SWOT Analysis / TOWS Matrix for Sampoerna Agro (Indonesia)
Based on various researches at Oak Spring University , Sampoerna Agro is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices,
challanges to central banks by blockchain based private currencies, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sampoerna Agro can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sampoerna Agro, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sampoerna Agro 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 Sampoerna Agro can be done for the following purposes –
1. Strategic planning of Sampoerna Agro
2. Improving business portfolio management of Sampoerna Agro
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 Sampoerna Agro
Strengths of Sampoerna Agro | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sampoerna Agro are -
Training and development
– Sampoerna Agro 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.
Successful track record of launching new products
– Sampoerna Agro has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sampoerna Agro 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.
Organizational Resilience of Sampoerna Agro
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sampoerna Agro does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Sampoerna Agro is one of the most innovative firm in Food Processing sector.
Low bargaining power of suppliers
– Suppliers of Sampoerna Agro in the Consumer/Non-Cyclical sector have low bargaining power. Sampoerna Agro has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sampoerna Agro to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Sampoerna Agro 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.
Effective Research and Development (R&D)
– Sampoerna Agro has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sampoerna Agro 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.
Superior customer experience
– The customer experience strategy of Sampoerna Agro in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Sampoerna Agro 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
– Sampoerna Agro has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sampoerna Agro to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Sampoerna Agro 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.
Learning organization
- Sampoerna Agro is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Sampoerna Agro is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sampoerna Agro emphasize – knowledge, initiative, and innovation.
Weaknesses of Sampoerna Agro | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sampoerna Agro are -
Employees’ less understanding of Sampoerna Agro strategy
– From the outside it seems that the employees of Sampoerna Agro 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.
High cash cycle compare to competitors
Sampoerna Agro 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.
Interest costs
– Compare to the competition, Sampoerna Agro 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 bargaining power of channel partners in Food Processing industry
– because of the regulatory requirements in Indonesia, Sampoerna Agro 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.
High dependence on Sampoerna Agro ‘s star products
– The top 2 products and services of Sampoerna Agro still accounts for major business revenue. This dependence on star products in Food Processing industry has resulted into insufficient focus on developing new products, even though Sampoerna Agro has relatively successful track record of launching new products.
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 Sampoerna Agro supply chain. Even after few cautionary changes, Sampoerna Agro is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sampoerna Agro vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Sampoerna Agro 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 Sampoerna Agro can leverage the sales team experience to cultivate customer relationships as Sampoerna Agro is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Indonesia, Sampoerna Agro needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Sampoerna Agro 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.
Increasing silos among functional specialists
– The organizational structure of Sampoerna Agro is dominated by functional specialists. It is not different from other players in the Food Processing industry, but Sampoerna Agro needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sampoerna Agro to focus more on services in the Food Processing industry rather than just following the product oriented approach.
Products dominated business model
– Even though Sampoerna Agro 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. Sampoerna Agro should strive to include more intangible value offerings along with its core products and services.
Sampoerna Agro Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sampoerna Agro are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sampoerna Agro 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 Sampoerna Agro to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sampoerna Agro can use these opportunities to build new business models that can help the communities that Sampoerna Agro operates in. Secondly it can use opportunities from government spending in Food Processing sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sampoerna Agro can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Sampoerna Agro to increase its market reach. Sampoerna Agro 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sampoerna Agro is facing challenges because of the dominance of functional experts in the organization. Sampoerna Agro 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.
Learning at scale
– Online learning technologies has now opened space for Sampoerna Agro 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.
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 Sampoerna Agro 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.
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. Sampoerna Agro 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. Sampoerna Agro 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.
Building a culture of innovation
– managers at Sampoerna Agro 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.
Manufacturing automation
– Sampoerna Agro 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.
Creating value in data economy
– The success of analytics program of Sampoerna Agro has opened avenues for new revenue streams for the organization in Food Processing industry. This can help Sampoerna Agro to build a more holistic ecosystem for Sampoerna Agro products in the Food Processing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Sampoerna Agro 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.
Developing new processes and practices
– Sampoerna Agro 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.
Threats Sampoerna Agro External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sampoerna Agro are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sampoerna Agro 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 Sampoerna Agro 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. Sampoerna Agro 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sampoerna Agro 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.
Stagnating economy with rate increase
– Sampoerna Agro 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.
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 Sampoerna Agro business can come under increasing regulations regarding data privacy, data security, etc.
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. Sampoerna Agro needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Food Processing industry are lowering. It can presents Sampoerna Agro with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Food Processing sector.
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.
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 Sampoerna Agro in the Food Processing sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Sampoerna Agro has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Sampoerna Agro 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.
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 Sampoerna Agro.
Shortening product life cycle
– it is one of the major threat that Sampoerna Agro is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Sampoerna Agro Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sampoerna Agro 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 Sampoerna Agro 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 Sampoerna Agro 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 Sampoerna Agro 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 Sampoerna Agro needs to make to build a sustainable competitive advantage.
