Alstom (0J2R) SWOT Analysis / TOWS Matrix / MBA Resources
Conglomerates
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Alstom (United Kingdom)
Based on various researches at Oak Spring University , Alstom is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing energy prices, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Alstom can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alstom, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alstom 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 Alstom can be done for the following purposes –
1. Strategic planning of Alstom
2. Improving business portfolio management of Alstom
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Conglomerates sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Alstom
Strengths of Alstom | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alstom are -
Operational resilience
– The operational resilience strategy of Alstom comprises – understanding the underlying the factors in the Conglomerates 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.
Digital Transformation in Conglomerates industry
- digital transformation varies from industry to industry. For Alstom digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Alstom 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.
Effective Research and Development (R&D)
– Alstom has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Alstom staying ahead in the Conglomerates industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Alstom has one of the best training and development program in Conglomerates 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
– Alstom has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Alstom 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.
High brand equity
– Alstom has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Alstom to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Alstom 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 Conglomerates 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.
Cross disciplinary teams
– Horizontal connected teams at the Alstom 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.
Innovation driven organization
– Alstom is one of the most innovative firm in Conglomerates sector.
Learning organization
- Alstom 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 Alstom is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Alstom emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Alstom in the Conglomerates sector have low bargaining power. Alstom has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Alstom to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Alstom is present in almost all the verticals within the Conglomerates industry. This has provided Alstom 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.
Weaknesses of Alstom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alstom are -
High bargaining power of channel partners in Conglomerates industry
– because of the regulatory requirements in United Kingdom, Alstom 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 Conglomerates industry.
Interest costs
– Compare to the competition, Alstom 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 Conglomerates industry
– The stress on hiring functional specialists at Alstom 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 decision making process
– As mentioned earlier in the report, Alstom has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Conglomerates industry over the last five years. Alstom 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.
Aligning sales with marketing
– From the outside it seems that Alstom needs to have more collaboration between its sales team and marketing team. Sales professionals in the Conglomerates industry have deep experience in developing customer relationships. Marketing department at Alstom can leverage the sales team experience to cultivate customer relationships as Alstom is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Alstom 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 Conglomerates industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Alstom is dominated by functional specialists. It is not different from other players in the Conglomerates industry, but Alstom needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Alstom to focus more on services in the Conglomerates industry rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee of Alstom is just above the Conglomerates 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 Conglomerates industry, Alstom 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.
Slow to strategic competitive environment developments
– As Alstom is one of the leading players in the Conglomerates industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Conglomerates industry in last five years.
No frontier risks strategy
– From the 10K / annual statement of Alstom, it seems that company is thinking out the frontier risks that can impact Conglomerates 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.
Alstom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Alstom are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Alstom 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 Alstom to increase its market reach. Alstom 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.
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 Alstom 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.
Use of Bitcoin and other crypto currencies for transactions in Conglomerates industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Alstom in the Conglomerates industry. Now Alstom can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Alstom 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 Alstom 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, Alstom is facing challenges because of the dominance of functional experts in the organization. Alstom can utilize new technology in the field of Conglomerates industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Alstom 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Alstom 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 Alstom to hire the very best people irrespective of their geographical location.
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. Alstom can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Alstom 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.
Manufacturing automation
– Alstom can use the latest technology developments to improve its manufacturing and designing process in Conglomerates 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.
Building a culture of innovation
– managers at Alstom 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 Conglomerates industry.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Alstom in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Conglomerates industry, and it will provide faster access to the consumers.
Threats Alstom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Alstom are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Conglomerates industry are lowering. It can presents Alstom with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Conglomerates sector.
Regulatory challenges
– Alstom 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 Conglomerates 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.
Easy access to finance
– Easy access to finance in Conglomerates industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Alstom can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Alstom 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. Alstom can take advantage of this fund but it will also bring new competitors in the Conglomerates industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Alstom 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 Alstom prominent markets.
High dependence on third party suppliers
– Alstom 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.
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 Alstom.
Increasing wage structure of Alstom
– 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 Alstom.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Alstom may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Conglomerates sector.
Stagnating economy with rate increase
– Alstom 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 Conglomerates industry.
Shortening product life cycle
– it is one of the major threat that Alstom is facing in Conglomerates sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Alstom Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Alstom 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 Alstom 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 Alstom 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 Alstom 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 Alstom needs to make to build a sustainable competitive advantage.