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 – talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, geopolitical disruptions, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings,
central banks are concerned over increasing inflation, increasing transportation and logistics costs, 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.
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.
Highly skilled collaborators
– Hormel Foods has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Food Processing industry. Secondly the value chain collaborators of Hormel Foods have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Sustainable margins compare to other players in Food Processing industry
– Hormel Foods has clearly differentiated products in the market place. This has enabled Hormel Foods to fetch slight price premium compare to the competitors in the Food Processing industry. The sustainable margins have also helped Hormel Foods to invest into research and development (R&D) and innovation.
Strong track record of project management in the Food Processing industry
– Hormel Foods is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Innovation driven organization
– Hormel Foods is one of the most innovative firm in Food Processing sector.
High brand equity
– Hormel Foods has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hormel Foods to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Hormel Foods has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hormel Foods staying ahead in the Food Processing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Hormel Foods | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hormel Foods are -
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hormel Foods is slow explore the new channels of communication. These new channels of communication can help Hormel Foods to provide better information regarding Food Processing 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 Hormel Foods needs to have more collaboration between its sales team and marketing team. Sales professionals in the Food Processing industry have deep experience in developing customer relationships. Marketing department at Hormel Foods can leverage the sales team experience to cultivate customer relationships as Hormel Foods is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Hormel Foods has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Food Processing industry over the last five years. Hormel Foods even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Capital Spending Reduction
– Even during the low interest decade, Hormel Foods 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 Food Processing industry using digital technology.
Low market penetration in new markets
– Outside its home market of United States, Hormel Foods needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Hormel Foods is just above the Food Processing 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.
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.
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.
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.
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.
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. Hormel Foods can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hormel Foods 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 Hormel Foods to hire the very best people irrespective of their geographical location.
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.
Use of Bitcoin and other crypto currencies for transactions in Food Processing industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hormel Foods in the Food Processing industry. Now Hormel Foods can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hormel Foods 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 Hormel Foods to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Better consumer reach
– The expansion of the 5G network will help Hormel Foods to increase its market reach. Hormel Foods 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.
Threats Hormel Foods External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hormel Foods are -
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.
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.
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. Hormel Foods needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Hormel Foods has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Hormel Foods needs to keep up with the evolution of technology in the Food Processing 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hormel Foods 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 Hormel Foods prominent markets.
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.
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.
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 Hormel Foods in the Food Processing sector and impact the bottomline of the organization.
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.
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.
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.
High dependence on third party suppliers
– Hormel Foods 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.
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.