SWOT Analysis / TOWS Matrix for Astra Agro Lestari (Indonesia)
Based on various researches at Oak Spring University , Astra Agro Lestari is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, geopolitical disruptions, there is backlash against globalization, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies,
digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Astra Agro Lestari
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Astra Agro Lestari can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Astra Agro Lestari, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Astra Agro Lestari 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 Astra Agro Lestari can be done for the following purposes –
1. Strategic planning of Astra Agro Lestari
2. Improving business portfolio management of Astra Agro Lestari
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 Astra Agro Lestari
Strengths of Astra Agro Lestari | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Astra Agro Lestari are -
Low bargaining power of suppliers
– Suppliers of Astra Agro Lestari in the Consumer/Non-Cyclical sector have low bargaining power. Astra Agro Lestari has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Astra Agro Lestari to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Astra Agro Lestari has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Astra Agro Lestari 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.
Innovation driven organization
– Astra Agro Lestari is one of the most innovative firm in Food Processing sector.
Ability to lead change in Food Processing
– Astra Agro Lestari 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 Astra Agro Lestari in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Astra Agro Lestari 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.
High brand equity
– Astra Agro Lestari has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Astra Agro Lestari to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Astra Agro Lestari has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Astra Agro Lestari 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.
Organizational Resilience of Astra Agro Lestari
– The covid-19 pandemic has put organizational resilience at the centre of everthing Astra Agro Lestari does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Astra Agro Lestari 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.
Diverse revenue streams
– Astra Agro Lestari is present in almost all the verticals within the Food Processing industry. This has provided Astra Agro Lestari 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.
Digital Transformation in Food Processing industry
- digital transformation varies from industry to industry. For Astra Agro Lestari digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Astra Agro Lestari 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.
Sustainable margins compare to other players in Food Processing industry
– Astra Agro Lestari has clearly differentiated products in the market place. This has enabled Astra Agro Lestari to fetch slight price premium compare to the competitors in the Food Processing industry. The sustainable margins have also helped Astra Agro Lestari to invest into research and development (R&D) and innovation.
Weaknesses of Astra Agro Lestari | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Astra Agro Lestari are -
High cash cycle compare to competitors
Astra Agro Lestari has a high cash cycle compare to other players in the Food Processing 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 decision making process
– As mentioned earlier in the report, Astra Agro Lestari 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. Astra Agro Lestari 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.
Slow to strategic competitive environment developments
– As Astra Agro Lestari is one of the leading players in the Food Processing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Food Processing industry in last five years.
Low market penetration in new markets
– Outside its home market of Indonesia, Astra Agro Lestari needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that Astra Agro Lestari needs to have more collaboration between its sales team and marketing team. Sales professionals in the Food Processing industry have deep experience in developing customer relationships. Marketing department at Astra Agro Lestari can leverage the sales team experience to cultivate customer relationships as Astra Agro Lestari is planning to shift buying processes online.
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 Astra Agro Lestari supply chain. Even after few cautionary changes, Astra Agro Lestari is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Astra Agro Lestari vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee of Astra Agro Lestari 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.
Need for greater diversity
– Astra Agro Lestari 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.
Workers concerns about automation
– As automation is fast increasing in the Food Processing industry, Astra Agro Lestari 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, Astra Agro Lestari 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 Food Processing industry using digital technology.
Products dominated business model
– Even though Astra Agro Lestari 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. Astra Agro Lestari should strive to include more intangible value offerings along with its core products and services.
Astra Agro Lestari Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Astra Agro Lestari are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Astra Agro Lestari 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 Astra Agro Lestari to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Astra Agro Lestari has opened avenues for new revenue streams for the organization in Food Processing industry. This can help Astra Agro Lestari to build a more holistic ecosystem for Astra Agro Lestari products in the Food Processing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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. Astra Agro Lestari can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Astra Agro Lestari in the Food Processing industry. Now Astra Agro Lestari can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Astra Agro Lestari 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Astra Agro Lestari 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 Astra Agro Lestari 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, Astra Agro Lestari 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.
Using analytics as competitive advantage
– Astra Agro Lestari 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 Astra Agro Lestari to build a competitive advantage using analytics. The analytics driven competitive advantage can help Astra Agro Lestari to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Astra Agro Lestari 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 Food Processing industry.
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 Astra Agro Lestari 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
– Astra Agro Lestari 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.
Loyalty marketing
– Astra Agro Lestari 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.
Better consumer reach
– The expansion of the 5G network will help Astra Agro Lestari to increase its market reach. Astra Agro Lestari 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 Astra Agro Lestari External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Astra Agro Lestari are -
Shortening product life cycle
– it is one of the major threat that Astra Agro Lestari is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Astra Agro Lestari 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.
Consumer confidence and its impact on Astra Agro Lestari 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 Food Processing industry and other sectors.
High dependence on third party suppliers
– Astra Agro Lestari 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.
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 Astra Agro Lestari in the Food Processing sector and impact the bottomline of the organization.
Increasing wage structure of Astra Agro Lestari
– 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 Astra Agro Lestari.
Easy access to finance
– Easy access to finance in Food Processing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Astra Agro Lestari can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Food Processing industry are lowering. It can presents Astra Agro Lestari with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Food Processing sector.
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. Astra Agro Lestari needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.
Regulatory challenges
– Astra Agro Lestari 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.
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 Astra Agro Lestari.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Astra Agro Lestari 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 Astra Agro Lestari 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 Astra Agro Lestari business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Astra Agro Lestari Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Astra Agro Lestari 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 Astra Agro Lestari 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 Astra Agro Lestari 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 Astra Agro Lestari 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 Astra Agro Lestari needs to make to build a sustainable competitive advantage.