Sandvik AB (0HC0) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Capital Goods
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sandvik AB (United Kingdom)
Based on various researches at Oak Spring University , Sandvik AB 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, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, geopolitical disruptions, increasing transportation and logistics costs, wage bills are increasing,
digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sandvik AB can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sandvik AB, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sandvik AB 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 Sandvik AB can be done for the following purposes –
1. Strategic planning of Sandvik AB
2. Improving business portfolio management of Sandvik AB
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Misc. Capital Goods sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sandvik AB
Strengths of Sandvik AB | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sandvik AB are -
Operational resilience
– The operational resilience strategy of Sandvik AB comprises – understanding the underlying the factors in the Misc. Capital Goods 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.
Cross disciplinary teams
– Horizontal connected teams at the Sandvik AB 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 Misc. Capital Goods industry
– Sandvik AB has clearly differentiated products in the market place. This has enabled Sandvik AB to fetch slight price premium compare to the competitors in the Misc. Capital Goods industry. The sustainable margins have also helped Sandvik AB to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Sandvik AB in the Capital Goods sector have low bargaining power. Sandvik AB has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sandvik AB to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Misc. Capital Goods
– Sandvik AB is one of the leading players in the Misc. Capital Goods industry in United Kingdom. Over the years it has not only transformed the business landscape in the Misc. Capital Goods industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Sandvik AB in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Sandvik AB has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Misc. Capital Goods industry. Secondly the value chain collaborators of Sandvik AB have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Sandvik AB 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 Sandvik AB is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sandvik AB emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Sandvik AB is one of the most innovative firm in Misc. Capital Goods sector.
Ability to recruit top talent
– Sandvik AB is one of the leading players in the Misc. Capital Goods industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Sandvik AB has one of the best training and development program in Capital Goods 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.
High switching costs
– The high switching costs that Sandvik AB 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.
Organizational Resilience of Sandvik AB
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sandvik AB does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Sandvik AB | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sandvik AB are -
Ability to respond to the competition
– As the decision making is very deliberative at Sandvik AB, in the dynamic environment of Misc. Capital Goods industry it has struggled to respond to the nimble upstart competition. Sandvik AB has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Sandvik AB products
– To increase the profitability and margins on the products, Sandvik AB 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, Sandvik AB is slow explore the new channels of communication. These new channels of communication can help Sandvik AB to provide better information regarding Misc. Capital Goods products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Sandvik AB is dominated by functional specialists. It is not different from other players in the Misc. Capital Goods industry, but Sandvik AB needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sandvik AB to focus more on services in the Misc. Capital Goods industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Sandvik AB has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Capital Goods industry over the last five years. Sandvik AB 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.
Low market penetration in new markets
– Outside its home market of United Kingdom, Sandvik AB needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Sandvik AB supply chain. Even after few cautionary changes, Sandvik AB is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sandvik AB vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Sandvik AB 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.
Capital Spending Reduction
– Even during the low interest decade, Sandvik AB 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 Misc. Capital Goods industry using digital technology.
High dependence on Sandvik AB ‘s star products
– The top 2 products and services of Sandvik AB still accounts for major business revenue. This dependence on star products in Misc. Capital Goods industry has resulted into insufficient focus on developing new products, even though Sandvik AB has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Sandvik AB is one of the leading players in the Misc. Capital Goods industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Misc. Capital Goods industry in last five years.
Sandvik AB Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sandvik AB are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sandvik AB is facing challenges because of the dominance of functional experts in the organization. Sandvik AB can utilize new technology in the field of Misc. Capital Goods industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sandvik AB 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.
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 Sandvik AB 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sandvik AB in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Misc. Capital Goods 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 Sandvik AB 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 Sandvik AB to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Sandvik AB 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 Misc. Capital Goods industry.
Learning at scale
– Online learning technologies has now opened space for Sandvik AB 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.
Buying journey improvements
– Sandvik AB can improve the customer journey of consumers in the Misc. Capital Goods 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sandvik AB can use these opportunities to build new business models that can help the communities that Sandvik AB operates in. Secondly it can use opportunities from government spending in Misc. Capital Goods sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sandvik AB 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 Sandvik AB to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sandvik AB can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Misc. Capital Goods industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sandvik AB 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. Sandvik AB 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.
Leveraging digital technologies
– Sandvik AB 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.
Threats Sandvik AB External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sandvik AB are -
Shortening product life cycle
– it is one of the major threat that Sandvik AB is facing in Misc. Capital Goods sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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. Sandvik AB 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.
Environmental challenges
– Sandvik AB 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. Sandvik AB can take advantage of this fund but it will also bring new competitors in the Misc. Capital Goods industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sandvik AB 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 Sandvik AB prominent markets.
Regulatory challenges
– Sandvik AB 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 Misc. Capital Goods industry regulations.
High dependence on third party suppliers
– Sandvik AB 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.
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 Sandvik AB 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, Sandvik AB may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Capital Goods sector.
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. Sandvik AB needs to understand the core reasons impacting the Misc. Capital Goods industry. This will help it in building a better workplace.
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 Sandvik AB in the Misc. Capital Goods sector and impact the bottomline of the organization.
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 Sandvik AB.
Increasing wage structure of Sandvik AB
– 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 Sandvik AB.
Weighted SWOT Analysis of Sandvik AB Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sandvik AB 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 Sandvik AB 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 Sandvik AB 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 Sandvik AB 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 Sandvik AB needs to make to build a sustainable competitive advantage.
