Parmalat (PLT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Parmalat (Italy)

Based on various researches at Oak Spring University , Parmalat is operating in a macro-environment that has been destablized by – geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, etc

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Introduction to SWOT Analysis of Parmalat

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

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

The strengths of Parmalat are -

Cross disciplinary teams

– Horizontal connected teams at the Parmalat 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.

Digital Transformation in Food Processing industry

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

Effective Research and Development (R&D)

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

– Parmalat 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 Parmalat have helped the firm to develop new products and bring them quickly to the marketplace.

High brand equity

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

Training and development

– Parmalat has one of the best training and development program in Consumer/Non-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.

Operational resilience

– The operational resilience strategy of Parmalat 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 Parmalat 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.

Sustainable margins compare to other players in Food Processing industry

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

Diverse revenue streams

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

Successful track record of launching new products

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

Strong track record of project management in the Food Processing industry

– Parmalat is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

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

The weaknesses of Parmalat are -

Increasing silos among functional specialists

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

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

Aligning sales with marketing

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

Lack of clear differentiation of Parmalat products

– To increase the profitability and margins on the products, Parmalat needs to provide more differentiated products than what it is currently offering in the marketplace.

Slow decision making process

– As mentioned earlier in the report, Parmalat 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. Parmalat 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, Parmalat is slow explore the new channels of communication. These new channels of communication can help Parmalat to provide better information regarding Food Processing products and services. It can also build an online community to further reach out to potential customers.

High cash cycle compare to competitors

Parmalat 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.

Ability to respond to the competition

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

Slow to strategic competitive environment developments

– As Parmalat is one of the leading players in the Food Processing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Food Processing industry in last five years.

Skills based hiring in Food Processing industry

– The stress on hiring functional specialists at Parmalat 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.

Products dominated business model

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

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

The opportunities of Parmalat 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 Parmalat in the Food Processing industry. Now Parmalat can target international markets with far fewer capital restrictions requirements than the existing system.

Building a culture of innovation

– managers at Parmalat 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.

Redefining models of collaboration and team work

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

Creating value in data economy

– The success of analytics program of Parmalat has opened avenues for new revenue streams for the organization in Food Processing industry. This can help Parmalat to build a more holistic ecosystem for Parmalat products in the Food Processing industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Learning at scale

– Online learning technologies has now opened space for Parmalat 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

– Parmalat 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.

Harnessing reconfiguration of the global supply chains

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

Loyalty marketing

– Parmalat 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.

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 Parmalat 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.

Increase in government spending

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

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Parmalat 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.

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

The threats of Parmalat 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 Parmalat business can come under increasing regulations regarding data privacy, data security, etc.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Parmalat in Food Processing industry. The Food Processing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

Consumer confidence and its impact on Parmalat 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.

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. Parmalat 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

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

– 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 Parmalat.

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 international competition and downward pressure on margins

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

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 Parmalat.

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

Shortening product life cycle

– it is one of the major threat that Parmalat is facing in Food Processing 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. Parmalat 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.

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

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Weighted SWOT Analysis of Parmalat Template, Example

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

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