Indofood (INDF) SWOT Analysis / TOWS Matrix / MBA Resources
Food Processing
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Indofood (Indonesia)
Based on various researches at Oak Spring University , Indofood is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, wage bills are increasing, increasing energy prices, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, increasing commodity prices,
banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Indofood can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Indofood, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Indofood 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 Indofood can be done for the following purposes –
1. Strategic planning of Indofood
2. Improving business portfolio management of Indofood
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Indofood
Strengths of Indofood | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Indofood are -
Cross disciplinary teams
– Horizontal connected teams at the Indofood 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.
Training and development
– Indofood 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.
High brand equity
– Indofood has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Indofood to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Indofood 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 Food Processing 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.
Diverse revenue streams
– Indofood is present in almost all the verticals within the Food Processing industry. This has provided Indofood 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.
Ability to lead change in Food Processing
– Indofood is one of the leading players in the Food Processing industry in Indonesia. Over the years it has not only transformed the business landscape in the Food Processing industry in Indonesia but also across the existing markets. The ability to lead change has enabled Indofood in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Indofood has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Indofood staying ahead in the Food Processing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Indofood has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Food Processing industry. Secondly the value chain collaborators of Indofood have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Indofood is one of the leading players in the Food Processing 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.
Strong track record of project management in the Food Processing industry
– Indofood is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Indofood 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.
Digital Transformation in Food Processing industry
- digital transformation varies from industry to industry. For Indofood digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Indofood 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.
Weaknesses of Indofood | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Indofood are -
Skills based hiring in Food Processing industry
– The stress on hiring functional specialists at Indofood 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 bargaining power of channel partners in Food Processing industry
– because of the regulatory requirements in Indonesia, Indofood 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 Food Processing industry.
Low market penetration in new markets
– Outside its home market of Indonesia, Indofood needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, Indofood has high operating costs in the Food Processing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Indofood lucrative customers.
Products dominated business model
– Even though Indofood has some of the most successful models in the Food Processing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Indofood should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Indofood products
– To increase the profitability and margins on the products, Indofood needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Indofood 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Indofood is slow explore the new channels of communication. These new channels of communication can help Indofood to provide better information regarding Food Processing products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee of Indofood is just above the Food Processing 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.
Interest costs
– Compare to the competition, Indofood 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.
Slow decision making process
– As mentioned earlier in the report, Indofood has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Food Processing industry over the last five years. Indofood 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.
Indofood Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Indofood are -
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 Indofood 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.
Using analytics as competitive advantage
– Indofood has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Food Processing sector. This continuous investment in analytics has enabled Indofood to build a competitive advantage using analytics. The analytics driven competitive advantage can help Indofood to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Indofood 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. Indofood can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Indofood has opened avenues for new revenue streams for the organization in Food Processing industry. This can help Indofood to build a more holistic ecosystem for Indofood products in the Food Processing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Indofood can develop new processes and procedures in Food Processing 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 Indofood 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 Food Processing industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Indofood in the Food Processing industry. Now Indofood can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Indofood can improve the customer journey of consumers in the Food Processing 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Indofood in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Food Processing industry, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Indofood is facing challenges because of the dominance of functional experts in the organization. Indofood can utilize new technology in the field of Food Processing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Indofood can use these opportunities to build new business models that can help the communities that Indofood operates in. Secondly it can use opportunities from government spending in Food Processing sector.
Manufacturing automation
– Indofood can use the latest technology developments to improve its manufacturing and designing process in Food Processing 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 Indofood External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Indofood 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.
Technology acceleration in Forth Industrial Revolution
– Indofood has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Indofood needs to keep up with the evolution of technology in the Food Processing 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. Indofood needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.
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
– Indofood 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.
Regulatory challenges
– Indofood 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 Food Processing industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Indofood may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Food Processing sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Indofood 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 Indofood prominent markets.
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. Indofood 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 Indofood is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Indofood 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 Food Processing industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Food Processing industry are lowering. It can presents Indofood with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Food Processing sector.
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 Indofood in the Food Processing sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Indofood Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Indofood 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 Indofood 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 Indofood 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 Indofood 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 Indofood needs to make to build a sustainable competitive advantage.
