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 – there is increasing trade war between United States & China, geopolitical disruptions, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, supply chains are disrupted by pandemic , increasing household debt because of falling income levels,
central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, 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 -
Diverse revenue streams
– Hornbach-Baumarkt is present in almost all the verticals within the Retail (Home Improvement) industry. This has provided Hornbach-Baumarkt 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.
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.
Ability to recruit top talent
– Hornbach-Baumarkt 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.
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.
Successful track record of launching new products
– Hornbach-Baumarkt has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hornbach-Baumarkt 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.
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.
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.
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.
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.
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.
Organizational Resilience of Hornbach-Baumarkt
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hornbach-Baumarkt does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Hornbach-Baumarkt | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hornbach-Baumarkt are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hornbach-Baumarkt is slow explore the new channels of communication. These new channels of communication can help Hornbach-Baumarkt to provide better information regarding Retail (Home Improvement) products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Lack of clear differentiation of Hornbach-Baumarkt products
– To increase the profitability and margins on the products, Hornbach-Baumarkt needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Germany, Hornbach-Baumarkt needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
High cash cycle compare to competitors
Hornbach-Baumarkt has a high cash cycle compare to other players in the Retail (Home Improvement) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that Hornbach-Baumarkt 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-Baumarkt can leverage the sales team experience to cultivate customer relationships as Hornbach-Baumarkt is planning to shift buying processes online.
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 -
Creating value in data economy
– The success of analytics program of Hornbach-Baumarkt has opened avenues for new revenue streams for the organization in Retail (Home Improvement) industry. This can help Hornbach-Baumarkt to build a more holistic ecosystem for Hornbach-Baumarkt products in the Retail (Home Improvement) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Home Improvement) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hornbach-Baumarkt 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. Hornbach-Baumarkt 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.
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.
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.
Building a culture of innovation
– managers at Hornbach-Baumarkt 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 Retail (Home Improvement) industry.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hornbach-Baumarkt is facing challenges because of the dominance of functional experts in the organization. Hornbach-Baumarkt 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.
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.
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.
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.
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.
Developing new processes and practices
– Hornbach-Baumarkt 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.
Threats Hornbach-Baumarkt External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hornbach-Baumarkt are -
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Hornbach-Baumarkt has witnessed rapid integration of technology during Covid-19 in the Retail (Home Improvement) industry. As one of the leading players in the industry, Hornbach-Baumarkt needs to keep up with the evolution of technology in the Retail (Home Improvement) 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.
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.
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 Hornbach-Baumarkt business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hornbach-Baumarkt in Retail (Home Improvement) industry. The Retail (Home Improvement) 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.
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.
Increasing wage structure of Hornbach-Baumarkt
– 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-Baumarkt.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hornbach-Baumarkt 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.
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.
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.
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.
