Parmalat (0NQB) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Parmalat (United Kingdom)

Based on various researches at Oak Spring University , Parmalat is operating in a macro-environment that has been destablized by – increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of Parmalat

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Parmalat can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Parmalat, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Parmalat 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 Parmalat can be done for the following purposes –
1. Strategic planning of Parmalat
2. Improving business portfolio management of Parmalat
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Parmalat

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

The strengths of Parmalat are -

Successful track record of launching new products

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

Highly skilled collaborators

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

Strong track record of project management in the Food Processing industry

– Parmalat is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Innovation driven organization

– Parmalat is one of the most innovative firm in Food Processing sector.

Operational resilience

– The operational resilience strategy of Parmalat comprises – understanding the underlying the factors in the Food Processing 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.

Organizational Resilience of Parmalat

– The covid-19 pandemic has put organizational resilience at the centre of everthing Parmalat does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Effective Research and Development (R&D)

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

High brand equity

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

Ability to recruit top talent

– Parmalat is one of the leading players in the Food Processing 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.

Learning organization

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

Low bargaining power of suppliers

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

High switching costs

– The high switching costs that Parmalat 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.

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

The weaknesses of Parmalat are -

Employees’ less understanding of Parmalat strategy

– From the outside it seems that the employees of Parmalat 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.

Compensation and incentives

– The revenue per employee of Parmalat is just above the Food Processing 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 operating costs

– Compare to the competitors, Parmalat has high operating costs in the Food Processing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Parmalat lucrative customers.

Lack of clear differentiation of Parmalat products

– To increase the profitability and margins on the products, Parmalat needs to provide more differentiated products than what it is currently offering in the marketplace.

Slow decision making process

– As mentioned earlier in the report, Parmalat has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Food Processing industry over the last five years. Parmalat 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 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 Parmalat supply chain. Even after few cautionary changes, Parmalat is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Parmalat vulnerable to further global disruptions in South East Asia.

Need for greater diversity

– Parmalat 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 bargaining power of channel partners in Food Processing industry

– because of the regulatory requirements in United Kingdom, Parmalat 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 Food Processing industry.

Capital Spending Reduction

– Even during the low interest decade, Parmalat 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 Food Processing industry using digital technology.

Skills based hiring in Food Processing industry

– The stress on hiring functional specialists at Parmalat 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.

High dependence on Parmalat ‘s star products

– The top 2 products and services of Parmalat still accounts for major business revenue. This dependence on star products in Food Processing industry has resulted into insufficient focus on developing new products, even though Parmalat has relatively successful track record of launching new products.

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

The opportunities of Parmalat are -

Developing new processes and practices

– Parmalat can develop new processes and procedures in Food Processing 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Food Processing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Parmalat 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. Parmalat 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Parmalat 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 Parmalat to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Leveraging digital technologies

– Parmalat 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.

Manufacturing automation

– Parmalat can use the latest technology developments to improve its manufacturing and designing process in Food Processing 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.

Creating value in data economy

– The success of analytics program of Parmalat has opened avenues for new revenue streams for the organization in Food Processing industry. This can help Parmalat to build a more holistic ecosystem for Parmalat products in the Food Processing industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Building a culture of innovation

– managers at Parmalat 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 Food Processing industry.

Increase in government spending

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

Using analytics as competitive advantage

– Parmalat has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Food Processing sector. This continuous investment in analytics has enabled Parmalat to build a competitive advantage using analytics. The analytics driven competitive advantage can help Parmalat to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Finding new ways to collaborate

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

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Parmalat can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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. Parmalat can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Better consumer reach

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

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

The threats of Parmalat are -

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 Parmalat.

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. Parmalat 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 Parmalat 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 Food Processing industry and other sectors.

Technology acceleration in Forth Industrial Revolution

– Parmalat has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Parmalat needs to keep up with the evolution of technology in the Food Processing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

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. Parmalat needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.

Easy access to finance

– Easy access to finance in Food Processing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Parmalat can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 Parmalat in the Food Processing sector and impact the bottomline of the organization.

Increasing wage structure of Parmalat

– 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 Parmalat.

Increasing international competition and downward pressure on margins

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

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Parmalat may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Food Processing sector.

High dependence on third party suppliers

– Parmalat 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.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Parmalat in Food Processing industry. The Food Processing 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 Parmalat Template, Example

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

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