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 – wage bills are increasing, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, 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 -
High brand equity
– Kraft Heinz has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kraft Heinz to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Strong track record of project management in the Food Processing industry
– Kraft Heinz is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Kraft Heinz is one of the leading players in the Food Processing industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Kraft Heinz has one of the best training and development program in Consumer/Non-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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Food Processing industry, Kraft Heinz 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.
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.
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.
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 decision making process
– As mentioned earlier in the report, Kraft Heinz 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. Kraft Heinz 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 cash cycle compare to competitors
Kraft Heinz has a high cash cycle compare to other players in the Food Processing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
High operating costs
– Compare to the competitors, Kraft Heinz 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 Kraft Heinz lucrative customers.
Kraft Heinz Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Kraft Heinz are -
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.
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. Kraft Heinz can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kraft Heinz 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 Kraft Heinz to hire the very best people irrespective of their geographical location.
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.
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.
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.
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.
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.
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. Kraft Heinz 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. Kraft Heinz 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.
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.
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. Kraft Heinz 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 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.
Threats Kraft Heinz External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Kraft Heinz are -
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.
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 Kraft Heinz.
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. Kraft Heinz needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.
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.
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.
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.
Regulatory challenges
– Kraft Heinz 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.
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 Kraft Heinz in the Food Processing sector and impact the bottomline of the organization.
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.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Kraft Heinz 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 Kraft Heinz prominent markets.
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.