SWOT Analysis / TOWS Matrix for Henkel VZO (Germany)
Based on various researches at Oak Spring University , Henkel VZO is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, increasing commodity prices, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , there is increasing trade war between United States & China,
increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Henkel VZO can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Henkel VZO, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Henkel VZO 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 Henkel VZO can be done for the following purposes –
1. Strategic planning of Henkel VZO
2. Improving business portfolio management of Henkel VZO
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 VZO
Strengths of Henkel VZO | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Henkel VZO are -
Effective Research and Development (R&D)
– Henkel VZO has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Henkel VZO staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Henkel VZO 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.
Ability to lead change in Chemical Manufacturing
– Henkel VZO 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 VZO in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Henkel VZO is one of the most innovative firm in Chemical Manufacturing sector.
Training and development
– Henkel VZO has one of the best training and development program in Basic Materials 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.
Successful track record of launching new products
– Henkel VZO has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Henkel VZO 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 Henkel VZO in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Henkel VZO is one of the leading players in the Chemical Manufacturing 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.
Highly skilled collaborators
– Henkel VZO has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemical Manufacturing industry. Secondly the value chain collaborators of Henkel VZO have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Henkel VZO
– The covid-19 pandemic has put organizational resilience at the centre of everthing Henkel VZO does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Henkel VZO 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 VZO is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Henkel VZO emphasize – knowledge, initiative, and innovation.
Digital Transformation in Chemical Manufacturing industry
- digital transformation varies from industry to industry. For Henkel VZO digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Henkel VZO 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.
Weaknesses of Henkel VZO | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Henkel VZO 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 Henkel VZO supply chain. Even after few cautionary changes, Henkel VZO is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Henkel VZO vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Germany, Henkel VZO needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Henkel VZO is just above the Chemical Manufacturing 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.
High bargaining power of channel partners in Chemical Manufacturing industry
– because of the regulatory requirements in Germany, Henkel VZO 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 Chemical Manufacturing industry.
High dependence on Henkel VZO ‘s star products
– The top 2 products and services of Henkel VZO still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though Henkel VZO has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Henkel VZO is dominated by functional specialists. It is not different from other players in the Chemical Manufacturing industry, but Henkel VZO needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Henkel VZO to focus more on services in the Chemical Manufacturing industry rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, Henkel VZO 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 VZO lucrative customers.
No frontier risks strategy
– From the 10K / annual statement of Henkel VZO, 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.
Ability to respond to the competition
– As the decision making is very deliberative at Henkel VZO, in the dynamic environment of Chemical Manufacturing industry it has struggled to respond to the nimble upstart competition. Henkel VZO has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Henkel VZO 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 VZO 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.
Lack of clear differentiation of Henkel VZO products
– To increase the profitability and margins on the products, Henkel VZO needs to provide more differentiated products than what it is currently offering in the marketplace.
Henkel VZO Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Henkel VZO are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Henkel VZO is facing challenges because of the dominance of functional experts in the organization. Henkel VZO can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Henkel VZO can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Henkel VZO has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Henkel VZO to build a more holistic ecosystem for Henkel VZO products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Henkel VZO 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.
Using analytics as competitive advantage
– Henkel VZO has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled Henkel VZO to build a competitive advantage using analytics. The analytics driven competitive advantage can help Henkel VZO to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 VZO in the Chemical Manufacturing industry. Now Henkel VZO can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Henkel VZO 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 VZO to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Henkel VZO 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.
Leveraging digital technologies
– Henkel VZO 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.
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 Henkel VZO 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.
Learning at scale
– Online learning technologies has now opened space for Henkel VZO 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
– Henkel VZO 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.
Better consumer reach
– The expansion of the 5G network will help Henkel VZO to increase its market reach. Henkel VZO 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.
Threats Henkel VZO External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Henkel VZO are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Henkel VZO 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.
Stagnating economy with rate increase
– Henkel VZO 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 Chemical Manufacturing industry.
Easy access to finance
– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Henkel VZO can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Henkel VZO needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Henkel VZO 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 VZO prominent markets.
Environmental challenges
– Henkel VZO 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 VZO can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents Henkel VZO with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.
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 Henkel VZO in the Chemical Manufacturing sector and impact the bottomline of the organization.
Regulatory challenges
– Henkel VZO 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.
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 VZO 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.
High dependence on third party suppliers
– Henkel VZO 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.
Increasing wage structure of Henkel VZO
– 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 VZO.
Weighted SWOT Analysis of Henkel VZO Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Henkel VZO 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 VZO 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 VZO 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 VZO 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 VZO needs to make to build a sustainable competitive advantage.