Hornbach-Baumarkt (HBMG) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Home Improvement)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hornbach-Baumarkt (Germany)
Based on various researches at Oak Spring University , Hornbach-Baumarkt is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, wage bills are increasing,
technology disruption, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Hornbach-Baumarkt
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hornbach-Baumarkt can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hornbach-Baumarkt, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hornbach-Baumarkt 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-Baumarkt can be done for the following purposes –
1. Strategic planning of Hornbach-Baumarkt
2. Improving business portfolio management of Hornbach-Baumarkt
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-Baumarkt
Strengths of Hornbach-Baumarkt | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hornbach-Baumarkt are -
High switching costs
– The high switching costs that Hornbach-Baumarkt 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.
Effective Research and Development (R&D)
– Hornbach-Baumarkt has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hornbach-Baumarkt 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.
Digital Transformation in Retail (Home Improvement) industry
- digital transformation varies from industry to industry. For Hornbach-Baumarkt digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hornbach-Baumarkt 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
- Hornbach-Baumarkt 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 Hornbach-Baumarkt is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hornbach-Baumarkt emphasize – knowledge, initiative, and innovation.
Ability to lead change in Retail (Home Improvement)
– Hornbach-Baumarkt 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-Baumarkt in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Hornbach-Baumarkt in the Services sector have low bargaining power. Hornbach-Baumarkt has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hornbach-Baumarkt to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Retail (Home Improvement) industry
– Hornbach-Baumarkt has clearly differentiated products in the market place. This has enabled Hornbach-Baumarkt to fetch slight price premium compare to the competitors in the Retail (Home Improvement) industry. The sustainable margins have also helped Hornbach-Baumarkt to invest into research and development (R&D) and innovation.
Training and development
– Hornbach-Baumarkt 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.
Superior customer experience
– The customer experience strategy of Hornbach-Baumarkt in Retail (Home Improvement) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Hornbach-Baumarkt is one of the most innovative firm in Retail (Home Improvement) sector.
High brand equity
– Hornbach-Baumarkt has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hornbach-Baumarkt to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Hornbach-Baumarkt 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 Retail (Home Improvement) 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.
Weaknesses of Hornbach-Baumarkt | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hornbach-Baumarkt are -
High operating costs
– Compare to the competitors, Hornbach-Baumarkt 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-Baumarkt lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Hornbach-Baumarkt is dominated by functional specialists. It is not different from other players in the Retail (Home Improvement) industry, but Hornbach-Baumarkt needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hornbach-Baumarkt to focus more on services in the Retail (Home Improvement) industry rather than just following the product oriented approach.
Employees’ less understanding of Hornbach-Baumarkt strategy
– From the outside it seems that the employees of Hornbach-Baumarkt 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-Baumarkt, in the dynamic environment of Retail (Home Improvement) industry it has struggled to respond to the nimble upstart competition. Hornbach-Baumarkt 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, Hornbach-Baumarkt has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Home Improvement) industry over the last five years. Hornbach-Baumarkt 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.
Skills based hiring in Retail (Home Improvement) industry
– The stress on hiring functional specialists at Hornbach-Baumarkt 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.
No frontier risks strategy
– From the 10K / annual statement of Hornbach-Baumarkt, 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.
Workers concerns about automation
– As automation is fast increasing in the Retail (Home Improvement) industry, Hornbach-Baumarkt 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.
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-Baumarkt supply chain. Even after few cautionary changes, Hornbach-Baumarkt is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hornbach-Baumarkt vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Retail (Home Improvement) industry
– because of the regulatory requirements in Germany, Hornbach-Baumarkt 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 Retail (Home Improvement) industry.
Interest costs
– Compare to the competition, Hornbach-Baumarkt 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.
Hornbach-Baumarkt Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hornbach-Baumarkt are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hornbach-Baumarkt 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.
Using analytics as competitive advantage
– Hornbach-Baumarkt 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-Baumarkt to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hornbach-Baumarkt to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Hornbach-Baumarkt 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.
Leveraging digital technologies
– Hornbach-Baumarkt 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hornbach-Baumarkt can use these opportunities to build new business models that can help the communities that Hornbach-Baumarkt operates in. Secondly it can use opportunities from government spending in Retail (Home Improvement) sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hornbach-Baumarkt can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions in Retail (Home Improvement) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hornbach-Baumarkt in the Retail (Home Improvement) industry. Now Hornbach-Baumarkt can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Hornbach-Baumarkt 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hornbach-Baumarkt 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
– Hornbach-Baumarkt can improve the customer journey of consumers in the Retail (Home Improvement) 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.
Learning at scale
– Online learning technologies has now opened space for Hornbach-Baumarkt 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Home Improvement) industry, but it has also influenced the consumer preferences. Hornbach-Baumarkt can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Hornbach-Baumarkt can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Hornbach-Baumarkt External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hornbach-Baumarkt are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hornbach-Baumarkt 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-Baumarkt prominent markets.
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-Baumarkt.
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-Baumarkt 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.
Regulatory challenges
– Hornbach-Baumarkt 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.
Shortening product life cycle
– it is one of the major threat that Hornbach-Baumarkt is facing in Retail (Home Improvement) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Hornbach-Baumarkt 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.
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-Baumarkt can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Hornbach-Baumarkt in the Retail (Home Improvement) sector and impact the bottomline of the organization.
Consumer confidence and its impact on Hornbach-Baumarkt 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.
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-Baumarkt needs to understand the core reasons impacting the Retail (Home Improvement) 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.
High dependence on third party suppliers
– Hornbach-Baumarkt 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.
Environmental challenges
– Hornbach-Baumarkt 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-Baumarkt can take advantage of this fund but it will also bring new competitors in the Retail (Home Improvement) industry.
Weighted SWOT Analysis of Hornbach-Baumarkt Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hornbach-Baumarkt 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-Baumarkt 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-Baumarkt 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-Baumarkt 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-Baumarkt needs to make to build a sustainable competitive advantage.