Alltech was a Lexington, Kentucky-based producer of supplements for animal feed, with revenues of over $2 billion (projected to reach $3 billion in 2018), sales in 120 countries, 5,000 employees, and 100 manufacturing plants worldwide. For nearly four decades, Alltech had been defined by its focus on innovation and marketing as well as the entrepreneurial spirit and vision of its founder, Dr. Pearse Lyons, who remained intimately involved in company operations and in managing relationships with key customers. This case finds Alltech in the midst of a new growth strategy-downstream integration, specifically buying up feed companies-which marked a stark departure from the company's longtime emphasis on organic growth. The decision to buy feed companies had been controversial within Alltech: feed was a low-margin, rather traditional commodity business, while Alltech earned relatively high margins on products rooted in science and innovation. However, Lyons believed downstream integration would allow Alltech to better communicate with its end customers (farmers), increase sales of its supplements, and help protect the firm from industry dynamics such as consolidation and cost pressure. Was he right, or should Alltech take a different approach?
Swot Analysis of "Alltech" written by David E. Bell, Natalie Kindred includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Alltech Feed facing as an external strategic factors. Some of the topics covered in Alltech case study are - Strategic Management Strategies, Change management, Corporate governance, Entrepreneurship, Growth strategy, Leadership, Managing uncertainty, Mergers & acquisitions, Organizational culture, Product development, Risk management, Sales and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Alltech casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, there is backlash against globalization,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Alltech case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alltech Feed, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alltech Feed 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 Alltech can be done for the following purposes –
1. Strategic planning using facts provided in Alltech case study
2. Improving business portfolio management of Alltech Feed
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Alltech Feed
Strengths Alltech | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alltech Feed in Alltech Harvard Business Review case study are -
High brand equity
– Alltech Feed has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Alltech Feed to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Alltech Feed 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.
Innovation driven organization
– Alltech Feed is one of the most innovative firm in sector. Manager in Alltech Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Alltech Feed has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Alltech Feed 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.
Ability to lead change in Sales & Marketing field
– Alltech Feed is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Alltech Feed in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Alltech Feed has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Alltech Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Alltech Feed has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Alltech - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Alltech Feed in the sector have low bargaining power. Alltech has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Alltech Feed to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Alltech Feed
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Alltech Feed does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Sales & Marketing industry
– Alltech firm has clearly differentiated products in the market place. This has enabled Alltech Feed to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Alltech Feed to invest into research and development (R&D) and innovation.
Strong track record of project management
– Alltech Feed is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Alltech Feed has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Alltech HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Alltech | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alltech are -
High operating costs
– Compare to the competitors, firm in the HBR case study Alltech has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Alltech Feed 's lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Alltech Feed is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Alltech can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Alltech Feed products
– To increase the profitability and margins on the products, Alltech Feed needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Alltech Feed has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Alltech Feed 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.
Capital Spending Reduction
– Even during the low interest decade, Alltech Feed 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 industry using digital technology.
High bargaining power of channel partners
– Because of the regulatory requirements, David E. Bell, Natalie Kindred suggests that, Alltech Feed 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 industry.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Alltech, is just above the industry average. Alltech Feed 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.
Increasing silos among functional specialists
– The organizational structure of Alltech Feed is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Alltech Feed needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Alltech Feed to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Alltech Feed 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 Alltech Feed has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Alltech should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Alltech Feed, firm in the HBR case study Alltech needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Alltech | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Alltech are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Alltech Feed is facing challenges because of the dominance of functional experts in the organization. Alltech case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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, Alltech Feed can use these opportunities to build new business models that can help the communities that Alltech Feed operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Alltech Feed 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 Alltech Feed to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Alltech Feed 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. Alltech Feed 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.
Buying journey improvements
– Alltech Feed can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Alltech suggest that firm 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Alltech Feed can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Alltech Feed 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, as suggested in case study, Alltech, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Alltech Feed has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– Alltech Feed 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.
Creating value in data economy
– The success of analytics program of Alltech Feed has opened avenues for new revenue streams for the organization in the industry. This can help Alltech Feed to build a more holistic ecosystem as suggested in the Alltech case study. Alltech Feed can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Alltech Feed has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Alltech - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Alltech Feed to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Alltech Feed 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.
Learning at scale
– Online learning technologies has now opened space for Alltech Feed 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.
Threats Alltech External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Alltech are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Alltech Feed in the Sales & Marketing industry. The Sales & Marketing 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.
Consumer confidence and its impact on Alltech Feed 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 the industry and other sectors.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Alltech Feed can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Alltech Feed 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 Sales & Marketing industry regulations.
Stagnating economy with rate increase
– Alltech Feed 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 field.
Environmental challenges
– Alltech Feed 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. Alltech Feed can take advantage of this fund but it will also bring new competitors in the Sales & Marketing 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 Alltech Feed business can come under increasing regulations regarding data privacy, data security, etc.
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 Alltech Feed.
Increasing wage structure of Alltech Feed
– 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 Alltech Feed.
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. Alltech Feed needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
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 Alltech Feed in the Sales & Marketing sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Alltech Feed 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.
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.
Weighted SWOT Analysis of Alltech Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Alltech 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 the case study Alltech 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 the Harvard case study Alltech 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 Alltech is 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 Alltech Feed needs to make to build a sustainable competitive advantage.
