Steinhoff Int (SNHG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Steinhoff Int (Germany)

Based on various researches at Oak Spring University , Steinhoff Int is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, geopolitical disruptions, there is increasing trade war between United States & China, wage bills are increasing, etc

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Introduction to SWOT Analysis of Steinhoff Int

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Steinhoff Int can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Steinhoff Int, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Steinhoff Int 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 Steinhoff Int can be done for the following purposes –
1. Strategic planning of Steinhoff Int
2. Improving business portfolio management of Steinhoff Int
3. Assessing feasibility of the new initiative in Germany
4. Making a Retail (Specialty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Steinhoff Int

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Strengths of Steinhoff Int | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Steinhoff Int are -

Sustainable margins compare to other players in Retail (Specialty) industry

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

Innovation driven organization

– Steinhoff Int is one of the most innovative firm in Retail (Specialty) sector.

Ability to recruit top talent

– Steinhoff Int is one of the leading players in the Retail (Specialty) 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.

Organizational Resilience of Steinhoff Int

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

Cross disciplinary teams

– Horizontal connected teams at the Steinhoff Int 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.

Low bargaining power of suppliers

– Suppliers of Steinhoff Int in the Services sector have low bargaining power. Steinhoff Int has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Steinhoff Int to manage not only supply disruptions but also source products at highly competitive prices.

High brand equity

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

Ability to lead change in Retail (Specialty)

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

Diverse revenue streams

– Steinhoff Int is present in almost all the verticals within the Retail (Specialty) industry. This has provided Steinhoff Int 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.

Strong track record of project management in the Retail (Specialty) industry

– Steinhoff Int 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 Retail (Specialty) industry

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

Operational resilience

– The operational resilience strategy of Steinhoff Int comprises – understanding the underlying the factors in the Retail (Specialty) 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 Steinhoff Int | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Steinhoff Int are -

Skills based hiring in Retail (Specialty) industry

– The stress on hiring functional specialists at Steinhoff Int 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.

High bargaining power of channel partners in Retail (Specialty) industry

– because of the regulatory requirements in Germany, Steinhoff Int 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 (Specialty) industry.

Compensation and incentives

– The revenue per employee of Steinhoff Int is just above the Retail (Specialty) 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.

Need for greater diversity

– Steinhoff Int 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.

Low market penetration in new markets

– Outside its home market of Germany, Steinhoff Int 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 Steinhoff Int supply chain. Even after few cautionary changes, Steinhoff Int is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Steinhoff Int vulnerable to further global disruptions in South East Asia.

Lack of clear differentiation of Steinhoff Int products

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

Ability to respond to the competition

– As the decision making is very deliberative at Steinhoff Int, in the dynamic environment of Retail (Specialty) industry it has struggled to respond to the nimble upstart competition. Steinhoff Int has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High dependence on Steinhoff Int ‘s star products

– The top 2 products and services of Steinhoff Int still accounts for major business revenue. This dependence on star products in Retail (Specialty) industry has resulted into insufficient focus on developing new products, even though Steinhoff Int has relatively successful track record of launching new products.

Slow decision making process

– As mentioned earlier in the report, Steinhoff Int 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 (Specialty) industry over the last five years. Steinhoff Int 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.

Employees’ less understanding of Steinhoff Int strategy

– From the outside it seems that the employees of Steinhoff Int 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.

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Steinhoff Int Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Steinhoff Int are -

Developing new processes and practices

– Steinhoff Int can develop new processes and procedures in Retail (Specialty) 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.

Harnessing reconfiguration of the global supply chains

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

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 Steinhoff Int 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.

Building a culture of innovation

– managers at Steinhoff Int 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 (Specialty) industry.

Manufacturing automation

– Steinhoff Int can use the latest technology developments to improve its manufacturing and designing process in Retail (Specialty) 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Retail (Specialty) industry, but it has also influenced the consumer preferences. Steinhoff Int can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Steinhoff Int is facing challenges because of the dominance of functional experts in the organization. Steinhoff Int can utilize new technology in the field of Retail (Specialty) 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 Steinhoff Int 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 Steinhoff Int to hire the very best people irrespective of their geographical location.

Using analytics as competitive advantage

– Steinhoff Int has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Specialty) sector. This continuous investment in analytics has enabled Steinhoff Int to build a competitive advantage using analytics. The analytics driven competitive advantage can help Steinhoff Int to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Steinhoff Int can use these opportunities to build new business models that can help the communities that Steinhoff Int operates in. Secondly it can use opportunities from government spending in Retail (Specialty) sector.

Better consumer reach

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Steinhoff Int 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 (Specialty) industry, and it will provide faster access to the consumers.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Retail (Specialty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Steinhoff Int 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. Steinhoff Int 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.

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Threats Steinhoff Int External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Steinhoff Int are -

Stagnating economy with rate increase

– Steinhoff Int 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 (Specialty) industry.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Retail (Specialty) industry are lowering. It can presents Steinhoff Int with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Specialty) sector.

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. Steinhoff Int 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.

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.

Technology acceleration in Forth Industrial Revolution

– Steinhoff Int has witnessed rapid integration of technology during Covid-19 in the Retail (Specialty) industry. As one of the leading players in the industry, Steinhoff Int needs to keep up with the evolution of technology in the Retail (Specialty) 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.

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 Steinhoff Int.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Steinhoff Int 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 Steinhoff Int prominent markets.

Shortening product life cycle

– it is one of the major threat that Steinhoff Int is facing in Retail (Specialty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Increasing wage structure of Steinhoff Int

– 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 Steinhoff Int.

High dependence on third party suppliers

– Steinhoff Int 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.

Regulatory challenges

– Steinhoff Int 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 (Specialty) industry regulations.

Environmental challenges

– Steinhoff Int 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. Steinhoff Int can take advantage of this fund but it will also bring new competitors in the Retail (Specialty) industry.

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. Steinhoff Int needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.

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Weighted SWOT Analysis of Steinhoff Int Template, Example

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

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