SWOT Analysis / TOWS Matrix for Hormel Foods (United States)
Based on various researches at Oak Spring University , Hormel Foods is operating in a macro-environment that has been destablized by – increasing commodity prices, there is backlash against globalization, geopolitical disruptions, technology disruption, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs,
increasing inequality as vast percentage of new income is going to the top 1%, 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 Hormel Foods can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hormel Foods, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hormel Foods 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 Hormel Foods can be done for the following purposes –
1. Strategic planning of Hormel Foods
2. Improving business portfolio management of Hormel Foods
3. Assessing feasibility of the new initiative in United States
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hormel Foods
Strengths of Hormel Foods | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hormel Foods are -
Digital Transformation in Food Processing industry
- digital transformation varies from industry to industry. For Hormel Foods digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hormel Foods 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.
Learning organization
- Hormel Foods 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 Hormel Foods is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hormel Foods emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Hormel Foods 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.
Successful track record of launching new products
– Hormel Foods has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hormel Foods 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.
Organizational Resilience of Hormel Foods
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hormel Foods does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Hormel Foods 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.
Ability to recruit top talent
– Hormel Foods is one of the leading players in the Food Processing 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.
Low bargaining power of suppliers
– Suppliers of Hormel Foods in the Consumer/Non-Cyclical sector have low bargaining power. Hormel Foods has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hormel Foods to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Hormel Foods comprises – understanding the underlying the factors in the Food Processing 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.
Superior customer experience
– The customer experience strategy of Hormel Foods in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Food Processing
– Hormel Foods is one of the leading players in the Food Processing industry in United States. Over the years it has not only transformed the business landscape in the Food Processing industry in United States but also across the existing markets. The ability to lead change has enabled Hormel Foods in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Hormel Foods is present in almost all the verticals within the Food Processing industry. This has provided Hormel Foods 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.
Weaknesses of Hormel Foods | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hormel Foods are -
High dependence on Hormel Foods ‘s star products
– The top 2 products and services of Hormel Foods still accounts for major business revenue. This dependence on star products in Food Processing industry has resulted into insufficient focus on developing new products, even though Hormel Foods has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Hormel Foods, it seems that company is thinking out the frontier risks that can impact Food Processing 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.
Workers concerns about automation
– As automation is fast increasing in the Food Processing industry, Hormel Foods 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.
High bargaining power of channel partners in Food Processing industry
– because of the regulatory requirements in United States, Hormel Foods 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 Food Processing industry.
Products dominated business model
– Even though Hormel Foods has some of the most successful models in the Food Processing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hormel Foods should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Hormel Foods 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 Hormel Foods supply chain. Even after few cautionary changes, Hormel Foods is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hormel Foods vulnerable to further global disruptions in South East Asia.
Skills based hiring in Food Processing industry
– The stress on hiring functional specialists at Hormel Foods 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.
High operating costs
– Compare to the competitors, Hormel Foods has high operating costs in the Food Processing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hormel Foods lucrative customers.
Lack of clear differentiation of Hormel Foods products
– To increase the profitability and margins on the products, Hormel Foods needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Hormel Foods is one of the leading players in the Food Processing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Food Processing industry in last five years.
Hormel Foods Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hormel Foods are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Hormel Foods 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
– Hormel Foods can improve the customer journey of consumers in the Food Processing 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Food Processing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hormel Foods 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. Hormel Foods 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.
Using analytics as competitive advantage
– Hormel Foods has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Food Processing sector. This continuous investment in analytics has enabled Hormel Foods to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hormel Foods to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Hormel Foods 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 Food Processing industry.
Learning at scale
– Online learning technologies has now opened space for Hormel Foods 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 Hormel Foods has opened avenues for new revenue streams for the organization in Food Processing industry. This can help Hormel Foods to build a more holistic ecosystem for Hormel Foods products in the Food Processing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hormel Foods is facing challenges because of the dominance of functional experts in the organization. Hormel Foods can utilize new technology in the field of Food Processing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 Hormel Foods 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.
Leveraging digital technologies
– Hormel Foods 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hormel Foods in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Food Processing industry, and it will provide faster access to the consumers.
Loyalty marketing
– Hormel Foods 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.
Manufacturing automation
– Hormel Foods can use the latest technology developments to improve its manufacturing and designing process in Food Processing 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.
Threats Hormel Foods External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hormel Foods are -
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 Hormel Foods.
Consumer confidence and its impact on Hormel Foods 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 Food Processing industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hormel Foods may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Food Processing sector.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Food Processing industry are lowering. It can presents Hormel Foods with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Food Processing sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hormel Foods in Food Processing industry. The Food Processing 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.
Shortening product life cycle
– it is one of the major threat that Hormel Foods is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Food Processing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hormel Foods can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Hormel Foods 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 Food Processing industry regulations.
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 Hormel Foods business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Hormel Foods
– 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 Hormel Foods.
Environmental challenges
– Hormel Foods 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. Hormel Foods can take advantage of this fund but it will also bring new competitors in the Food Processing industry.
Stagnating economy with rate increase
– Hormel Foods 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 Food Processing industry.
Weighted SWOT Analysis of Hormel Foods Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hormel Foods 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 Hormel Foods 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 Hormel Foods 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 Hormel Foods 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 Hormel Foods needs to make to build a sustainable competitive advantage.