SWOT Analysis / TOWS Matrix for Indocement Tunggal (Indonesia)
Based on various researches at Oak Spring University , Indocement Tunggal is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, technology disruption, cloud computing is disrupting traditional business models, wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, there is increasing trade war between United States & China,
challanges to central banks by blockchain based private currencies, increasing energy prices, etc
Introduction to SWOT Analysis of Indocement Tunggal
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Indocement Tunggal can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Indocement Tunggal, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Indocement Tunggal 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 Indocement Tunggal can be done for the following purposes –
1. Strategic planning of Indocement Tunggal
2. Improving business portfolio management of Indocement Tunggal
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Construction - Raw Materials sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Indocement Tunggal
Strengths of Indocement Tunggal | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Indocement Tunggal are -
Diverse revenue streams
– Indocement Tunggal is present in almost all the verticals within the Construction - Raw Materials industry. This has provided Indocement Tunggal 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.
Cross disciplinary teams
– Horizontal connected teams at the Indocement Tunggal 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.
Ability to recruit top talent
– Indocement Tunggal is one of the leading players in the Construction - Raw Materials 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.
Organizational Resilience of Indocement Tunggal
– The covid-19 pandemic has put organizational resilience at the centre of everthing Indocement Tunggal does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Indocement Tunggal has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Indocement Tunggal staying ahead in the Construction - Raw Materials industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Construction - Raw Materials industry
– Indocement Tunggal is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Indocement Tunggal comprises – understanding the underlying the factors in the Construction - Raw Materials 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.
Highly skilled collaborators
– Indocement Tunggal has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction - Raw Materials industry. Secondly the value chain collaborators of Indocement Tunggal have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Construction - Raw Materials
– Indocement Tunggal is one of the leading players in the Construction - Raw Materials industry in Indonesia. Over the years it has not only transformed the business landscape in the Construction - Raw Materials industry in Indonesia but also across the existing markets. The ability to lead change has enabled Indocement Tunggal in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Indocement Tunggal is one of the most innovative firm in Construction - Raw Materials sector.
High switching costs
– The high switching costs that Indocement Tunggal 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.
Sustainable margins compare to other players in Construction - Raw Materials industry
– Indocement Tunggal has clearly differentiated products in the market place. This has enabled Indocement Tunggal to fetch slight price premium compare to the competitors in the Construction - Raw Materials industry. The sustainable margins have also helped Indocement Tunggal to invest into research and development (R&D) and innovation.
Weaknesses of Indocement Tunggal | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Indocement Tunggal are -
Low market penetration in new markets
– Outside its home market of Indonesia, Indocement Tunggal needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Indocement Tunggal supply chain. Even after few cautionary changes, Indocement Tunggal is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Indocement Tunggal vulnerable to further global disruptions in South East Asia.
Skills based hiring in Construction - Raw Materials industry
– The stress on hiring functional specialists at Indocement Tunggal 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.
No frontier risks strategy
– From the 10K / annual statement of Indocement Tunggal, it seems that company is thinking out the frontier risks that can impact Construction - Raw Materials industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Indocement Tunggal has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction - Raw Materials industry over the last five years. Indocement Tunggal 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.
Interest costs
– Compare to the competition, Indocement Tunggal 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
Indocement Tunggal has a high cash cycle compare to other players in the Construction - Raw Materials industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that Indocement Tunggal needs to have more collaboration between its sales team and marketing team. Sales professionals in the Construction - Raw Materials industry have deep experience in developing customer relationships. Marketing department at Indocement Tunggal can leverage the sales team experience to cultivate customer relationships as Indocement Tunggal is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Indocement Tunggal is just above the Construction - Raw Materials industry average. It 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 Indocement Tunggal is one of the leading players in the Construction - Raw Materials industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction - Raw Materials industry in last five years.
Products dominated business model
– Even though Indocement Tunggal has some of the most successful models in the Construction - Raw Materials industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Indocement Tunggal should strive to include more intangible value offerings along with its core products and services.
Indocement Tunggal Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Indocement Tunggal are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Indocement Tunggal can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Indocement Tunggal can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Indocement Tunggal can use these opportunities to build new business models that can help the communities that Indocement Tunggal operates in. Secondly it can use opportunities from government spending in Construction - Raw Materials 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 Indocement Tunggal 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Indocement Tunggal 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 Indocement Tunggal 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 Construction - Raw Materials industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Indocement Tunggal 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. Indocement Tunggal 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Construction - Raw Materials industry, but it has also influenced the consumer preferences. Indocement Tunggal can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Indocement Tunggal 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.
Creating value in data economy
– The success of analytics program of Indocement Tunggal has opened avenues for new revenue streams for the organization in Construction - Raw Materials industry. This can help Indocement Tunggal to build a more holistic ecosystem for Indocement Tunggal products in the Construction - Raw Materials industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Indocement Tunggal 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 Indocement Tunggal to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions in Construction - Raw Materials industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Indocement Tunggal in the Construction - Raw Materials industry. Now Indocement Tunggal can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Indocement Tunggal to increase its market reach. Indocement Tunggal 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.
Threats Indocement Tunggal External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Indocement Tunggal are -
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.
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 Indocement Tunggal.
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 Indocement Tunggal in the Construction - Raw Materials sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Indocement Tunggal in Construction - Raw Materials industry. The Construction - Raw Materials 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.
Stagnating economy with rate increase
– Indocement Tunggal 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 Construction - Raw Materials industry.
Regulatory challenges
– Indocement Tunggal 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 Construction - Raw Materials industry regulations.
Technology acceleration in Forth Industrial Revolution
– Indocement Tunggal has witnessed rapid integration of technology during Covid-19 in the Construction - Raw Materials industry. As one of the leading players in the industry, Indocement Tunggal needs to keep up with the evolution of technology in the Construction - Raw Materials 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.
Environmental challenges
– Indocement Tunggal 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. Indocement Tunggal can take advantage of this fund but it will also bring new competitors in the Construction - Raw Materials industry.
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.
Consumer confidence and its impact on Indocement Tunggal 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 Construction - Raw Materials industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Indocement Tunggal 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 Indocement Tunggal 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 Indocement Tunggal business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Indocement Tunggal may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction - Raw Materials sector.
Weighted SWOT Analysis of Indocement Tunggal Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Indocement Tunggal 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 Indocement Tunggal 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 Indocement Tunggal 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 Indocement Tunggal 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 Indocement Tunggal needs to make to build a sustainable competitive advantage.