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 – increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs,
increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
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.
Ability to lead change in Food Processing
– Sampoerna Agro 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 Sampoerna Agro in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
High switching costs
– The high switching costs that Sampoerna Agro 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.
Strong track record of project management in the Food Processing industry
– Sampoerna Agro is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Sampoerna Agro 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 Sampoerna Agro have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Food Processing industry
- digital transformation varies from industry to industry. For Sampoerna Agro digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sampoerna Agro 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.
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.
Operational resilience
– The operational resilience strategy of Sampoerna Agro comprises – understanding the underlying the factors in the Food Processing 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.
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.
Diverse revenue streams
– Sampoerna Agro is present in almost all the verticals within the Food Processing industry. This has provided Sampoerna Agro 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.
Weaknesses of Sampoerna Agro | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sampoerna Agro are -
Need for greater diversity
– Sampoerna Agro 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.
Lack of clear differentiation of Sampoerna Agro products
– To increase the profitability and margins on the products, Sampoerna Agro needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Sampoerna Agro 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. Sampoerna Agro 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.
Skills based hiring in Food Processing industry
– The stress on hiring functional specialists at Sampoerna Agro 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.
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.
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.
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.
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.
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.
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.
Sampoerna Agro Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sampoerna Agro are -
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Food Processing industry, but it has also influenced the consumer preferences. Sampoerna Agro can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sampoerna Agro 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.
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.
Buying journey improvements
– Sampoerna Agro 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sampoerna Agro 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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sampoerna Agro 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 Sampoerna Agro to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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. Sampoerna Agro can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Sampoerna Agro External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sampoerna Agro are -
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. Sampoerna Agro can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Sampoerna Agro 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.
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.
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.
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.
High dependence on third party suppliers
– Sampoerna Agro 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sampoerna Agro 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.
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.
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.
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.
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.
Increasing wage structure of Sampoerna Agro
– 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 Sampoerna Agro.
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.