Nokian Renkaat Oyj (0FFY) SWOT Analysis / TOWS Matrix / 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 inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, geopolitical disruptions, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, etc

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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.

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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

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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 -

Digital Transformation in Tires industry

- digital transformation varies from industry to industry. For Nokian Renkaat Oyj digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nokian Renkaat Oyj 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.

Effective Research and Development (R&D)

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

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.

Low bargaining power of suppliers

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

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.

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.

Sustainable margins compare to other players in Tires industry

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

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.

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.

Learning organization

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

Cross disciplinary teams

– Horizontal connected teams at the Nokian Renkaat Oyj 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.

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.

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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 -

Aligning sales with marketing

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

High bargaining power of channel partners in Tires industry

– because of the regulatory requirements in United Kingdom, Nokian Renkaat Oyj 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 Tires industry.

Employees’ less understanding of Nokian Renkaat Oyj strategy

– From the outside it seems that the employees of Nokian Renkaat Oyj 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.

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.

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.

Interest costs

– Compare to the competition, Nokian Renkaat Oyj 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.

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.

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.

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.

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.

Compensation and incentives

– The revenue per employee of Nokian Renkaat Oyj is just above the Tires 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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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 -

Creating value in data economy

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

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. Nokian Renkaat Oyj can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Tires industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nokian Renkaat Oyj 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. Nokian Renkaat Oyj 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.

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.

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.

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.

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.

Lowering marketing communication costs

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

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.

Use of Bitcoin and other crypto currencies for transactions in Tires industry

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

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.

Buying journey improvements

– Nokian Renkaat Oyj can improve the customer journey of consumers in the Tires 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.

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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 -

Shortening product life cycle

– it is one of the major threat that Nokian Renkaat Oyj is facing in Tires sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

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.

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.

Easy access to finance

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

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.

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.

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.

Environmental challenges

– Nokian Renkaat Oyj 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. Nokian Renkaat Oyj can take advantage of this fund but it will also bring new competitors in the Tires industry.

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.

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. Nokian Renkaat Oyj needs to understand the core reasons impacting the Tires industry. This will help it in building a better workplace.

Technology acceleration in Forth Industrial Revolution

– Nokian Renkaat Oyj has witnessed rapid integration of technology during Covid-19 in the Tires industry. As one of the leading players in the industry, Nokian Renkaat Oyj needs to keep up with the evolution of technology in the Tires 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.

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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.

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