Innovating at Arauco: Chile's Largest Forestry Company SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Innovating at Arauco: Chile's Largest Forestry Company
On February 27, 2010, Chile was razed by a three-minute earthquake of 8.8 magnitude on the Richter scale. More than 500 people died and nearly 400,000 homes were destroyed. The overall cost was estimated at US$20 billion. Over 70 per cent of the people who had died in the earthquake were from the coastal town of ConstituciA?n. Celulosa Arauco y ConstituciA?n (Arauco), a Chilean-based forestry and timber company, was ConstituciA?n's largest employer. Arauco's pulp mill and major sawmill in ConstituciA?n was completely destroyed, and all but one of the 34 remaining manufacturing facilities were wiped out. The company's executives moved rapidly to respond to the crisis and create a plan to rebuild ConstituciA?n. By the end of April 2010, Arauco's pulp business in Chile was operating at 70 per cent capacity and in May, the company's pulp mill in ConstituciA?n reopened. However, the disaster had left an indelible imprint on Arauco's vision and values. The company had been thinking about pursuing further innovation. The company's values of efficiency and productivity had been tested with an environmental disaster in 2005, but innovation was still limited. Then in 2009, an opportunity provided Arauco with the ability to engage innovation on a larger scale. But the earthquake and rebuilding efforts now required the company's full attention. Should Arauco proceed with its innovation, and if so how would Arauco balance these two different objectives?
Swot Analysis of "Innovating at Arauco: Chile's Largest Forestry Company" written by Carlos Osorio, Pratima Bansal includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arauco Constitucia facing as an external strategic factors. Some of the topics covered in Innovating at Arauco: Chile's Largest Forestry Company case study are - Strategic Management Strategies, Strategy, Sustainability and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Innovating at Arauco: Chile's Largest Forestry Company casestudy better are - – geopolitical disruptions, there is backlash against globalization, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, technology disruption,
increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Innovating at Arauco: Chile's Largest Forestry Company
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Innovating at Arauco: Chile's Largest Forestry Company case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arauco Constitucia, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arauco Constitucia 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 Innovating at Arauco: Chile's Largest Forestry Company can be done for the following purposes –
1. Strategic planning using facts provided in Innovating at Arauco: Chile's Largest Forestry Company case study
2. Improving business portfolio management of Arauco Constitucia
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arauco Constitucia
Strengths Innovating at Arauco: Chile's Largest Forestry Company | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arauco Constitucia in Innovating at Arauco: Chile's Largest Forestry Company Harvard Business Review case study are -
Organizational Resilience of Arauco Constitucia
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Arauco Constitucia does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Arauco Constitucia is present in almost all the verticals within the industry. This has provided firm in Innovating at Arauco: Chile's Largest Forestry Company case study 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.
High brand equity
– Arauco Constitucia has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arauco Constitucia to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Arauco Constitucia has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Innovating at Arauco: Chile's Largest Forestry Company 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)
– Arauco Constitucia 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 Innovating at Arauco: Chile's Largest Forestry Company - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Arauco Constitucia 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 Arauco Constitucia is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Innovating at Arauco: Chile's Largest Forestry Company Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Innovating at Arauco: Chile's Largest Forestry Company Harvard Business Review case study comprises – understanding the underlying the factors in the 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.
Superior customer experience
– The customer experience strategy of Arauco Constitucia in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Arauco Constitucia digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arauco Constitucia 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.
Successful track record of launching new products
– Arauco Constitucia has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arauco Constitucia 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 Innovation & Entrepreneurship field
– Arauco Constitucia 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 Arauco Constitucia in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Arauco Constitucia 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.
Weaknesses Innovating at Arauco: Chile's Largest Forestry Company | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Innovating at Arauco: Chile's Largest Forestry Company are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Innovating at Arauco: Chile's Largest Forestry Company HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Arauco Constitucia has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study Innovating at Arauco: Chile's Largest Forestry Company that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Innovating at Arauco: Chile's Largest Forestry Company can leverage the sales team experience to cultivate customer relationships as Arauco Constitucia is planning to shift buying processes online.
Products dominated business model
– Even though Arauco Constitucia 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 - Innovating at Arauco: Chile's Largest Forestry Company should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Innovating at Arauco: Chile's Largest Forestry Company, is just above the industry average. Arauco Constitucia 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.
Slow to strategic competitive environment developments
– As Innovating at Arauco: Chile's Largest Forestry Company HBR case study mentions - Arauco Constitucia takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Arauco Constitucia 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.
Skills based hiring
– The stress on hiring functional specialists at Arauco Constitucia 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 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 Arauco Constitucia supply chain. Even after few cautionary changes mentioned in the HBR case study - Innovating at Arauco: Chile's Largest Forestry Company, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arauco Constitucia vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Innovating at Arauco: Chile's Largest Forestry Company 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 Arauco Constitucia 's lucrative customers.
High cash cycle compare to competitors
Arauco Constitucia has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Arauco Constitucia is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Innovating at Arauco: Chile's Largest Forestry Company can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Innovating at Arauco: Chile's Largest Forestry Company | 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 Innovating at Arauco: Chile's Largest Forestry Company are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arauco Constitucia 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 Arauco Constitucia to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Arauco Constitucia has opened avenues for new revenue streams for the organization in the industry. This can help Arauco Constitucia to build a more holistic ecosystem as suggested in the Innovating at Arauco: Chile's Largest Forestry Company case study. Arauco Constitucia can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Arauco Constitucia can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Innovating at Arauco: Chile's Largest Forestry Company 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arauco Constitucia 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.
Manufacturing automation
– Arauco Constitucia can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship segment. 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arauco Constitucia 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, Innovating at Arauco: Chile's Largest Forestry Company, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Arauco Constitucia 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 Innovation & Entrepreneurship segment.
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 Arauco Constitucia 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.
Learning at scale
– Online learning technologies has now opened space for Arauco Constitucia 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Arauco Constitucia 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. Arauco Constitucia 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Arauco Constitucia in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, 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 Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Arauco Constitucia can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arauco Constitucia can use these opportunities to build new business models that can help the communities that Arauco Constitucia operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Threats Innovating at Arauco: Chile's Largest Forestry Company External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Innovating at Arauco: Chile's Largest Forestry Company are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Innovating at Arauco: Chile's Largest Forestry Company, Arauco Constitucia may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
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 Arauco Constitucia business can come under increasing regulations regarding data privacy, data security, etc.
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.
Shortening product life cycle
– it is one of the major threat that Arauco Constitucia is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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 Arauco Constitucia.
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. Arauco Constitucia needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Environmental challenges
– Arauco Constitucia 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. Arauco Constitucia can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Regulatory challenges
– Arauco Constitucia 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 Innovation & Entrepreneurship industry regulations.
Technology acceleration in Forth Industrial Revolution
– Arauco Constitucia has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Arauco Constitucia needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
High dependence on third party suppliers
– Arauco Constitucia 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.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Arauco Constitucia can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Arauco Constitucia 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.
Stagnating economy with rate increase
– Arauco Constitucia 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.
Weighted SWOT Analysis of Innovating at Arauco: Chile's Largest Forestry Company 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 Innovating at Arauco: Chile's Largest Forestry Company 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 Innovating at Arauco: Chile's Largest Forestry Company 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 Innovating at Arauco: Chile's Largest Forestry Company 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 Innovating at Arauco: Chile's Largest Forestry Company 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 Arauco Constitucia needs to make to build a sustainable competitive advantage.