Nokian Renkaat Oyj (0FFY) SWOT Analysis / TOWS Matrix / MBA Resources
Tires
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nokian Renkaat Oyj (United Kingdom)
Based on various researches at Oak Spring University , Nokian Renkaat Oyj is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing energy prices, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy,
geopolitical disruptions, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Nokian Renkaat Oyj
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nokian Renkaat Oyj can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nokian Renkaat Oyj, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nokian Renkaat Oyj 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 Nokian Renkaat Oyj can be done for the following purposes –
1. Strategic planning of Nokian Renkaat Oyj
2. Improving business portfolio management of Nokian Renkaat Oyj
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Tires sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nokian Renkaat Oyj
Strengths of Nokian Renkaat Oyj | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nokian Renkaat Oyj are -
Training and development
– Nokian Renkaat Oyj has one of the best training and development program in Consumer Cyclical 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.
Strong track record of project management in the Tires industry
– Nokian Renkaat Oyj is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Nokian Renkaat Oyj has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nokian Renkaat Oyj 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 switching costs
– The high switching costs that Nokian Renkaat Oyj 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.
Ability to lead change in Tires
– Nokian Renkaat Oyj is one of the leading players in the Tires industry in United Kingdom. Over the years it has not only transformed the business landscape in the Tires industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Nokian Renkaat Oyj in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Nokian Renkaat Oyj in Tires industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Nokian Renkaat Oyj
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nokian Renkaat Oyj does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Nokian Renkaat Oyj has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nokian Renkaat Oyj to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy of Nokian Renkaat Oyj comprises – understanding the underlying the factors in the Tires 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.
Analytics focus
– Nokian Renkaat Oyj 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 Tires 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.
Highly skilled collaborators
– Nokian Renkaat Oyj has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Tires industry. Secondly the value chain collaborators of Nokian Renkaat Oyj have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Nokian Renkaat Oyj is one of the leading players in the Tires 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.
Weaknesses of Nokian Renkaat Oyj | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nokian Renkaat Oyj are -
Need for greater diversity
– Nokian Renkaat Oyj 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.
Increasing silos among functional specialists
– The organizational structure of Nokian Renkaat Oyj is dominated by functional specialists. It is not different from other players in the Tires industry, but Nokian Renkaat Oyj needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nokian Renkaat Oyj to focus more on services in the Tires industry rather than just following the product oriented approach.
Products dominated business model
– Even though Nokian Renkaat Oyj has some of the most successful models in the Tires industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Nokian Renkaat Oyj should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Nokian Renkaat Oyj is one of the leading players in the Tires industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Tires industry in last five years.
Low market penetration in new markets
– Outside its home market of United Kingdom, Nokian Renkaat Oyj needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Tires industry, Nokian Renkaat Oyj 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 decision making process
– As mentioned earlier in the report, Nokian Renkaat Oyj has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Tires industry over the last five years. Nokian Renkaat Oyj 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
Nokian Renkaat Oyj has a high cash cycle compare to other players in the Tires industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in Tires industry
– The stress on hiring functional specialists at Nokian Renkaat Oyj 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 operating costs
– Compare to the competitors, Nokian Renkaat Oyj has high operating costs in the Tires industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nokian Renkaat Oyj lucrative customers.
No frontier risks strategy
– From the 10K / annual statement of Nokian Renkaat Oyj, it seems that company is thinking out the frontier risks that can impact Tires 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.
Nokian Renkaat Oyj Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nokian Renkaat Oyj are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nokian Renkaat Oyj is facing challenges because of the dominance of functional experts in the organization. Nokian Renkaat Oyj can utilize new technology in the field of Tires industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Tires industry, but it has also influenced the consumer preferences. Nokian Renkaat Oyj can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Nokian Renkaat Oyj 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nokian Renkaat Oyj can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nokian Renkaat Oyj 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 Nokian Renkaat Oyj to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nokian Renkaat Oyj 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.
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 Nokian Renkaat Oyj 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.
Learning at scale
– Online learning technologies has now opened space for Nokian Renkaat Oyj 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.
Building a culture of innovation
– managers at Nokian Renkaat Oyj 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 Tires industry.
Using analytics as competitive advantage
– Nokian Renkaat Oyj has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Tires sector. This continuous investment in analytics has enabled Nokian Renkaat Oyj to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nokian Renkaat Oyj to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nokian Renkaat Oyj 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 Nokian Renkaat Oyj to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Nokian Renkaat Oyj to increase its market reach. Nokian Renkaat Oyj 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nokian Renkaat Oyj can use these opportunities to build new business models that can help the communities that Nokian Renkaat Oyj operates in. Secondly it can use opportunities from government spending in Tires sector.
Threats Nokian Renkaat Oyj External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nokian Renkaat Oyj 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 Nokian Renkaat Oyj in the Tires sector and impact the bottomline of the organization.
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 Nokian Renkaat Oyj business can come under increasing regulations regarding data privacy, data security, etc.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nokian Renkaat Oyj may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tires sector.
High dependence on third party suppliers
– Nokian Renkaat Oyj 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.
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. Nokian Renkaat Oyj 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.
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 Nokian Renkaat Oyj.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nokian Renkaat Oyj 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 Nokian Renkaat Oyj prominent markets.
Regulatory challenges
– Nokian Renkaat Oyj 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 Tires industry regulations.
Consumer confidence and its impact on Nokian Renkaat Oyj 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 Tires industry and other sectors.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nokian Renkaat Oyj in Tires industry. The Tires 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Tires industry are lowering. It can presents Nokian Renkaat Oyj with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Tires sector.
Weighted SWOT Analysis of Nokian Renkaat Oyj Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nokian Renkaat Oyj 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 Nokian Renkaat Oyj 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 Nokian Renkaat Oyj 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 Nokian Renkaat Oyj 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 Nokian Renkaat Oyj needs to make to build a sustainable competitive advantage.