Based on various researches at Oak Spring University , Wartsila Oyj Abp is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, increasing transportation and logistics costs,
technology disruption, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Wartsila Oyj Abp can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wartsila Oyj Abp, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wartsila Oyj Abp 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 Wartsila Oyj Abp can be done for the following purposes –
1. Strategic planning of Wartsila Oyj Abp
2. Improving business portfolio management of Wartsila Oyj Abp
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Business Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wartsila Oyj Abp
Strengths of Wartsila Oyj Abp | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wartsila Oyj Abp are -
Ability to recruit top talent
– Wartsila Oyj Abp is one of the leading players in the Business Services 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.
Organizational Resilience of Wartsila Oyj Abp
– The covid-19 pandemic has put organizational resilience at the centre of everthing Wartsila Oyj Abp does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Wartsila Oyj Abp has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wartsila Oyj Abp to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Business Services
– Wartsila Oyj Abp is one of the leading players in the Business Services industry in United Kingdom. Over the years it has not only transformed the business landscape in the Business Services industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Wartsila Oyj Abp in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Wartsila Oyj Abp has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Business Services industry. Secondly the value chain collaborators of Wartsila Oyj Abp have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Wartsila Oyj Abp in Business Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Business Services industry
– Wartsila Oyj Abp has clearly differentiated products in the market place. This has enabled Wartsila Oyj Abp to fetch slight price premium compare to the competitors in the Business Services industry. The sustainable margins have also helped Wartsila Oyj Abp to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Wartsila Oyj Abp 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.
Effective Research and Development (R&D)
– Wartsila Oyj Abp has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Wartsila Oyj Abp staying ahead in the Business Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Wartsila Oyj Abp is present in almost all the verticals within the Business Services industry. This has provided Wartsila Oyj Abp 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.
Successful track record of launching new products
– Wartsila Oyj Abp has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wartsila Oyj Abp 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.
Operational resilience
– The operational resilience strategy of Wartsila Oyj Abp comprises – understanding the underlying the factors in the Business Services 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.
Weaknesses of Wartsila Oyj Abp | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wartsila Oyj Abp are -
Slow decision making process
– As mentioned earlier in the report, Wartsila Oyj Abp has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Business Services industry over the last five years. Wartsila Oyj Abp 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.
Need for greater diversity
– Wartsila Oyj Abp 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.
High cash cycle compare to competitors
Wartsila Oyj Abp has a high cash cycle compare to other players in the Business Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on Wartsila Oyj Abp ‘s star products
– The top 2 products and services of Wartsila Oyj Abp still accounts for major business revenue. This dependence on star products in Business Services industry has resulted into insufficient focus on developing new products, even though Wartsila Oyj Abp has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Wartsila Oyj Abp, it seems that company is thinking out the frontier risks that can impact Business Services 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.
Workers concerns about automation
– As automation is fast increasing in the Business Services industry, Wartsila Oyj Abp 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.
Ability to respond to the competition
– As the decision making is very deliberative at Wartsila Oyj Abp, in the dynamic environment of Business Services industry it has struggled to respond to the nimble upstart competition. Wartsila Oyj Abp 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, Wartsila Oyj Abp 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.
Employees’ less understanding of Wartsila Oyj Abp strategy
– From the outside it seems that the employees of Wartsila Oyj Abp 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.
Skills based hiring in Business Services industry
– The stress on hiring functional specialists at Wartsila Oyj Abp 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.
Compensation and incentives
– The revenue per employee of Wartsila Oyj Abp is just above the Business Services 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.
Wartsila Oyj Abp Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Wartsila Oyj Abp are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Wartsila Oyj Abp in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Business Services industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Wartsila Oyj Abp has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Business Services sector. This continuous investment in analytics has enabled Wartsila Oyj Abp to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wartsila Oyj Abp to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Wartsila Oyj Abp 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Business Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Wartsila Oyj Abp 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. Wartsila Oyj Abp 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.
Manufacturing automation
– Wartsila Oyj Abp can use the latest technology developments to improve its manufacturing and designing process in Business Services 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.
Developing new processes and practices
– Wartsila Oyj Abp can develop new processes and procedures in Business Services 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.
Loyalty marketing
– Wartsila Oyj Abp 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Wartsila Oyj Abp 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 Wartsila Oyj Abp to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Wartsila Oyj Abp is facing challenges because of the dominance of functional experts in the organization. Wartsila Oyj Abp can utilize new technology in the field of Business Services 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 Wartsila Oyj Abp 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 Wartsila Oyj Abp to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Wartsila Oyj Abp 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wartsila Oyj Abp can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Wartsila Oyj Abp 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.
Threats Wartsila Oyj Abp External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Wartsila Oyj Abp are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wartsila Oyj Abp in Business Services industry. The Business Services 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.
Increasing wage structure of Wartsila Oyj Abp
– 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 Wartsila Oyj Abp.
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 Wartsila Oyj Abp in the Business Services sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Wartsila Oyj Abp may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Business Services sector.
High dependence on third party suppliers
– Wartsila Oyj Abp 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.
Shortening product life cycle
– it is one of the major threat that Wartsila Oyj Abp is facing in Business Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Business Services industry are lowering. It can presents Wartsila Oyj Abp with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Business Services sector.
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. Wartsila Oyj Abp 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, Wartsila Oyj Abp 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 Wartsila Oyj Abp prominent markets.
Consumer confidence and its impact on Wartsila Oyj Abp 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 Business Services industry and other sectors.
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 Wartsila Oyj Abp.
Weighted SWOT Analysis of Wartsila Oyj Abp Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Wartsila Oyj Abp 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 Wartsila Oyj Abp 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 Wartsila Oyj Abp 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 Wartsila Oyj Abp 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 Wartsila Oyj Abp needs to make to build a sustainable competitive advantage.
