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 – increasing commodity prices, wage bills are increasing, cloud computing is disrupting traditional business models, technology disruption, geopolitical disruptions, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation,
increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, 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 -
Training and development
– Pirelli & C has one of the best training and development program in Consumer 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.
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.
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.
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.
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.
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.
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.
High switching costs
– The high switching costs that Pirelli & C 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 Tires industry
– Pirelli & C is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Pirelli & C in Tires industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Weaknesses of Pirelli & C | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Pirelli & C are -
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.
High bargaining power of channel partners in Tires industry
– because of the regulatory requirements in Italy, Pirelli & C 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 Tires industry.
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.
Products dominated business model
– Even though Pirelli & C has some of the most successful models in the Tires industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Pirelli & C should strive to include more intangible value offerings along with its core products and services.
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 Pirelli & C supply chain. Even after few cautionary changes, Pirelli & C is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Pirelli & C vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, Pirelli & C has high operating costs in the Tires industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Pirelli & C lucrative customers.
Compensation and incentives
– The revenue per employee of Pirelli & C is just above the Tires 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.
High dependence on Pirelli & C ‘s star products
– The top 2 products and services of Pirelli & C still accounts for major business revenue. This dependence on star products in Tires industry has resulted into insufficient focus on developing new products, even though Pirelli & C has relatively successful track record of launching new products.
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.
Skills based hiring in Tires industry
– The stress on hiring functional specialists at Pirelli & C 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.
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.
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.
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.
Using analytics as competitive advantage
– Pirelli & C has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Tires sector. This continuous investment in analytics has enabled Pirelli & C to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pirelli & C to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Developing new processes and practices
– Pirelli & C can develop new processes and procedures in Tires 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.
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.
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.
Use of Bitcoin and other crypto currencies for transactions in Tires industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Pirelli & C in the Tires industry. Now Pirelli & C can target international markets with far fewer capital restrictions requirements than the existing system.
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. Pirelli & C can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Pirelli & C has opened avenues for new revenue streams for the organization in Tires industry. This can help Pirelli & C to build a more holistic ecosystem for Pirelli & C products in the Tires industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Tires industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Pirelli & C 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. Pirelli & C 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.
Threats Pirelli & C External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Pirelli & C are -
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.
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.
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.
High dependence on third party suppliers
– Pirelli & C 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.
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.
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 Pirelli & C in the Tires sector and impact the bottomline of the organization.
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. Pirelli & C needs to understand the core reasons impacting the Tires industry. This will help it in building a better workplace.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Pirelli & C is facing in Tires sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Pirelli & C may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tires sector.
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.