & Mauritz AB has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hennes & Mauritz AB 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.
Ability to recruit top talent
– Hennes & Mauritz AB 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.
Superior customer experience
– The customer experience strategy of Hennes & Mauritz AB in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Hennes & Mauritz AB 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.
Learning organization
- Hennes & Mauritz AB 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 Hennes & Mauritz AB is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hennes & Mauritz AB emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Hennes & Mauritz AB 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.
Diverse revenue streams
– Hennes & Mauritz AB is present in almost all the verticals within the industry. This has provided Hennes & Mauritz AB 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 Hennes & Mauritz AB in the sector have low bargaining power. Hennes & Mauritz AB has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hennes & Mauritz AB to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Hennes & Mauritz AB 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 Hennes & Mauritz AB have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Hennes & Mauritz AB 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.
Operational resilience
– The operational resilience strategy of Hennes & Mauritz AB 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
– Hennes & Mauritz AB is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Hennes & Mauritz AB | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hennes & Mauritz AB are -
Need for greater diversity
– Hennes & Mauritz AB 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.
Interest costs
– Compare to the competition, Hennes & Mauritz AB 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.
Compensation and incentives
– The revenue per employee of Hennes & Mauritz AB 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
Hennes & Mauritz AB 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hennes & Mauritz AB is slow explore the new channels of communication. These new channels of communication can help Hennes & Mauritz AB 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 Hennes & Mauritz AB 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 Hennes & Mauritz AB can leverage the sales team experience to cultivate customer relationships as Hennes & Mauritz AB is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of United States, Hennes & Mauritz AB needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, Hennes & Mauritz AB 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 Hennes & Mauritz AB lucrative customers.
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 Hennes & Mauritz AB supply chain. Even after few cautionary changes, Hennes & Mauritz AB is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hennes & Mauritz AB vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Hennes & Mauritz AB, 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.
High bargaining power of channel partners in industry
– because of the regulatory requirements in United States, Hennes & Mauritz AB 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.
Hennes & Mauritz AB Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hennes & Mauritz AB are -
Manufacturing automation
– Hennes & Mauritz AB 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.
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. Hennes & Mauritz AB can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hennes & Mauritz AB can use these opportunities to build new business models that can help the communities that Hennes & Mauritz AB operates in. Secondly it can use opportunities from government spending in sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hennes & Mauritz AB 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hennes & Mauritz AB can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hennes & Mauritz AB is facing challenges because of the dominance of functional experts in the organization. Hennes & Mauritz AB 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.
Loyalty marketing
– Hennes & Mauritz AB 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.
Leveraging digital technologies
– Hennes & Mauritz AB 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.
Creating value in data economy
– The success of analytics program of Hennes & Mauritz AB has opened avenues for new revenue streams for the organization in industry. This can help Hennes & Mauritz AB to build a more holistic ecosystem for Hennes & Mauritz AB products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Hennes & Mauritz AB 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 industry.
Better consumer reach
– The expansion of the 5G network will help Hennes & Mauritz AB to increase its market reach. Hennes & Mauritz AB 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.
Learning at scale
– Online learning technologies has now opened space for Hennes & Mauritz AB 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hennes & Mauritz AB 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 Hennes & Mauritz AB to hire the very best people irrespective of their geographical location.
Threats Hennes & Mauritz AB External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hennes & Mauritz AB are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hennes & Mauritz AB 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.
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 Hennes & Mauritz AB 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hennes & Mauritz AB in industry. The 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.
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.
Regulatory challenges
– Hennes & Mauritz AB 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.
Environmental challenges
– Hennes & Mauritz AB 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. Hennes & Mauritz AB can take advantage of this fund but it will also bring new competitors in the industry.
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. Hennes & Mauritz AB can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Hennes & Mauritz AB has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Hennes & Mauritz AB 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.
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 Hennes & Mauritz AB business can come under increasing regulations regarding data privacy, data security, etc.
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. Hennes & Mauritz AB needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
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 Hennes & Mauritz AB in the sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Hennes & Mauritz AB 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.
Weighted SWOT Analysis of Hennes & Mauritz AB Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hennes & Mauritz AB 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 Hennes & Mauritz AB 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 Hennes & Mauritz AB 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 Hennes & Mauritz AB 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 Hennes & Mauritz AB needs to make to build a sustainable competitive advantage.