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 household debt because of falling income levels, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, there is backlash against globalization, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, 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 -

Superior customer experience

– The customer experience strategy of Parmalat in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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.

Sustainable margins compare to other players in Food Processing industry

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

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.

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.

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.

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.

Analytics focus

– Parmalat 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 Food Processing 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

- 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.

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.

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.

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.

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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 -

Aligning sales with marketing

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

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.

Interest costs

– Compare to the competition, Parmalat 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.

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.

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.

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.

Low market penetration in new markets

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

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.

Workers concerns about automation

– As automation is fast increasing in the Food Processing industry, Parmalat 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.

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.

Products dominated business model

– Even though Parmalat has some of the most successful models in the Food Processing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Parmalat should strive to include more intangible value offerings along with its core products and services.

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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 -

Loyalty marketing

– Parmalat 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.

Buying journey improvements

– Parmalat can improve the customer journey of consumers in the Food Processing 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.

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.

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.

Redefining models of collaboration and team work

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

Learning at scale

– Online learning technologies has now opened space for Parmalat 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.

Lowering marketing communication costs

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

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.

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.

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.

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.

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.

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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 -

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.

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.

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.

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.

Barriers of entry lowering

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

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.

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.

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.

Environmental challenges

– Parmalat 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. Parmalat can take advantage of this fund but it will also bring new competitors in the Food Processing industry.

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.

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.

Regulatory challenges

– Parmalat 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 Food Processing industry regulations.

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.

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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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