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Heineken SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Heineken managers to do a situational analysis of the organization . It is a useful technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Heineken is facing in its current business environment.
The Heineken is one of the leading firms in its industry. Heineken maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Heineken to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The core purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Heineken strengths, and eradicate its weaknesses.
Step by Step Guide to Heineken SWOT Analysis
Strengths of Heineken – Internal Strategic Factors
As one of the leading organizations in its industry, Heineken has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Heineken are –
- Strong Brand Portfolio – Over the years Heineken has invested in building a strong brand portfolio. The SWOT analysis of Heineken just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Highly successful at Go To Market strategies for its products.
- Successful track record of developing new products – product innovation.
- Automation of activities brought consistency of quality to Heineken products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Highly skilled workforce through successful training and learning programs. Heineken is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
Weakness of Heineken – Internal Strategic Factors
Weakness are the areas where Heineken can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Heineken needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Heineken has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Heineken is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- High attrition rate in work force – compare to other organizations in the industry Heineken has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
Opportunities for Heineken – External Strategic Factors
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Heineken.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Heineken’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Heineken an opportunity to enter a new emerging market.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Heineken to drive home its advantage in new technology and gain market share in the new product category.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Heineken to capture new customers and increase its market share.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Heineken. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- New trends in the consumer behavior can open up new market for the Heineken . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- The new technology provides an opportunity to Heineken to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
Threats Heineken Facing - External Strategic Factors
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Rising raw material can pose a threat to the Heineken profitability.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
Limitations of SWOT Analysis for Heineken
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Heineken
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Heineken
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Heineken managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Heineken
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)