Pirelli & C (PIRC) SWOT Analysis / TOWS Matrix / MBA Resources
Tires
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Pirelli & C (Italy)
Based on various researches at Oak Spring University , Pirelli & C is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic ,
increasing commodity prices, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Pirelli & C can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pirelli & C, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pirelli & C 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 Pirelli & C can be done for the following purposes –
1. Strategic planning of Pirelli & C
2. Improving business portfolio management of Pirelli & C
3. Assessing feasibility of the new initiative in Italy
4. Making a Tires sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Pirelli & C
Strengths of Pirelli & C | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pirelli & C are -
High brand equity
– Pirelli & C has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pirelli & C to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Pirelli & C has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Tires industry. Secondly the value chain collaborators of Pirelli & C have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Pirelli & C 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 Tires 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.
Successful track record of launching new products
– Pirelli & C has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pirelli & C 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.
Digital Transformation in Tires industry
- digital transformation varies from industry to industry. For Pirelli & C digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Pirelli & C 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.
Cross disciplinary teams
– Horizontal connected teams at the Pirelli & C 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.
Diverse revenue streams
– Pirelli & C is present in almost all the verticals within the Tires industry. This has provided Pirelli & C 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.
Low bargaining power of suppliers
– Suppliers of Pirelli & C in the Consumer Cyclical sector have low bargaining power. Pirelli & C has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Pirelli & C to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Pirelli & C 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 Pirelli & C is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Pirelli & C emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Pirelli & C comprises – understanding the underlying the factors in the Tires 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.
Ability to lead change in Tires
– Pirelli & C is one of the leading players in the Tires industry in Italy. Over the years it has not only transformed the business landscape in the Tires industry in Italy but also across the existing markets. The ability to lead change has enabled Pirelli & C in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Pirelli & C is one of the leading players in the Tires 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.
Weaknesses of Pirelli & C | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Pirelli & C are -
Aligning sales with marketing
– From the outside it seems that Pirelli & C needs to have more collaboration between its sales team and marketing team. Sales professionals in the Tires industry have deep experience in developing customer relationships. Marketing department at Pirelli & C can leverage the sales team experience to cultivate customer relationships as Pirelli & C is planning to shift buying processes online.
High cash cycle compare to competitors
Pirelli & C has a high cash cycle compare to other players in the Tires industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of Pirelli & C strategy
– From the outside it seems that the employees of Pirelli & C 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.
Slow to strategic competitive environment developments
– As Pirelli & C is one of the leading players in the Tires industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Tires industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative at Pirelli & C, in the dynamic environment of Tires industry it has struggled to respond to the nimble upstart competition. Pirelli & C has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Pirelli & C 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.
Lack of clear differentiation of Pirelli & C products
– To increase the profitability and margins on the products, Pirelli & C needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Pirelli & C is slow explore the new channels of communication. These new channels of communication can help Pirelli & C to provide better information regarding Tires 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, Pirelli & C needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Pirelli & C 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.
Capital Spending Reduction
– Even during the low interest decade, Pirelli & C has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Tires industry using digital technology.
Pirelli & C Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Pirelli & C are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Pirelli & C can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Pirelli & C can improve the customer journey of consumers in the Tires 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.
Building a culture of innovation
– managers at Pirelli & C 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 Tires industry.
Loyalty marketing
– Pirelli & C 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.
Manufacturing automation
– Pirelli & C can use the latest technology developments to improve its manufacturing and designing process in Tires 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.
Learning at scale
– Online learning technologies has now opened space for Pirelli & C 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.
Leveraging digital technologies
– Pirelli & C 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.
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 Pirelli & C 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Pirelli & C 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Pirelli & C 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 Pirelli & C to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Pirelli & C to increase its market reach. Pirelli & C 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 Pirelli & C in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Tires industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Pirelli & C 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 Pirelli & C to hire the very best people irrespective of their geographical location.
Threats Pirelli & C External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Pirelli & C are -
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. Pirelli & C 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 Pirelli & C 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 Tires industry and other sectors.
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 Pirelli & C business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Tires industry are lowering. It can presents Pirelli & C with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Tires sector.
Increasing wage structure of Pirelli & C
– 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 Pirelli & C.
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 Pirelli & C.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Pirelli & C 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 Pirelli & C prominent markets.
Stagnating economy with rate increase
– Pirelli & C 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 Tires industry.
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.
Regulatory challenges
– Pirelli & C 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 Tires industry regulations.
Easy access to finance
– Easy access to finance in Tires industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Pirelli & C can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Pirelli & C has witnessed rapid integration of technology during Covid-19 in the Tires industry. As one of the leading players in the industry, Pirelli & C needs to keep up with the evolution of technology in the Tires 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.
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.
Weighted SWOT Analysis of Pirelli & C Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Pirelli & C 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 Pirelli & C 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 Pirelli & C 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 Pirelli & C 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 Pirelli & C needs to make to build a sustainable competitive advantage.