SWOT Analysis / TOWS Matrix for Gudang Garam (Indonesia)
Based on various researches at Oak Spring University , Gudang Garam is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, increasing energy prices, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies,
talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Gudang Garam can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gudang Garam, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gudang Garam 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 Gudang Garam can be done for the following purposes –
1. Strategic planning of Gudang Garam
2. Improving business portfolio management of Gudang Garam
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Tobacco sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Gudang Garam
Strengths of Gudang Garam | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gudang Garam are -
Cross disciplinary teams
– Horizontal connected teams at the Gudang Garam 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.
Operational resilience
– The operational resilience strategy of Gudang Garam comprises – understanding the underlying the factors in the Tobacco 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.
High brand equity
– Gudang Garam has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Gudang Garam to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Gudang Garam 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.
Effective Research and Development (R&D)
– Gudang Garam has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Gudang Garam staying ahead in the Tobacco 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 Gudang Garam in the Consumer/Non-Cyclical sector have low bargaining power. Gudang Garam has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gudang Garam to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Tobacco industry
– Gudang Garam is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Gudang Garam 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 Tobacco industry. The technology infrastructure of Indonesia 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 recruit top talent
– Gudang Garam is one of the leading players in the Tobacco industry in Indonesia. It is in a position to attract the best talent available in Indonesia. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Tobacco
– Gudang Garam is one of the leading players in the Tobacco industry in Indonesia. Over the years it has not only transformed the business landscape in the Tobacco industry in Indonesia but also across the existing markets. The ability to lead change has enabled Gudang Garam in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Gudang Garam has one of the best training and development program in Consumer/Non-Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Sustainable margins compare to other players in Tobacco industry
– Gudang Garam has clearly differentiated products in the market place. This has enabled Gudang Garam to fetch slight price premium compare to the competitors in the Tobacco industry. The sustainable margins have also helped Gudang Garam to invest into research and development (R&D) and innovation.
Weaknesses of Gudang Garam | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Gudang Garam are -
High bargaining power of channel partners in Tobacco industry
– because of the regulatory requirements in Indonesia, Gudang Garam 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 Tobacco industry.
Products dominated business model
– Even though Gudang Garam has some of the most successful models in the Tobacco industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Gudang Garam should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Gudang Garam products
– To increase the profitability and margins on the products, Gudang Garam needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Gudang Garam 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.
High cash cycle compare to competitors
Gudang Garam has a high cash cycle compare to other players in the Tobacco industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of Gudang Garam strategy
– From the outside it seems that the employees of Gudang Garam 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.
Slow decision making process
– As mentioned earlier in the report, Gudang Garam has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Tobacco industry over the last five years. Gudang Garam 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.
High operating costs
– Compare to the competitors, Gudang Garam has high operating costs in the Tobacco industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Gudang Garam lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the Tobacco industry, Gudang Garam 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.
Capital Spending Reduction
– Even during the low interest decade, Gudang Garam 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 Tobacco industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Gudang Garam is dominated by functional specialists. It is not different from other players in the Tobacco industry, but Gudang Garam needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Gudang Garam to focus more on services in the Tobacco industry rather than just following the product oriented approach.
Gudang Garam Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Gudang Garam are -
Creating value in data economy
– The success of analytics program of Gudang Garam has opened avenues for new revenue streams for the organization in Tobacco industry. This can help Gudang Garam to build a more holistic ecosystem for Gudang Garam products in the Tobacco industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Tobacco industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Gudang Garam 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. Gudang Garam 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Gudang Garam can use these opportunities to build new business models that can help the communities that Gudang Garam operates in. Secondly it can use opportunities from government spending in Tobacco sector.
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 Gudang Garam 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.
Leveraging digital technologies
– Gudang Garam 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gudang Garam can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Gudang Garam 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 Gudang Garam to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Gudang Garam 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.
Manufacturing automation
– Gudang Garam can use the latest technology developments to improve its manufacturing and designing process in Tobacco 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.
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. Gudang Garam can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Gudang Garam can develop new processes and procedures in Tobacco 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.
Learning at scale
– Online learning technologies has now opened space for Gudang Garam 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.
Use of Bitcoin and other crypto currencies for transactions in Tobacco industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Gudang Garam in the Tobacco industry. Now Gudang Garam can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Gudang Garam External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Gudang Garam are -
Easy access to finance
– Easy access to finance in Tobacco industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Gudang Garam 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. Gudang Garam 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Tobacco industry are lowering. It can presents Gudang Garam with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Tobacco sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gudang Garam in Tobacco industry. The Tobacco 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.
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 Gudang Garam in the Tobacco sector and impact the bottomline of the organization.
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. Gudang Garam needs to understand the core reasons impacting the Tobacco industry. This will help it in building a better workplace.
Regulatory challenges
– Gudang Garam 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 Tobacco industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Gudang Garam may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tobacco sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gudang Garam 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 Gudang Garam prominent markets.
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 Gudang Garam business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Gudang Garam 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.
Stagnating economy with rate increase
– Gudang Garam 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 Tobacco industry.
Environmental challenges
– Gudang Garam 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. Gudang Garam can take advantage of this fund but it will also bring new competitors in the Tobacco industry.
Weighted SWOT Analysis of Gudang Garam Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Gudang Garam 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 Gudang Garam 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 Gudang Garam 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 Gudang Garam 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 Gudang Garam needs to make to build a sustainable competitive advantage.