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 – central banks are concerned over increasing inflation, wage bills are increasing, supply chains are disrupted by pandemic , there is backlash against globalization, increasing government debt because of Covid-19 spendings, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google,
competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
Superior customer experience
– The customer experience strategy of Gudang Garam in Tobacco industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
Successful track record of launching new products
– Gudang Garam has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gudang Garam 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.
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.
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.
Organizational Resilience of Gudang Garam
– The covid-19 pandemic has put organizational resilience at the centre of everthing Gudang Garam does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
Digital Transformation in Tobacco industry
- digital transformation varies from industry to industry. For Gudang Garam digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Gudang Garam 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 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.
Weaknesses of Gudang Garam | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Gudang Garam are -
Slow to strategic competitive environment developments
– As Gudang Garam is one of the leading players in the Tobacco industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Tobacco industry in last five years.
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.
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 Gudang Garam supply chain. Even after few cautionary changes, Gudang Garam is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gudang Garam vulnerable to further global disruptions in South East Asia.
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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Gudang Garam, in the dynamic environment of Tobacco industry it has struggled to respond to the nimble upstart competition. Gudang Garam has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Need for greater diversity
– Gudang Garam has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Gudang Garam is slow explore the new channels of communication. These new channels of communication can help Gudang Garam to provide better information regarding Tobacco products and services. It can also build an online community to further reach out to potential customers.
Gudang Garam Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Gudang Garam are -
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Gudang Garam 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Gudang Garam is facing challenges because of the dominance of functional experts in the organization. Gudang Garam can utilize new technology in the field of Tobacco industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Tobacco industry, but it has also influenced the consumer preferences. Gudang Garam 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 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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Gudang Garam to increase its market reach. Gudang Garam 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.
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.
Buying journey improvements
– Gudang Garam can improve the customer journey of consumers in the Tobacco industry by using analytics and artificial intelligence. It 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.
Using analytics as competitive advantage
– Gudang Garam has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Tobacco sector. This continuous investment in analytics has enabled Gudang Garam to build a competitive advantage using analytics. The analytics driven competitive advantage can help Gudang Garam to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Threats Gudang Garam External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Gudang Garam are -
Technology acceleration in Forth Industrial Revolution
– Gudang Garam has witnessed rapid integration of technology during Covid-19 in the Tobacco industry. As one of the leading players in the industry, Gudang Garam needs to keep up with the evolution of technology in the Tobacco 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 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.
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.
Consumer confidence and its impact on Gudang Garam 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 Tobacco industry and other sectors.
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.
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.
Increasing wage structure of Gudang Garam
– 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 Gudang Garam.
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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Gudang Garam is facing in Tobacco sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
