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 – digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, technology disruption, increasing household debt because of falling income levels, there is backlash against globalization, increasing government debt because of Covid-19 spendings, geopolitical disruptions,
supply chains are disrupted by pandemic , increasing energy prices, 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 -
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.
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.
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.
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.
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.
Innovation driven organization
– Sampoerna Agro is one of the most innovative firm in Food Processing sector.
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.
Sustainable margins compare to other players in Food Processing industry
– Sampoerna Agro has clearly differentiated products in the market place. This has enabled Sampoerna Agro to fetch slight price premium compare to the competitors in the Food Processing industry. The sustainable margins have also helped Sampoerna Agro to invest into research and development (R&D) and innovation.
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.
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.
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.
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.
Weaknesses of Sampoerna Agro | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sampoerna Agro are -
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.
No frontier risks strategy
– From the 10K / annual statement of Sampoerna Agro, it seems that company is thinking out the frontier risks that can impact Food Processing industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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 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.
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sampoerna Agro is slow explore the new channels of communication. These new channels of communication can help Sampoerna Agro to provide better information regarding Food Processing products and services. It can also build an online community to further reach out to potential customers.
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.
Workers concerns about automation
– As automation is fast increasing in the Food Processing industry, Sampoerna Agro 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Threats Sampoerna Agro External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sampoerna Agro are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.