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 – competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google,
increasing transportation and logistics costs, increasing energy prices, 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 -
Innovation driven organization
– WPP is one of the most innovative firm in Advertising sector.
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.
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.
Diverse revenue streams
– WPP is present in almost all the verticals within the Advertising industry. This has provided WPP 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.
Effective Research and Development (R&D)
– WPP has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – WPP staying ahead in the Advertising industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– WPP has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Advertising industry. Secondly the value chain collaborators of WPP have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Strong track record of project management in the Advertising industry
– WPP is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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.
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.
Weaknesses of WPP | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of WPP are -
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.
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.
No frontier risks strategy
– From the 10K / annual statement of WPP, it seems that company is thinking out the frontier risks that can impact Advertising 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.
Need for greater diversity
– WPP has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Increasing silos among functional specialists
– The organizational structure of WPP is dominated by functional specialists. It is not different from other players in the Advertising industry, but WPP needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help WPP to focus more on services in the Advertising industry rather than just following the product oriented approach.
High cash cycle compare to competitors
WPP has a high cash cycle compare to other players in the Advertising industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
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.
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.
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.
WPP Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of WPP are -
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.
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.
Using analytics as competitive advantage
– WPP has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Advertising sector. This continuous investment in analytics has enabled WPP to build a competitive advantage using analytics. The analytics driven competitive advantage can help WPP to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, WPP is facing challenges because of the dominance of functional experts in the organization. WPP can utilize new technology in the field of Advertising industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, WPP 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.
Developing new processes and practices
– WPP can develop new processes and procedures in Advertising industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, WPP 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 WPP to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– WPP can improve the customer journey of consumers in the Advertising 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.
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.
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.
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.
Threats WPP External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of WPP are -
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.
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 WPP business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for 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.
Environmental challenges
– WPP 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. WPP can take advantage of this fund but it will also bring new competitors 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.
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.
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.
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. WPP needs to understand the core reasons impacting the Advertising industry. This will help it in building a better workplace.
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.
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.
Easy access to finance
– Easy access to finance in Advertising industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. WPP can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.