SWOT Analysis / TOWS Matrix for Koninklijke DSM (United Kingdom)
Based on various researches at Oak Spring University , Koninklijke DSM is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, increasing commodity prices, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, talent flight as more people leaving formal jobs,
challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Koninklijke DSM can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Koninklijke DSM, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Koninklijke DSM 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 Koninklijke DSM can be done for the following purposes –
1. Strategic planning of Koninklijke DSM
2. Improving business portfolio management of Koninklijke DSM
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Koninklijke DSM
Strengths of Koninklijke DSM | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Koninklijke DSM are -
High switching costs
– The high switching costs that Koninklijke DSM has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Sustainable margins compare to other players in Chemical Manufacturing industry
– Koninklijke DSM has clearly differentiated products in the market place. This has enabled Koninklijke DSM to fetch slight price premium compare to the competitors in the Chemical Manufacturing industry. The sustainable margins have also helped Koninklijke DSM to invest into research and development (R&D) and innovation.
Strong track record of project management in the Chemical Manufacturing industry
– Koninklijke DSM is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Koninklijke DSM has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Koninklijke DSM staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Koninklijke DSM 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 Koninklijke DSM is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Koninklijke DSM emphasize – knowledge, initiative, and innovation.
High brand equity
– Koninklijke DSM has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Koninklijke DSM to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy of Koninklijke DSM comprises – understanding the underlying the factors in the Chemical Manufacturing 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.
Training and development
– Koninklijke DSM has one of the best training and development program in Basic Materials 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.
Digital Transformation in Chemical Manufacturing industry
- digital transformation varies from industry to industry. For Koninklijke DSM digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Koninklijke DSM 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.
Ability to lead change in Chemical Manufacturing
– Koninklijke DSM is one of the leading players in the Chemical Manufacturing industry in United Kingdom. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Koninklijke DSM in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Koninklijke DSM in the Basic Materials sector have low bargaining power. Koninklijke DSM has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Koninklijke DSM to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Koninklijke DSM has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Koninklijke DSM 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.
Weaknesses of Koninklijke DSM | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Koninklijke DSM are -
Low market penetration in new markets
– Outside its home market of United Kingdom, Koninklijke DSM 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 Koninklijke DSM supply chain. Even after few cautionary changes, Koninklijke DSM is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Koninklijke DSM vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of Koninklijke DSM strategy
– From the outside it seems that the employees of Koninklijke DSM 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 Koninklijke DSM ‘s star products
– The top 2 products and services of Koninklijke DSM still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though Koninklijke DSM has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Koninklijke DSM, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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 decision making process
– As mentioned earlier in the report, Koninklijke DSM has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Koninklijke DSM 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.
Interest costs
– Compare to the competition, Koninklijke DSM 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.
Skills based hiring in Chemical Manufacturing industry
– The stress on hiring functional specialists at Koninklijke DSM 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Koninklijke DSM is slow explore the new channels of communication. These new channels of communication can help Koninklijke DSM to provide better information regarding Chemical Manufacturing products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Koninklijke DSM has a high cash cycle compare to other players in the Chemical Manufacturing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of Koninklijke DSM products
– To increase the profitability and margins on the products, Koninklijke DSM needs to provide more differentiated products than what it is currently offering in the marketplace.
Koninklijke DSM Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Koninklijke DSM are -
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. Koninklijke DSM can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Koninklijke DSM in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– Koninklijke DSM 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 Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Koninklijke DSM 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. Koninklijke DSM 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Koninklijke DSM 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 Koninklijke DSM 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Koninklijke DSM 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 Koninklijke DSM to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Koninklijke DSM can improve the customer journey of consumers in the Chemical Manufacturing 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Koninklijke DSM 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.
Creating value in data economy
– The success of analytics program of Koninklijke DSM has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Koninklijke DSM to build a more holistic ecosystem for Koninklijke DSM products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Koninklijke DSM has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled Koninklijke DSM to build a competitive advantage using analytics. The analytics driven competitive advantage can help Koninklijke DSM to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Koninklijke DSM to increase its market reach. Koninklijke DSM will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– Koninklijke DSM can use the latest technology developments to improve its manufacturing and designing process in Chemical Manufacturing 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.
Threats Koninklijke DSM External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Koninklijke DSM are -
Consumer confidence and its impact on Koninklijke DSM 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 Chemical Manufacturing industry and other sectors.
Stagnating economy with rate increase
– Koninklijke DSM 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 Chemical Manufacturing industry.
Environmental challenges
– Koninklijke DSM 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. Koninklijke DSM can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.
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 Koninklijke DSM in the Chemical Manufacturing sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Koninklijke DSM in Chemical Manufacturing industry. The Chemical Manufacturing 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Koninklijke DSM may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing 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 Koninklijke DSM business can come under increasing regulations regarding data privacy, data security, 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents Koninklijke DSM with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.
Technology acceleration in Forth Industrial Revolution
– Koninklijke DSM has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, Koninklijke DSM needs to keep up with the evolution of technology in the Chemical Manufacturing 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.
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.
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 Koninklijke DSM.
Regulatory challenges
– Koninklijke DSM 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 Chemical Manufacturing industry regulations.
Weighted SWOT Analysis of Koninklijke DSM Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Koninklijke DSM 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 Koninklijke DSM 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 Koninklijke DSM 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 Koninklijke DSM 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 Koninklijke DSM needs to make to build a sustainable competitive advantage.
