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 – customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing commodity prices, geopolitical disruptions, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google,
banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, 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 -
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.
Innovation driven organization
– Hormel Foods is one of the most innovative firm in Food Processing sector.
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.
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.
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.
Analytics focus
– Hormel Foods 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 Food Processing 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 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.
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.
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.
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.
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.
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.
Weaknesses of Hormel Foods | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hormel Foods are -
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.
Employees’ less understanding of Hormel Foods strategy
– From the outside it seems that the employees of Hormel Foods 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.
Increasing silos among functional specialists
– The organizational structure of Hormel Foods is dominated by functional specialists. It is not different from other players in the Food Processing industry, but Hormel Foods needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hormel Foods to focus more on services in the Food Processing industry rather than just following the product oriented approach.
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.
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.
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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Hormel Foods, in the dynamic environment of Food Processing industry it has struggled to respond to the nimble upstart competition. Hormel Foods 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 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.
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 -
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Food Processing industry, but it has also influenced the consumer preferences. Hormel Foods can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hormel Foods can use these opportunities to build new business models that can help the communities that Hormel Foods operates in. Secondly it can use opportunities from government spending in Food Processing sector.
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.
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.
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.
Threats Hormel Foods External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hormel Foods are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Hormel Foods will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
