Henkel ST (HNKG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Henkel ST (Germany)

Based on various researches at Oak Spring University , Henkel ST is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, talent flight as more people leaving formal jobs, technology disruption, there is increasing trade war between United States & China, wage bills are increasing, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of Henkel ST

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Henkel ST can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Henkel ST, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Henkel ST 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Henkel ST can be done for the following purposes –
1. Strategic planning of Henkel ST
2. Improving business portfolio management of Henkel ST
3. Assessing feasibility of the new initiative in Germany
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Henkel ST

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Strengths of Henkel ST | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Henkel ST are -

Organizational Resilience of Henkel ST

– The covid-19 pandemic has put organizational resilience at the centre of everthing Henkel ST does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Strong track record of project management in the Chemical Manufacturing industry

– Henkel ST is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Digital Transformation in Chemical Manufacturing industry

- digital transformation varies from industry to industry. For Henkel ST digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Henkel ST 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.

Learning organization

- Henkel ST 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 Henkel ST is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Henkel ST emphasize – knowledge, initiative, and innovation.

Innovation driven organization

– Henkel ST is one of the most innovative firm in Chemical Manufacturing sector.

Superior customer experience

– The customer experience strategy of Henkel ST in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Analytics focus

– Henkel ST 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 Chemical Manufacturing 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.

Sustainable margins compare to other players in Chemical Manufacturing industry

– Henkel ST has clearly differentiated products in the market place. This has enabled Henkel ST to fetch slight price premium compare to the competitors in the Chemical Manufacturing industry. The sustainable margins have also helped Henkel ST to invest into research and development (R&D) and innovation.

Cross disciplinary teams

– Horizontal connected teams at the Henkel ST 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.

High brand equity

– Henkel ST has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Henkel ST to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Ability to lead change in Chemical Manufacturing

– Henkel ST is one of the leading players in the Chemical Manufacturing industry in Germany. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in Germany but also across the existing markets. The ability to lead change has enabled Henkel ST in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Operational resilience

– The operational resilience strategy of Henkel ST comprises – understanding the underlying the factors in the Chemical Manufacturing 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.

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Weaknesses of Henkel ST | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Henkel ST are -

Capital Spending Reduction

– Even during the low interest decade, Henkel ST 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 Chemical Manufacturing industry using digital technology.

Lack of clear differentiation of Henkel ST products

– To increase the profitability and margins on the products, Henkel ST needs to provide more differentiated products than what it is currently offering in the marketplace.

Need for greater diversity

– Henkel ST 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.

Products dominated business model

– Even though Henkel ST has some of the most successful models in the Chemical Manufacturing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Henkel ST should strive to include more intangible value offerings along with its core products and services.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Henkel ST is slow explore the new channels of communication. These new channels of communication can help Henkel ST to provide better information regarding Chemical Manufacturing products and services. It can also build an online community to further reach out to potential customers.

High operating costs

– Compare to the competitors, Henkel ST has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Henkel ST lucrative customers.

Low market penetration in new markets

– Outside its home market of Germany, Henkel ST needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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 Henkel ST supply chain. Even after few cautionary changes, Henkel ST is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Henkel ST vulnerable to further global disruptions in South East Asia.

Slow to strategic competitive environment developments

– As Henkel ST is one of the leading players in the Chemical Manufacturing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Chemical Manufacturing industry in last five years.

Slow decision making process

– As mentioned earlier in the report, Henkel ST has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Henkel ST 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.

No frontier risks strategy

– From the 10K / annual statement of Henkel ST, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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.

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Henkel ST Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Henkel ST are -

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. Henkel ST can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Developing new processes and practices

– Henkel ST can develop new processes and procedures in Chemical Manufacturing 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.

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Henkel ST in the Chemical Manufacturing industry. Now Henkel ST 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 Henkel ST 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.

Better consumer reach

– The expansion of the 5G network will help Henkel ST to increase its market reach. Henkel ST 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Henkel ST 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 Henkel ST to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Henkel ST 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 Henkel ST to hire the very best people irrespective of their geographical location.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Henkel ST in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.

Building a culture of innovation

– managers at Henkel ST 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 Chemical Manufacturing industry.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Henkel ST 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. Henkel ST 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.

Manufacturing automation

– Henkel ST can use the latest technology developments to improve its manufacturing and designing process in Chemical Manufacturing 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.

Loyalty marketing

– Henkel ST 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Henkel ST can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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Threats Henkel ST External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Henkel ST are -

High dependence on third party suppliers

– Henkel ST 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.

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 Henkel ST business can come under increasing regulations regarding data privacy, data security, etc.

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. Henkel ST 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.

Environmental challenges

– Henkel ST 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. Henkel ST can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.

Regulatory challenges

– Henkel ST 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 Chemical Manufacturing industry regulations.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Henkel ST in Chemical Manufacturing industry. The Chemical Manufacturing 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 acceleration in Forth Industrial Revolution

– Henkel ST has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, Henkel ST needs to keep up with the evolution of technology in the Chemical Manufacturing 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.

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.

Consumer confidence and its impact on Henkel ST 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 Chemical Manufacturing industry and other sectors.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Henkel ST 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 Henkel ST prominent markets.

Increasing wage structure of Henkel ST

– 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 Henkel ST.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents Henkel ST with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Henkel ST may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing sector.

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Weighted SWOT Analysis of Henkel ST Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Henkel ST 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 Henkel ST 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 Henkel ST 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 Henkel ST 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 Henkel ST needs to make to build a sustainable competitive advantage.

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