Associated British Foods (ABF) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Associated British Foods (United Kingdom)

Based on various researches at Oak Spring University , Associated British Foods is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, wage bills are increasing, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of Associated British Foods

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Associated British Foods can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Associated British Foods, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Associated British Foods 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 Associated British Foods can be done for the following purposes –
1. Strategic planning of Associated British Foods
2. Improving business portfolio management of Associated British Foods
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Retail (Apparel) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Associated British Foods

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Strengths of Associated British Foods | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Associated British Foods are -

High brand equity

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

Superior customer experience

– The customer experience strategy of Associated British Foods in Retail (Apparel) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Cross disciplinary teams

– Horizontal connected teams at the Associated British Foods 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.

Training and development

– Associated British Foods has one of the best training and development program in Services 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.

Diverse revenue streams

– Associated British Foods is present in almost all the verticals within the Retail (Apparel) industry. This has provided Associated British Foods 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.

Ability to recruit top talent

– Associated British Foods is one of the leading players in the Retail (Apparel) 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.

Low bargaining power of suppliers

– Suppliers of Associated British Foods in the Services sector have low bargaining power. Associated British Foods has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Associated British Foods to manage not only supply disruptions but also source products at highly competitive prices.

Analytics focus

– Associated British Foods 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 Retail (Apparel) 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.

Innovation driven organization

– Associated British Foods is one of the most innovative firm in Retail (Apparel) sector.

Learning organization

- Associated British Foods 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 Associated British Foods is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Associated British Foods emphasize – knowledge, initiative, and innovation.

Digital Transformation in Retail (Apparel) industry

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

Operational resilience

– The operational resilience strategy of Associated British Foods comprises – understanding the underlying the factors in the Retail (Apparel) 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.

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Weaknesses of Associated British Foods | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Associated British Foods are -

Compensation and incentives

– The revenue per employee of Associated British Foods is just above the Retail (Apparel) 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.

Skills based hiring in Retail (Apparel) industry

– The stress on hiring functional specialists at Associated British Foods 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.

High operating costs

– Compare to the competitors, Associated British Foods has high operating costs in the Retail (Apparel) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Associated British Foods lucrative customers.

Slow decision making process

– As mentioned earlier in the report, Associated British Foods has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Apparel) industry over the last five years. Associated British Foods 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.

Capital Spending Reduction

– Even during the low interest decade, Associated British Foods 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 Retail (Apparel) industry using digital technology.

Interest costs

– Compare to the competition, Associated British Foods 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.

Workers concerns about automation

– As automation is fast increasing in the Retail (Apparel) industry, Associated British Foods needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

No frontier risks strategy

– From the 10K / annual statement of Associated British Foods, it seems that company is thinking out the frontier risks that can impact Retail (Apparel) 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.

Aligning sales with marketing

– From the outside it seems that Associated British Foods needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Apparel) industry have deep experience in developing customer relationships. Marketing department at Associated British Foods can leverage the sales team experience to cultivate customer relationships as Associated British Foods is planning to shift buying processes online.

High cash cycle compare to competitors

Associated British Foods has a high cash cycle compare to other players in the Retail (Apparel) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Low market penetration in new markets

– Outside its home market of United Kingdom, Associated British Foods needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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Associated British Foods Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Associated British Foods are -

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Associated British Foods can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Associated British Foods is facing challenges because of the dominance of functional experts in the organization. Associated British Foods can utilize new technology in the field of Retail (Apparel) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Using analytics as competitive advantage

– Associated British Foods has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Apparel) sector. This continuous investment in analytics has enabled Associated British Foods to build a competitive advantage using analytics. The analytics driven competitive advantage can help Associated British Foods to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Manufacturing automation

– Associated British Foods can use the latest technology developments to improve its manufacturing and designing process in Retail (Apparel) 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.

Harnessing reconfiguration of the global supply chains

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Associated British Foods can use these opportunities to build new business models that can help the communities that Associated British Foods operates in. Secondly it can use opportunities from government spending in Retail (Apparel) sector.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Associated British Foods 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 Associated British Foods to hire the very best people irrespective of their geographical location.

Buying journey improvements

– Associated British Foods can improve the customer journey of consumers in the Retail (Apparel) 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Associated British Foods in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Apparel) industry, and it will provide faster access to the consumers.

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 Associated British Foods 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.

Building a culture of innovation

– managers at Associated British Foods 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 Retail (Apparel) industry.

Loyalty marketing

– Associated British Foods 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.

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. Associated British Foods can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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Threats Associated British Foods External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Associated British Foods 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. Associated British Foods 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.

Increasing wage structure of Associated British Foods

– 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 Associated British Foods.

Consumer confidence and its impact on Associated British Foods 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 Retail (Apparel) industry and other sectors.

Stagnating economy with rate increase

– Associated British Foods 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 Retail (Apparel) industry.

High dependence on third party suppliers

– Associated British Foods 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 Associated British Foods in the Retail (Apparel) sector and impact the bottomline of the organization.

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 Associated British Foods business can come under increasing regulations regarding data privacy, data security, etc.

Environmental challenges

– Associated British Foods 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. Associated British Foods can take advantage of this fund but it will also bring new competitors in the Retail (Apparel) industry.

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.

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.

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 Associated British Foods.

Easy access to finance

– Easy access to finance in Retail (Apparel) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Associated British Foods can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Retail (Apparel) industry are lowering. It can presents Associated British Foods with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Apparel) sector.

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Weighted SWOT Analysis of Associated British Foods Template, Example

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

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