home24 (H24) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for home24 (Germany)

Based on various researches at Oak Spring University , home24 is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, there is increasing trade war between United States & China, increasing commodity prices, etc

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Introduction to SWOT Analysis of home24

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that home24 can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the home24, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which home24 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 home24 can be done for the following purposes –
1. Strategic planning of home24
2. Improving business portfolio management of home24
3. Assessing feasibility of the new initiative in Germany
4. Making a Furniture & Fixtures sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of home24

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Strengths of home24 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of home24 are -

Low bargaining power of suppliers

– Suppliers of home24 in the Consumer Cyclical sector have low bargaining power. home24 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps home24 to manage not only supply disruptions but also source products at highly competitive prices.

Diverse revenue streams

– home24 is present in almost all the verticals within the Furniture & Fixtures industry. This has provided home24 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.

Cross disciplinary teams

– Horizontal connected teams at the home24 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.

Innovation driven organization

– home24 is one of the most innovative firm in Furniture & Fixtures sector.

Analytics focus

– home24 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 Furniture & Fixtures 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 Furniture & Fixtures

– home24 is one of the leading players in the Furniture & Fixtures industry in Germany. Over the years it has not only transformed the business landscape in the Furniture & Fixtures industry in Germany but also across the existing markets. The ability to lead change has enabled home24 in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Highly skilled collaborators

– home24 has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Furniture & Fixtures industry. Secondly the value chain collaborators of home24 have helped the firm to develop new products and bring them quickly to the marketplace.

Digital Transformation in Furniture & Fixtures industry

- digital transformation varies from industry to industry. For home24 digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. home24 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 home24 comprises – understanding the underlying the factors in the Furniture & Fixtures 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.

Ability to recruit top talent

– home24 is one of the leading players in the Furniture & Fixtures 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.

High switching costs

– The high switching costs that home24 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

- home24 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 home24 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at home24 emphasize – knowledge, initiative, and innovation.

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Weaknesses of home24 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of home24 are -

Workers concerns about automation

– As automation is fast increasing in the Furniture & Fixtures industry, home24 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.

Products dominated business model

– Even though home24 has some of the most successful models in the Furniture & Fixtures industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. home24 should strive to include more intangible value offerings along with its core products and services.

Compensation and incentives

– The revenue per employee of home24 is just above the Furniture & Fixtures 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 dependence on home24 ‘s star products

– The top 2 products and services of home24 still accounts for major business revenue. This dependence on star products in Furniture & Fixtures industry has resulted into insufficient focus on developing new products, even though home24 has relatively successful track record of launching new products.

Slow to strategic competitive environment developments

– As home24 is one of the leading players in the Furniture & Fixtures industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Furniture & Fixtures industry in last five years.

Interest costs

– Compare to the competition, home24 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.

Skills based hiring in Furniture & Fixtures industry

– The stress on hiring functional specialists at home24 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 Furniture & Fixtures industry

– because of the regulatory requirements in Germany, home24 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 Furniture & Fixtures industry.

Slow decision making process

– As mentioned earlier in the report, home24 has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Furniture & Fixtures industry over the last five years. home24 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 home24 strategy

– From the outside it seems that the employees of home24 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.

Capital Spending Reduction

– Even during the low interest decade, home24 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 Furniture & Fixtures industry using digital technology.

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home24 Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of home24 are -

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, home24 can use these opportunities to build new business models that can help the communities that home24 operates in. Secondly it can use opportunities from government spending in Furniture & Fixtures sector.

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. home24 can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Building a culture of innovation

– managers at home24 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 Furniture & Fixtures industry.

Manufacturing automation

– home24 can use the latest technology developments to improve its manufacturing and designing process in Furniture & Fixtures 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, home24 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.

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 home24 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.

Better consumer reach

– The expansion of the 5G network will help home24 to increase its market reach. home24 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, home24 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 home24 to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Using analytics as competitive advantage

– home24 has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Furniture & Fixtures sector. This continuous investment in analytics has enabled home24 to build a competitive advantage using analytics. The analytics driven competitive advantage can help home24 to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Creating value in data economy

– The success of analytics program of home24 has opened avenues for new revenue streams for the organization in Furniture & Fixtures industry. This can help home24 to build a more holistic ecosystem for home24 products in the Furniture & Fixtures 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 home24 in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Furniture & Fixtures industry, and it will provide faster access to the consumers.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Furniture & Fixtures industry, but it has also influenced the consumer preferences. home24 can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Furniture & Fixtures industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. home24 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. home24 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 home24 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of home24 are -

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. home24 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.

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.

Consumer confidence and its impact on home24 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 Furniture & Fixtures industry and other sectors.

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 home24.

High dependence on third party suppliers

– home24 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.

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

– home24 has witnessed rapid integration of technology during Covid-19 in the Furniture & Fixtures industry. As one of the leading players in the industry, home24 needs to keep up with the evolution of technology in the Furniture & Fixtures 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.

Environmental challenges

– home24 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. home24 can take advantage of this fund but it will also bring new competitors in the Furniture & Fixtures industry.

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 home24 business can come under increasing regulations regarding data privacy, data security, etc.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, home24 may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Furniture & Fixtures sector.

Stagnating economy with rate increase

– home24 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 Furniture & Fixtures industry.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, home24 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 home24 prominent markets.

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 home24 in the Furniture & Fixtures sector and impact the bottomline of the organization.

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Weighted SWOT Analysis of home24 Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at home24 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 home24 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 home24 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 home24 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 home24 needs to make to build a sustainable competitive advantage.

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