WPP (WPP) SWOT Analysis / TOWS Matrix / MBA Resources
Advertising
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for WPP (United Kingdom)
Based on various researches at Oak Spring University , WPP is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models,
increasing government debt because of Covid-19 spendings, 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 WPP can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the WPP, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which WPP 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 WPP can be done for the following purposes –
1. Strategic planning of WPP
2. Improving business portfolio management of WPP
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Advertising sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of WPP
Strengths of WPP | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of WPP are -
Learning organization
- WPP 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 WPP is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at WPP emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that WPP 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.
Successful track record of launching new products
– WPP has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. WPP 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.
Training and development
– WPP 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.
Superior customer experience
– The customer experience strategy of WPP in Advertising industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– WPP has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled WPP to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the WPP 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.
Ability to recruit top talent
– WPP is one of the leading players in the Advertising 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.
Digital Transformation in Advertising industry
- digital transformation varies from industry to industry. For WPP digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. WPP 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 WPP comprises – understanding the underlying the factors in the Advertising 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.
Ability to lead change in Advertising
– WPP is one of the leading players in the Advertising industry in United Kingdom. Over the years it has not only transformed the business landscape in the Advertising industry in United Kingdom but also across the existing markets. The ability to lead change has enabled WPP in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– WPP 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 Advertising 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.
Weaknesses of WPP | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of WPP are -
Products dominated business model
– Even though WPP has some of the most successful models in the Advertising industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. WPP should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– From the outside it seems that WPP needs to have more collaboration between its sales team and marketing team. Sales professionals in the Advertising industry have deep experience in developing customer relationships. Marketing department at WPP can leverage the sales team experience to cultivate customer relationships as WPP is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, WPP has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Advertising industry over the last five years. WPP 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, WPP 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 Advertising industry using digital technology.
Workers concerns about automation
– As automation is fast increasing in the Advertising industry, WPP 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.
Compensation and incentives
– The revenue per employee of WPP is just above the Advertising 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.
Ability to respond to the competition
– As the decision making is very deliberative at WPP, in the dynamic environment of Advertising industry it has struggled to respond to the nimble upstart competition. WPP has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, WPP is slow explore the new channels of communication. These new channels of communication can help WPP to provide better information regarding Advertising products and services. It can also build an online community to further reach out to potential customers.
High dependence on WPP ‘s star products
– The top 2 products and services of WPP still accounts for major business revenue. This dependence on star products in Advertising industry has resulted into insufficient focus on developing new products, even though WPP has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, WPP has high operating costs in the Advertising industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract WPP lucrative customers.
Low market penetration in new markets
– Outside its home market of United Kingdom, WPP needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
WPP Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of WPP are -
Building a culture of innovation
– managers at WPP 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 Advertising industry.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Advertising industry, but it has also influenced the consumer preferences. WPP can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, WPP can use these opportunities to build new business models that can help the communities that WPP operates in. Secondly it can use opportunities from government spending in Advertising sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for WPP in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Advertising industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects WPP can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– WPP 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.
Learning at scale
– Online learning technologies has now opened space for WPP 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 Advertising industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for WPP in the Advertising industry. Now WPP can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help WPP to increase its market reach. WPP 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
– WPP can use the latest technology developments to improve its manufacturing and designing process in Advertising 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.
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. WPP can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– WPP 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 Advertising industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. WPP 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. WPP 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.
Threats WPP External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of WPP are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Advertising industry are lowering. It can presents WPP with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Advertising sector.
Shortening product life cycle
– it is one of the major threat that WPP is facing in Advertising sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– WPP 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 Advertising industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, WPP 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 WPP prominent markets.
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 WPP.
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 WPP in the Advertising sector and impact the bottomline of the organization.
Regulatory challenges
– WPP 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 Advertising industry regulations.
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.
High dependence on third party suppliers
– WPP 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, WPP may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Advertising sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for WPP in Advertising industry. The Advertising 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. WPP 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.
Consumer confidence and its impact on WPP 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 Advertising industry and other sectors.
Weighted SWOT Analysis of WPP Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at WPP 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 WPP 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 WPP 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 WPP 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 WPP needs to make to build a sustainable competitive advantage.