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 – increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, technology disruption, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, 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 -

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.

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.

Operational resilience

– The operational resilience strategy of Danone 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.

High switching costs

– The high switching costs that Danone 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.

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.

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.

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.

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.

Learning organization

- Danone 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 Danone is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Danone emphasize – knowledge, initiative, and innovation.

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.

Diverse revenue streams

– Danone is present in almost all the verticals within the Food Processing industry. This has provided Danone 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.

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.

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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 -

Aligning sales with marketing

– From the outside it seems that Danone 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 Danone can leverage the sales team experience to cultivate customer relationships as Danone is planning to shift buying processes online.

Interest costs

– Compare to the competition, Danone 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.

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.

Slow decision making process

– As mentioned earlier in the report, Danone 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. Danone 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.

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.

Low market penetration in new markets

– Outside its home market of Italy, Danone needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Employees’ less understanding of Danone strategy

– From the outside it seems that the employees of Danone 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 operating costs

– Compare to the competitors, Danone 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 Danone lucrative customers.

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.

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.

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.

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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 -

Use of Bitcoin and other crypto currencies for transactions in Food Processing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Danone in the Food Processing industry. Now Danone can target international markets with far fewer capital restrictions requirements than the existing system.

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.

Building a culture of innovation

– managers at Danone 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.

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.

Using analytics as competitive advantage

– Danone has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Food Processing sector. This continuous investment in analytics has enabled Danone to build a competitive advantage using analytics. The analytics driven competitive advantage can help Danone to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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.

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.

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. Danone can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Low interest rates

– Even though inflation is raising its head in most developed economies, Danone 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Danone is facing challenges because of the dominance of functional experts in the organization. Danone 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.

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.

Manufacturing automation

– Danone 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.

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.

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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 -

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.

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.

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.

Increasing wage structure of Danone

– 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 Danone.

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. Danone can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

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.

Environmental challenges

– Danone 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. Danone can take advantage of this fund but it will also bring new competitors in the Food Processing industry.

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.

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.

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 Danone business can come under increasing regulations regarding data privacy, data security, etc.

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.

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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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