Hornbach (HBH) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Home Improvement)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hornbach (Germany)
Based on various researches at Oak Spring University , Hornbach is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, increasing energy prices, increasing transportation and logistics costs, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings,
there is backlash against globalization, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hornbach can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hornbach, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hornbach 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 Hornbach can be done for the following purposes –
1. Strategic planning of Hornbach
2. Improving business portfolio management of Hornbach
3. Assessing feasibility of the new initiative in Germany
4. Making a Retail (Home Improvement) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hornbach
Strengths of Hornbach | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hornbach are -
Diverse revenue streams
– Hornbach is present in almost all the verticals within the Retail (Home Improvement) industry. This has provided Hornbach a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Effective Research and Development (R&D)
– Hornbach has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hornbach staying ahead in the Retail (Home Improvement) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Hornbach is one of the most innovative firm in Retail (Home Improvement) sector.
Cross disciplinary teams
– Horizontal connected teams at the Hornbach 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.
Operational resilience
– The operational resilience strategy of Hornbach comprises – understanding the underlying the factors in the Retail (Home Improvement) 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.
Training and development
– Hornbach has one of the best training and development program in Services 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.
Strong track record of project management in the Retail (Home Improvement) industry
– Hornbach 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 lead change in Retail (Home Improvement)
– Hornbach is one of the leading players in the Retail (Home Improvement) industry in Germany. Over the years it has not only transformed the business landscape in the Retail (Home Improvement) industry in Germany but also across the existing markets. The ability to lead change has enabled Hornbach in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Hornbach
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hornbach does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Hornbach in the Services sector have low bargaining power. Hornbach has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hornbach to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Hornbach is one of the leading players in the Retail (Home Improvement) 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.
Sustainable margins compare to other players in Retail (Home Improvement) industry
– Hornbach has clearly differentiated products in the market place. This has enabled Hornbach to fetch slight price premium compare to the competitors in the Retail (Home Improvement) industry. The sustainable margins have also helped Hornbach to invest into research and development (R&D) and innovation.
Weaknesses of Hornbach | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hornbach are -
Aligning sales with marketing
– From the outside it seems that Hornbach needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Home Improvement) industry have deep experience in developing customer relationships. Marketing department at Hornbach can leverage the sales team experience to cultivate customer relationships as Hornbach is planning to shift buying processes online.
High dependence on Hornbach ‘s star products
– The top 2 products and services of Hornbach still accounts for major business revenue. This dependence on star products in Retail (Home Improvement) industry has resulted into insufficient focus on developing new products, even though Hornbach has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Hornbach 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 Retail (Home Improvement) industry using digital technology.
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 Hornbach supply chain. Even after few cautionary changes, Hornbach is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hornbach vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Germany, Hornbach needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Hornbach is dominated by functional specialists. It is not different from other players in the Retail (Home Improvement) industry, but Hornbach needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hornbach to focus more on services in the Retail (Home Improvement) industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Hornbach, it seems that company is thinking out the frontier risks that can impact Retail (Home Improvement) 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.
High operating costs
– Compare to the competitors, Hornbach has high operating costs in the Retail (Home Improvement) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hornbach lucrative customers.
Employees’ less understanding of Hornbach strategy
– From the outside it seems that the employees of Hornbach 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.
Ability to respond to the competition
– As the decision making is very deliberative at Hornbach, in the dynamic environment of Retail (Home Improvement) industry it has struggled to respond to the nimble upstart competition. Hornbach has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring in Retail (Home Improvement) industry
– The stress on hiring functional specialists at Hornbach 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.
Hornbach Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hornbach are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hornbach is facing challenges because of the dominance of functional experts in the organization. Hornbach can utilize new technology in the field of Retail (Home Improvement) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hornbach 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 Hornbach to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Hornbach has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Home Improvement) sector. This continuous investment in analytics has enabled Hornbach to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hornbach to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hornbach 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 Hornbach to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hornbach in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Home Improvement) industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Hornbach has opened avenues for new revenue streams for the organization in Retail (Home Improvement) industry. This can help Hornbach to build a more holistic ecosystem for Hornbach products in the Retail (Home Improvement) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Hornbach 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hornbach can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Hornbach can develop new processes and procedures in Retail (Home Improvement) 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.
Better consumer reach
– The expansion of the 5G network will help Hornbach to increase its market reach. Hornbach 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.
Manufacturing automation
– Hornbach can use the latest technology developments to improve its manufacturing and designing process in Retail (Home Improvement) 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.
Learning at scale
– Online learning technologies has now opened space for Hornbach 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hornbach 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.
Threats Hornbach External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hornbach are -
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. Hornbach needs to understand the core reasons impacting the Retail (Home Improvement) industry. This will help it in building a better workplace.
Regulatory challenges
– Hornbach 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 Retail (Home Improvement) industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hornbach may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Home Improvement) sector.
Stagnating economy with rate increase
– Hornbach 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 Retail (Home Improvement) industry.
Shortening product life cycle
– it is one of the major threat that Hornbach is facing in Retail (Home Improvement) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Hornbach
– 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 Hornbach.
Consumer confidence and its impact on Hornbach 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 Retail (Home Improvement) industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hornbach 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 Hornbach prominent markets.
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. Hornbach 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
– Hornbach 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. Hornbach can take advantage of this fund but it will also bring new competitors in the Retail (Home Improvement) 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.
Easy access to finance
– Easy access to finance in Retail (Home Improvement) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hornbach can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Hornbach.
Weighted SWOT Analysis of Hornbach Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hornbach 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 Hornbach 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 Hornbach 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 Hornbach 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 Hornbach needs to make to build a sustainable competitive advantage.
