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 – competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, wage bills are increasing, 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 switching costs

– The high switching costs that Associated British Foods 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 Associated British Foods

– The covid-19 pandemic has put organizational resilience at the centre of everthing Associated British Foods does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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.

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.

Ability to lead change in Retail (Apparel)

– Associated British Foods is one of the leading players in the Retail (Apparel) industry in United Kingdom. Over the years it has not only transformed the business landscape in the Retail (Apparel) industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Associated British Foods in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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.

Successful track record of launching new products

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

Highly skilled collaborators

– Associated British Foods has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Apparel) industry. Secondly the value chain collaborators of Associated British Foods have helped the firm to develop new products and bring them quickly to the marketplace.

Sustainable margins compare to other players in Retail (Apparel) industry

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

Strong track record of project management in the Retail (Apparel) industry

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

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.

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.

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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 -

High dependence on Associated British Foods ‘s star products

– The top 2 products and services of Associated British Foods still accounts for major business revenue. This dependence on star products in Retail (Apparel) industry has resulted into insufficient focus on developing new products, even though Associated British Foods has relatively successful track record of launching new products.

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.

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.

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.

High bargaining power of channel partners in Retail (Apparel) industry

– because of the regulatory requirements in United Kingdom, Associated British Foods 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 Retail (Apparel) industry.

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.

Slow to strategic competitive environment developments

– As Associated British Foods is one of the leading players in the Retail (Apparel) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Apparel) industry in last five years.

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.

Ability to respond to the competition

– As the decision making is very deliberative at Associated British Foods, in the dynamic environment of Retail (Apparel) industry it has struggled to respond to the nimble upstart competition. Associated British Foods has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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.

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.

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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 -

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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Retail (Apparel) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Associated British Foods 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. Associated British Foods 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.

Use of Bitcoin and other crypto currencies for transactions in Retail (Apparel) industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Associated British Foods in the Retail (Apparel) industry. Now Associated British Foods can target international markets with far fewer capital restrictions requirements than the existing system.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Retail (Apparel) industry, but it has also influenced the consumer preferences. Associated British Foods can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Creating value in data economy

– The success of analytics program of Associated British Foods has opened avenues for new revenue streams for the organization in Retail (Apparel) industry. This can help Associated British Foods to build a more holistic ecosystem for Associated British Foods products in the Retail (Apparel) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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.

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.

Leveraging digital technologies

– Associated British Foods 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.

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.

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.

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.

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.

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.

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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 -

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Associated British Foods may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Apparel) sector.

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.

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.

Shortening product life cycle

– it is one of the major threat that Associated British Foods is facing in Retail (Apparel) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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.

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. Associated British Foods needs to understand the core reasons impacting the Retail (Apparel) industry. This will help it in building a better workplace.

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 international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Associated British Foods 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 Associated British Foods prominent markets.

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.

Technology acceleration in Forth Industrial Revolution

– Associated British Foods has witnessed rapid integration of technology during Covid-19 in the Retail (Apparel) industry. As one of the leading players in the industry, Associated British Foods needs to keep up with the evolution of technology in the Retail (Apparel) 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Associated British Foods in Retail (Apparel) industry. The Retail (Apparel) 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.

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.

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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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