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 – increasing government debt because of Covid-19 spendings, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%,
increasing transportation and logistics costs, there is backlash against globalization, 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 -
Strong track record of project management in the Food Processing industry
– Astra Agro Lestari is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Ability to recruit top talent
– Astra Agro Lestari 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.
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.
Training and development
– Astra Agro Lestari 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.
Innovation driven organization
– Astra Agro Lestari is one of the most innovative firm in Food Processing sector.
Superior customer experience
– The customer experience strategy of Astra Agro Lestari in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Highly skilled collaborators
– Astra Agro Lestari 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 Astra Agro Lestari have helped the firm to develop new products and bring them quickly to the marketplace.
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.
High bargaining power of channel partners in Food Processing industry
– because of the regulatory requirements in Indonesia, Astra Agro Lestari 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Astra Agro Lestari, in the dynamic environment of Food Processing industry it has struggled to respond to the nimble upstart competition. Astra Agro Lestari has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Interest costs
– Compare to the competition, Astra Agro Lestari 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.
Employees’ less understanding of Astra Agro Lestari strategy
– From the outside it seems that the employees of Astra Agro Lestari 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.
Lack of clear differentiation of Astra Agro Lestari products
– To increase the profitability and margins on the products, Astra Agro Lestari needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Astra Agro Lestari 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 Astra Agro Lestari lucrative customers.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Astra Agro Lestari is slow explore the new channels of communication. These new channels of communication can help Astra Agro Lestari to provide better information regarding Food Processing products and services. It can also build an online community to further reach out to potential customers.
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 -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Astra Agro Lestari can use these opportunities to build new business models that can help the communities that Astra Agro Lestari operates in. Secondly it can use opportunities from government spending in Food Processing sector.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Astra Agro Lestari is facing challenges because of the dominance of functional experts in the organization. Astra Agro Lestari 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.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Food Processing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Astra Agro Lestari 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. Astra Agro Lestari 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Astra Agro Lestari can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Astra Agro Lestari 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.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Astra Agro Lestari 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.
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.
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 -
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.
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.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Astra Agro Lestari 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.
Environmental challenges
– Astra Agro Lestari 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. Astra Agro Lestari can take advantage of this fund but it will also bring new competitors in the Food Processing industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Astra Agro Lestari in Food Processing industry. The Food Processing 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.
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.
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.
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.
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.
