SWOT Analysis / TOWS Matrix for Kraft Heinz (Germany)
Based on various researches at Oak Spring University , Kraft Heinz is operating in a macro-environment that has been destablized by – geopolitical disruptions, increasing energy prices, wage bills are increasing, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings,
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 Kraft Heinz can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kraft Heinz, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kraft Heinz 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 Kraft Heinz can be done for the following purposes –
1. Strategic planning of Kraft Heinz
2. Improving business portfolio management of Kraft Heinz
3. Assessing feasibility of the new initiative in Germany
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Kraft Heinz
Strengths of Kraft Heinz | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kraft Heinz are -
Effective Research and Development (R&D)
– Kraft Heinz has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Kraft Heinz 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.
Innovation driven organization
– Kraft Heinz is one of the most innovative firm in Food Processing sector.
Ability to lead change in Food Processing
– Kraft Heinz is one of the leading players in the Food Processing industry in Germany. Over the years it has not only transformed the business landscape in the Food Processing industry in Germany but also across the existing markets. The ability to lead change has enabled Kraft Heinz in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Kraft Heinz 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
– Kraft Heinz has clearly differentiated products in the market place. This has enabled Kraft Heinz to fetch slight price premium compare to the competitors in the Food Processing industry. The sustainable margins have also helped Kraft Heinz to invest into research and development (R&D) and innovation.
Organizational Resilience of Kraft Heinz
– The covid-19 pandemic has put organizational resilience at the centre of everthing Kraft Heinz 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 Kraft Heinz 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.
Cross disciplinary teams
– Horizontal connected teams at the Kraft Heinz 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.
Digital Transformation in Food Processing industry
- digital transformation varies from industry to industry. For Kraft Heinz digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kraft Heinz 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 Kraft Heinz 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.
Analytics focus
– Kraft Heinz 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 Germany 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.
Successful track record of launching new products
– Kraft Heinz has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kraft Heinz 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.
Weaknesses of Kraft Heinz | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kraft Heinz are -
Low market penetration in new markets
– Outside its home market of Germany, Kraft Heinz needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– From the 10K / annual statement of Kraft Heinz, 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.
Lack of clear differentiation of Kraft Heinz products
– To increase the profitability and margins on the products, Kraft Heinz needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Kraft Heinz 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kraft Heinz is slow explore the new channels of communication. These new channels of communication can help Kraft Heinz to provide better information regarding Food Processing products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Kraft Heinz 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 Kraft Heinz 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.
Increasing silos among functional specialists
– The organizational structure of Kraft Heinz is dominated by functional specialists. It is not different from other players in the Food Processing industry, but Kraft Heinz needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kraft Heinz to focus more on services in the Food Processing industry rather than just following the product oriented approach.
Skills based hiring in Food Processing industry
– The stress on hiring functional specialists at Kraft Heinz 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.
Ability to respond to the competition
– As the decision making is very deliberative at Kraft Heinz, in the dynamic environment of Food Processing industry it has struggled to respond to the nimble upstart competition. Kraft Heinz has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Kraft Heinz 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.
Kraft Heinz Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Kraft Heinz are -
Loyalty marketing
– Kraft Heinz 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.
Building a culture of innovation
– managers at Kraft Heinz 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Kraft Heinz can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Kraft Heinz 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 Kraft Heinz to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kraft Heinz to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Kraft Heinz 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
– Kraft Heinz 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kraft Heinz 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.
Leveraging digital technologies
– Kraft Heinz 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.
Learning at scale
– Online learning technologies has now opened space for Kraft Heinz 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kraft Heinz can use these opportunities to build new business models that can help the communities that Kraft Heinz operates in. Secondly it can use opportunities from government spending in Food Processing sector.
Developing new processes and practices
– Kraft Heinz can develop new processes and procedures in Food Processing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Kraft Heinz 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.
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 Kraft Heinz in the Food Processing industry. Now Kraft Heinz can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Kraft Heinz External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Kraft Heinz are -
Consumer confidence and its impact on Kraft Heinz 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, Kraft Heinz 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.
Stagnating economy with rate increase
– Kraft Heinz 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.
High dependence on third party suppliers
– Kraft Heinz 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.
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. Kraft Heinz 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
– Kraft Heinz has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Kraft Heinz 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 Kraft Heinz 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 Kraft Heinz 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 Kraft Heinz is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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 Kraft Heinz business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Kraft Heinz 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. Kraft Heinz can take advantage of this fund but it will also bring new competitors in the Food Processing industry.
Weighted SWOT Analysis of Kraft Heinz Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Kraft Heinz 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 Kraft Heinz 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 Kraft Heinz 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 Kraft Heinz 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 Kraft Heinz needs to make to build a sustainable competitive advantage.
