Danone (DNN) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Danone (Italy)

Based on various researches at Oak Spring University , Danone is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing energy prices, increasing commodity prices, etc

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Introduction to SWOT Analysis of Danone

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Danone can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Danone, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Danone 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Danone can be done for the following purposes –
1. Strategic planning of Danone
2. Improving business portfolio management of Danone
3. Assessing feasibility of the new initiative in Italy
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Danone

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Strengths of Danone | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Danone are -

Ability to lead change in Food Processing

– Danone is one of the leading players in the Food Processing industry in Italy. Over the years it has not only transformed the business landscape in the Food Processing industry in Italy but also across the existing markets. The ability to lead change has enabled Danone in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Analytics focus

– Danone 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 Italy 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.

Low bargaining power of suppliers

– Suppliers of Danone in the Consumer/Non-Cyclical sector have low bargaining power. Danone has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Danone to manage not only supply disruptions but also source products at highly competitive prices.

Superior customer experience

– The customer experience strategy of Danone in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Innovation driven organization

– Danone is one of the most innovative firm in Food Processing sector.

Successful track record of launching new products

– Danone has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Danone 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.

Cross disciplinary teams

– Horizontal connected teams at the Danone 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.

Sustainable margins compare to other players in Food Processing industry

– Danone has clearly differentiated products in the market place. This has enabled Danone to fetch slight price premium compare to the competitors in the Food Processing industry. The sustainable margins have also helped Danone to invest into research and development (R&D) and innovation.

Ability to recruit top talent

– Danone is one of the leading players in the Food Processing industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.

Effective Research and Development (R&D)

– Danone has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Danone 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.

Digital Transformation in Food Processing industry

- digital transformation varies from industry to industry. For Danone digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Danone 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.

High brand equity

– Danone has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Danone to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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Weaknesses of Danone | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Danone are -

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 Danone supply chain. Even after few cautionary changes, Danone is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Danone vulnerable to further global disruptions in South East Asia.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Danone is slow explore the new channels of communication. These new channels of communication can help Danone to provide better information regarding Food Processing products and services. It can also build an online community to further reach out to potential customers.

Products dominated business model

– Even though Danone 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. Danone should strive to include more intangible value offerings along with its core products and services.

Increasing silos among functional specialists

– The organizational structure of Danone is dominated by functional specialists. It is not different from other players in the Food Processing industry, but Danone needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Danone to focus more on services in the Food Processing industry rather than just following the product oriented approach.

Compensation and incentives

– The revenue per employee of Danone 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

– Danone 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.

Skills based hiring in Food Processing industry

– The stress on hiring functional specialists at Danone 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.

Workers concerns about automation

– As automation is fast increasing in the Food Processing industry, Danone 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.

High dependence on Danone ‘s star products

– The top 2 products and services of Danone 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 Danone has relatively successful track record of launching new products.

Ability to respond to the competition

– As the decision making is very deliberative at Danone, in the dynamic environment of Food Processing industry it has struggled to respond to the nimble upstart competition. Danone has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High cash cycle compare to competitors

Danone 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.

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Danone Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Danone are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Danone 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 Danone to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Developing new processes and practices

– Danone 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.

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 Danone 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Danone 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 Danone to hire the very best people irrespective of their geographical location.

Loyalty marketing

– Danone 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Danone 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.

Buying journey improvements

– Danone 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.

Learning at scale

– Online learning technologies has now opened space for Danone 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Danone can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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. Danone can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Danone can use these opportunities to build new business models that can help the communities that Danone operates in. Secondly it can use opportunities from government spending in Food Processing sector.

Leveraging digital technologies

– Danone 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.

Better consumer reach

– The expansion of the 5G network will help Danone to increase its market reach. Danone 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.

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Threats Danone External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Danone are -

High dependence on third party suppliers

– Danone 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.

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. Danone needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Danone 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 Danone prominent markets.

Technology acceleration in Forth Industrial Revolution

– Danone has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Danone 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.

Shortening product life cycle

– it is one of the major threat that Danone is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Danone.

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. Danone 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 Danone 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, Danone 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.

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 Danone in the Food Processing sector and impact the bottomline of the organization.

Regulatory challenges

– Danone 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.

Stagnating economy with rate increase

– Danone 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.

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Weighted SWOT Analysis of Danone Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Danone 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 Danone 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 Danone 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 Danone 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 Danone needs to make to build a sustainable competitive advantage.

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