Hermes International (HRMS) SWOT Analysis / TOWS Matrix / MBA Resources
Apparel/Accessories
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hermes International (France)
Based on various researches at Oak Spring University , Hermes International 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%, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, geopolitical disruptions, cloud computing is disrupting traditional business models,
digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Hermes International
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hermes International can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hermes International, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hermes International 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 Hermes International can be done for the following purposes –
1. Strategic planning of Hermes International
2. Improving business portfolio management of Hermes International
3. Assessing feasibility of the new initiative in France
4. Making a Apparel/Accessories sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hermes International
Strengths of Hermes International | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hermes International are -
Digital Transformation in Apparel/Accessories industry
- digital transformation varies from industry to industry. For Hermes International digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hermes International 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.
Strong track record of project management in the Apparel/Accessories industry
– Hermes International 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
– Hermes International has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hermes International 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.
Training and development
– Hermes International has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Operational resilience
– The operational resilience strategy of Hermes International comprises – understanding the underlying the factors in the Apparel/Accessories 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.
Ability to recruit top talent
– Hermes International is one of the leading players in the Apparel/Accessories industry in France. It is in a position to attract the best talent available in France. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Apparel/Accessories industry
– Hermes International has clearly differentiated products in the market place. This has enabled Hermes International to fetch slight price premium compare to the competitors in the Apparel/Accessories industry. The sustainable margins have also helped Hermes International to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Hermes International has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hermes International staying ahead in the Apparel/Accessories industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Hermes International is one of the most innovative firm in Apparel/Accessories sector.
High switching costs
– The high switching costs that Hermes International 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
- Hermes International 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 Hermes International is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hermes International emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Hermes International has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Apparel/Accessories industry. Secondly the value chain collaborators of Hermes International have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Hermes International | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hermes International are -
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 Hermes International supply chain. Even after few cautionary changes, Hermes International is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hermes International vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Hermes International is dominated by functional specialists. It is not different from other players in the Apparel/Accessories industry, but Hermes International needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hermes International to focus more on services in the Apparel/Accessories industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of France, Hermes International needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Apparel/Accessories industry, Hermes International 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 Apparel/Accessories industry
– because of the regulatory requirements in France, Hermes International 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 Apparel/Accessories industry.
Products dominated business model
– Even though Hermes International has some of the most successful models in the Apparel/Accessories industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hermes International should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Hermes International has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Apparel/Accessories industry over the last five years. Hermes International 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.
High dependence on Hermes International ‘s star products
– The top 2 products and services of Hermes International still accounts for major business revenue. This dependence on star products in Apparel/Accessories industry has resulted into insufficient focus on developing new products, even though Hermes International has relatively successful track record of launching new products.
Employees’ less understanding of Hermes International strategy
– From the outside it seems that the employees of Hermes International 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.
No frontier risks strategy
– From the 10K / annual statement of Hermes International, it seems that company is thinking out the frontier risks that can impact Apparel/Accessories 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.
Capital Spending Reduction
– Even during the low interest decade, Hermes International 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 Apparel/Accessories industry using digital technology.
Hermes International Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hermes International are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Hermes International 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. Hermes International can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hermes International in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Apparel/Accessories industry, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Hermes International to increase its market reach. Hermes International 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.
Creating value in data economy
– The success of analytics program of Hermes International has opened avenues for new revenue streams for the organization in Apparel/Accessories industry. This can help Hermes International to build a more holistic ecosystem for Hermes International products in the Apparel/Accessories industry by providing – data insight services, data privacy related products, data based consulting services, 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 Hermes International 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.
Loyalty marketing
– Hermes International 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, Hermes International can use these opportunities to build new business models that can help the communities that Hermes International operates in. Secondly it can use opportunities from government spending in Apparel/Accessories sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hermes International 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 Hermes International to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Hermes International 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.
Manufacturing automation
– Hermes International can use the latest technology developments to improve its manufacturing and designing process in Apparel/Accessories 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.
Use of Bitcoin and other crypto currencies for transactions in Apparel/Accessories industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hermes International in the Apparel/Accessories industry. Now Hermes International can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Hermes International 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.
Threats Hermes International External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hermes International are -
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 Hermes International in the Apparel/Accessories sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Apparel/Accessories industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hermes International can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hermes International 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 Hermes International prominent markets.
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 Hermes International.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Apparel/Accessories industry are lowering. It can presents Hermes International with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Apparel/Accessories 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hermes International may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Apparel/Accessories sector.
Technology acceleration in Forth Industrial Revolution
– Hermes International has witnessed rapid integration of technology during Covid-19 in the Apparel/Accessories industry. As one of the leading players in the industry, Hermes International needs to keep up with the evolution of technology in the Apparel/Accessories 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.
Stagnating economy with rate increase
– Hermes International 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 Apparel/Accessories industry.
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.
Environmental challenges
– Hermes International 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. Hermes International can take advantage of this fund but it will also bring new competitors in the Apparel/Accessories industry.
Shortening product life cycle
– it is one of the major threat that Hermes International is facing in Apparel/Accessories sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Hermes International
– 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 Hermes International.
Weighted SWOT Analysis of Hermes International Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hermes International 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 Hermes International 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 Hermes International 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 Hermes International 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 Hermes International needs to make to build a sustainable competitive advantage.