Danone (0KFX) SWOT Analysis / TOWS Matrix / MBA Resources
Food Processing
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Danone (United Kingdom)
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, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, wage bills are increasing, increasing energy prices, central banks are concerned over increasing inflation,
competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, etc
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.
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 United Kingdom
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Danone
Strengths of Danone | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Danone are -
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.
Innovation driven organization
– Danone is one of the most innovative firm in Food Processing sector.
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.
Highly skilled collaborators
– Danone 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 Danone have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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 United Kingdom 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.
Strong track record of project management in the Food Processing industry
– Danone is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Food Processing
– Danone is one of the leading players in the Food Processing industry in United Kingdom. Over the years it has not only transformed the business landscape in the Food Processing industry in United Kingdom 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.
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.
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.
Superior customer experience
– The customer experience strategy of Danone in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Weaknesses of Danone | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Danone are -
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.
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 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 Danone supply chain. Even after few cautionary changes, Danone is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Danone vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Danone 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 Food Processing industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Danone is dominated by functional specialists. It is not different from other players in the Food Processing industry, but Danone needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Danone to focus more on services in the Food Processing industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Danone, it seems that company is thinking out the frontier risks that can impact Food Processing industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to strategic competitive environment developments
– As Danone 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.
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.
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.
Low market penetration in new markets
– Outside its home market of United Kingdom, Danone needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Danone Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Danone are -
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.
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.
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.
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.
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.
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.
Leveraging digital technologies
– Danone 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Food Processing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Danone 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. Danone 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Danone 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 Danone 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 Danone can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Danone can use these opportunities to build new business models that can help the communities that Danone operates in. Secondly it can use opportunities from government spending in Food Processing sector.
Threats Danone External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Danone are -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Food Processing industry are lowering. It can presents Danone with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Food Processing sector.
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.
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.
High dependence on third party suppliers
– Danone 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.
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.
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.
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.
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, Danone 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 Danone prominent markets.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Danone 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.
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.
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.