Krones AG (0LQ4) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Krones AG (United Kingdom)

Based on various researches at Oak Spring University , Krones AG is operating in a macro-environment that has been destablized by – increasing energy prices, wage bills are increasing, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, technology disruption, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of Krones AG

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

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

The strengths of Krones AG are -

Strong track record of project management in the Containers & Packaging industry

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

Learning organization

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

Low bargaining power of suppliers

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

Effective Research and Development (R&D)

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

Successful track record of launching new products

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

Digital Transformation in Containers & Packaging industry

- digital transformation varies from industry to industry. For Krones AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Krones AG 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 Krones AG 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 recruit top talent

– Krones AG is one of the leading players in the Containers & Packaging 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.

Organizational Resilience of Krones AG

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

Ability to lead change in Containers & Packaging

– Krones AG is one of the leading players in the Containers & Packaging industry in United Kingdom. Over the years it has not only transformed the business landscape in the Containers & Packaging industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Krones AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Analytics focus

– Krones AG 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 Containers & Packaging 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

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

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

The weaknesses of Krones AG are -

Compensation and incentives

– The revenue per employee of Krones AG is just above the Containers & Packaging 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.

Slow decision making process

– As mentioned earlier in the report, Krones AG has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Containers & Packaging industry over the last five years. Krones AG 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, Krones AG 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 dependence on Krones AG ‘s star products

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

Ability to respond to the competition

– As the decision making is very deliberative at Krones AG, in the dynamic environment of Containers & Packaging industry it has struggled to respond to the nimble upstart competition. Krones AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Products dominated business model

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

Lack of clear differentiation of Krones AG products

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

Increasing silos among functional specialists

– The organizational structure of Krones AG is dominated by functional specialists. It is not different from other players in the Containers & Packaging industry, but Krones AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Krones AG to focus more on services in the Containers & Packaging industry rather than just following the product oriented approach.

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 Krones AG supply chain. Even after few cautionary changes, Krones AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Krones AG vulnerable to further global disruptions in South East Asia.

High cash cycle compare to competitors

Krones AG has a high cash cycle compare to other players in the Containers & Packaging industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Need for greater diversity

– Krones AG 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.

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

The opportunities of Krones AG are -

Leveraging digital technologies

– Krones AG 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 Krones AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Harnessing reconfiguration of the global supply chains

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

Using analytics as competitive advantage

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

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 Krones AG 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Containers & Packaging industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Krones AG 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. Krones AG 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Krones AG 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.

Creating value in data economy

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

Lowering marketing communication costs

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

Developing new processes and practices

– Krones AG can develop new processes and procedures in Containers & Packaging 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.

Manufacturing automation

– Krones AG can use the latest technology developments to improve its manufacturing and designing process in Containers & Packaging 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.

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

Loyalty marketing

– Krones AG 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.

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

The threats of Krones AG are -

Regulatory challenges

– Krones AG 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 Containers & Packaging industry regulations.

High dependence on third party suppliers

– Krones AG 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.

Environmental challenges

– Krones AG 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. Krones AG can take advantage of this fund but it will also bring new competitors in the Containers & Packaging industry.

Increasing wage structure of Krones AG

– 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 Krones AG.

Easy access to finance

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

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 Krones AG business can come under increasing regulations regarding data privacy, data security, etc.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Krones AG in Containers & Packaging industry. The Containers & Packaging 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.

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. Krones AG needs to understand the core reasons impacting the Containers & Packaging industry. This will help it in building a better workplace.

Barriers of entry lowering

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

Stagnating economy with rate increase

– Krones AG 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 Containers & Packaging industry.

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.

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 Krones AG.

Technology acceleration in Forth Industrial Revolution

– Krones AG has witnessed rapid integration of technology during Covid-19 in the Containers & Packaging industry. As one of the leading players in the industry, Krones AG needs to keep up with the evolution of technology in the Containers & Packaging 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 Krones AG Template, Example

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

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