Pearson (PSON) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Pearson (United Kingdom)

Based on various researches at Oak Spring University , Pearson is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, technology disruption, increasing commodity prices, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of Pearson

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Pearson can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pearson, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pearson 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Pearson can be done for the following purposes –
1. Strategic planning of Pearson
2. Improving business portfolio management of Pearson
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Printing & Publishing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Pearson

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Strengths of Pearson | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Pearson are -

Successful track record of launching new products

– Pearson has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pearson 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.

Effective Research and Development (R&D)

– Pearson has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Pearson staying ahead in the Printing & Publishing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

High brand equity

– Pearson has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pearson to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Low bargaining power of suppliers

– Suppliers of Pearson in the Services sector have low bargaining power. Pearson has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Pearson to manage not only supply disruptions but also source products at highly competitive prices.

Innovation driven organization

– Pearson is one of the most innovative firm in Printing & Publishing sector.

Highly skilled collaborators

– Pearson has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Printing & Publishing industry. Secondly the value chain collaborators of Pearson have helped the firm to develop new products and bring them quickly to the marketplace.

Sustainable margins compare to other players in Printing & Publishing industry

– Pearson has clearly differentiated products in the market place. This has enabled Pearson to fetch slight price premium compare to the competitors in the Printing & Publishing industry. The sustainable margins have also helped Pearson to invest into research and development (R&D) and innovation.

Ability to lead change in Printing & Publishing

– Pearson is one of the leading players in the Printing & Publishing industry in United Kingdom. Over the years it has not only transformed the business landscape in the Printing & Publishing industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Pearson in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Digital Transformation in Printing & Publishing industry

- digital transformation varies from industry to industry. For Pearson digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Pearson 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 recruit top talent

– Pearson is one of the leading players in the Printing & Publishing 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.

Analytics focus

– Pearson 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 Printing & Publishing 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.

Learning organization

- Pearson 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 Pearson is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Pearson emphasize – knowledge, initiative, and innovation.

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Weaknesses of Pearson | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Pearson are -

Aligning sales with marketing

– From the outside it seems that Pearson needs to have more collaboration between its sales team and marketing team. Sales professionals in the Printing & Publishing industry have deep experience in developing customer relationships. Marketing department at Pearson can leverage the sales team experience to cultivate customer relationships as Pearson is planning to shift buying processes online.

Ability to respond to the competition

– As the decision making is very deliberative at Pearson, in the dynamic environment of Printing & Publishing industry it has struggled to respond to the nimble upstart competition. Pearson has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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 Pearson supply chain. Even after few cautionary changes, Pearson is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Pearson vulnerable to further global disruptions in South East Asia.

Need for greater diversity

– Pearson 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.

Interest costs

– Compare to the competition, Pearson 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.

Slow decision making process

– As mentioned earlier in the report, Pearson has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Printing & Publishing industry over the last five years. Pearson 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.

High cash cycle compare to competitors

Pearson has a high cash cycle compare to other players in the Printing & Publishing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Low market penetration in new markets

– Outside its home market of United Kingdom, Pearson needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Workers concerns about automation

– As automation is fast increasing in the Printing & Publishing industry, Pearson 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 Pearson is one of the leading players in the Printing & Publishing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Printing & Publishing industry in last five years.

Compensation and incentives

– The revenue per employee of Pearson is just above the Printing & Publishing 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.

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Pearson Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Pearson are -

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Pearson can use these opportunities to build new business models that can help the communities that Pearson operates in. Secondly it can use opportunities from government spending in Printing & Publishing sector.

Use of Bitcoin and other crypto currencies for transactions in Printing & Publishing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Pearson in the Printing & Publishing industry. Now Pearson can target international markets with far fewer capital restrictions requirements than the existing system.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Pearson in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Printing & Publishing industry, and it will provide faster access to the consumers.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Pearson is facing challenges because of the dominance of functional experts in the organization. Pearson can utilize new technology in the field of Printing & Publishing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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 Pearson 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.

Better consumer reach

– The expansion of the 5G network will help Pearson to increase its market reach. Pearson 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

– Pearson has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Printing & Publishing sector. This continuous investment in analytics has enabled Pearson to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pearson 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, Pearson 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 Printing & Publishing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Pearson 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. Pearson 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Printing & Publishing industry, but it has also influenced the consumer preferences. Pearson can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Buying journey improvements

– Pearson can improve the customer journey of consumers in the Printing & Publishing 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.

Learning at scale

– Online learning technologies has now opened space for Pearson 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.

Developing new processes and practices

– Pearson can develop new processes and procedures in Printing & Publishing 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.

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Threats Pearson External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Pearson are -

Easy access to finance

– Easy access to finance in Printing & Publishing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Pearson 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

– Pearson 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. Pearson can take advantage of this fund but it will also bring new competitors in the Printing & Publishing industry.

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. Pearson needs to understand the core reasons impacting the Printing & Publishing industry. This will help it in building a better workplace.

Consumer confidence and its impact on Pearson 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 Printing & Publishing 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 Pearson.

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 Pearson in the Printing & Publishing sector and impact the bottomline of the organization.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Pearson 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 Pearson prominent markets.

High dependence on third party suppliers

– Pearson 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 Pearson is facing in Printing & Publishing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Increasing wage structure of Pearson

– 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 Pearson.

Stagnating economy with rate increase

– Pearson 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 Printing & Publishing industry.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Printing & Publishing industry are lowering. It can presents Pearson with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Printing & Publishing sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Pearson in Printing & Publishing industry. The Printing & Publishing 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.

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Weighted SWOT Analysis of Pearson Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Pearson 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 Pearson 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 Pearson 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 Pearson 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 Pearson needs to make to build a sustainable competitive advantage.

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