DS Smith (SMDS) SWOT Analysis / TOWS Matrix / MBA Resources
Paper & Paper Products
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for DS Smith (United Kingdom)
Based on various researches at Oak Spring University , DS Smith 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 , banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, technology disruption, increasing transportation and logistics costs,
cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that DS Smith can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the DS Smith, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which DS Smith 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 DS Smith can be done for the following purposes –
1. Strategic planning of DS Smith
2. Improving business portfolio management of DS Smith
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Paper & Paper Products sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of DS Smith
Strengths of DS Smith | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of DS Smith are -
Sustainable margins compare to other players in Paper & Paper Products industry
– DS Smith has clearly differentiated products in the market place. This has enabled DS Smith to fetch slight price premium compare to the competitors in the Paper & Paper Products industry. The sustainable margins have also helped DS Smith to invest into research and development (R&D) and innovation.
Training and development
– DS Smith has one of the best training and development program in Basic Materials 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.
Cross disciplinary teams
– Horizontal connected teams at the DS Smith 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.
Highly skilled collaborators
– DS Smith has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Paper & Paper Products industry. Secondly the value chain collaborators of DS Smith have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of DS Smith in Paper & Paper Products industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Paper & Paper Products
– DS Smith is one of the leading players in the Paper & Paper Products industry in United Kingdom. Over the years it has not only transformed the business landscape in the Paper & Paper Products industry in United Kingdom but also across the existing markets. The ability to lead change has enabled DS Smith in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Paper & Paper Products industry
- digital transformation varies from industry to industry. For DS Smith digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. DS Smith 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.
High switching costs
– The high switching costs that DS Smith 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.
Innovation driven organization
– DS Smith is one of the most innovative firm in Paper & Paper Products sector.
Diverse revenue streams
– DS Smith is present in almost all the verticals within the Paper & Paper Products industry. This has provided DS Smith 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.
Ability to recruit top talent
– DS Smith is one of the leading players in the Paper & Paper Products 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.
Effective Research and Development (R&D)
– DS Smith has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – DS Smith staying ahead in the Paper & Paper Products industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of DS Smith | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of DS Smith are -
Workers concerns about automation
– As automation is fast increasing in the Paper & Paper Products industry, DS Smith 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.
Need for greater diversity
– DS Smith 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.
Compensation and incentives
– The revenue per employee of DS Smith is just above the Paper & Paper Products 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.
Low market penetration in new markets
– Outside its home market of United Kingdom, DS Smith needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
DS Smith has a high cash cycle compare to other players in the Paper & Paper Products industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, DS Smith 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 Paper & Paper Products industry using digital technology.
Interest costs
– Compare to the competition, DS Smith 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.
Lack of clear differentiation of DS Smith products
– To increase the profitability and margins on the products, DS Smith needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of DS Smith strategy
– From the outside it seems that the employees of DS Smith 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.
High operating costs
– Compare to the competitors, DS Smith has high operating costs in the Paper & Paper Products industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract DS Smith lucrative customers.
Products dominated business model
– Even though DS Smith has some of the most successful models in the Paper & Paper Products industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. DS Smith should strive to include more intangible value offerings along with its core products and services.
DS Smith Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of DS Smith are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Paper & Paper Products industry, but it has also influenced the consumer preferences. DS Smith can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– DS Smith 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.
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 DS Smith 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for DS Smith in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Paper & Paper Products industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for DS Smith 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 DS Smith to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions in Paper & Paper Products industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for DS Smith in the Paper & Paper Products industry. Now DS Smith can target international markets with far fewer capital restrictions requirements than the existing system.
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. DS Smith can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects DS Smith can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of DS Smith has opened avenues for new revenue streams for the organization in Paper & Paper Products industry. This can help DS Smith to build a more holistic ecosystem for DS Smith products in the Paper & Paper Products industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, DS Smith is facing challenges because of the dominance of functional experts in the organization. DS Smith can utilize new technology in the field of Paper & Paper Products 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 DS Smith 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Paper & Paper Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. DS Smith 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. DS Smith 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.
Building a culture of innovation
– managers at DS Smith 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 Paper & Paper Products industry.
Threats DS Smith External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of DS Smith are -
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 DS Smith in the Paper & Paper Products sector and impact the bottomline of the organization.
Increasing wage structure of DS Smith
– 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 DS Smith.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for DS Smith in Paper & Paper Products industry. The Paper & Paper Products 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.
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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, DS Smith 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 DS Smith prominent markets.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of DS Smith business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– DS Smith 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 Paper & Paper Products industry.
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 DS Smith.
High dependence on third party suppliers
– DS Smith 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 DS Smith is facing in Paper & Paper Products sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– DS Smith 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 Paper & Paper Products industry regulations.
Easy access to finance
– Easy access to finance in Paper & Paper Products industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. DS Smith can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Weighted SWOT Analysis of DS Smith Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at DS Smith 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 DS Smith 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 DS Smith 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 DS Smith 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 DS Smith needs to make to build a sustainable competitive advantage.