Aggreko (AGGK) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Aggreko (United Kingdom)

Based on various researches at Oak Spring University , Aggreko is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, etc

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Introduction to SWOT Analysis of Aggreko

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

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

The strengths of Aggreko are -

Effective Research and Development (R&D)

– Aggreko has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Aggreko staying ahead in the Rental & Leasing 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

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

Sustainable margins compare to other players in Rental & Leasing industry

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

Operational resilience

– The operational resilience strategy of Aggreko comprises – understanding the underlying the factors in the Rental & Leasing 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.

Digital Transformation in Rental & Leasing industry

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

Diverse revenue streams

– Aggreko is present in almost all the verticals within the Rental & Leasing industry. This has provided Aggreko 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.

Training and development

– Aggreko has one of the best training and development program in Services 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.

Innovation driven organization

– Aggreko is one of the most innovative firm in Rental & Leasing sector.

Learning organization

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

Strong track record of project management in the Rental & Leasing industry

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

Highly skilled collaborators

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

Low bargaining power of suppliers

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

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

The weaknesses of Aggreko are -

Skills based hiring in Rental & Leasing industry

– The stress on hiring functional specialists at Aggreko 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 dependence on Aggreko ‘s star products

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

Workers concerns about automation

– As automation is fast increasing in the Rental & Leasing industry, Aggreko 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.

Employees’ less understanding of Aggreko strategy

– From the outside it seems that the employees of Aggreko 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, Aggreko has high operating costs in the Rental & Leasing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Aggreko lucrative customers.

Lack of clear differentiation of Aggreko products

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

Slow to strategic competitive environment developments

– As Aggreko is one of the leading players in the Rental & Leasing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Rental & Leasing industry in last five years.

Low market penetration in new markets

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

Need for greater diversity

– Aggreko 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.

Ability to respond to the competition

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

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aggreko is slow explore the new channels of communication. These new channels of communication can help Aggreko to provide better information regarding Rental & Leasing products and services. It can also build an online community to further reach out to potential customers.

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

The opportunities of Aggreko are -

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

Creating value in data economy

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aggreko can use these opportunities to build new business models that can help the communities that Aggreko operates in. Secondly it can use opportunities from government spending in Rental & Leasing sector.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aggreko 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 Aggreko 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, Aggreko 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Rental & Leasing industry, but it has also influenced the consumer preferences. Aggreko can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Building a culture of innovation

– managers at Aggreko 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 Rental & Leasing industry.

Manufacturing automation

– Aggreko can use the latest technology developments to improve its manufacturing and designing process in Rental & Leasing 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.

Redefining models of collaboration and team work

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

Developing new processes and practices

– Aggreko can develop new processes and procedures in Rental & Leasing 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.

Use of Bitcoin and other crypto currencies for transactions in Rental & Leasing industry

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

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Aggreko can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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 Aggreko 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.

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

The threats of Aggreko 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. Aggreko 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.

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

Regulatory challenges

– Aggreko 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 Rental & Leasing industry regulations.

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 Aggreko in the Rental & Leasing sector and impact the bottomline of the organization.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Aggreko in Rental & Leasing industry. The Rental & Leasing 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.

Stagnating economy with rate increase

– Aggreko 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 Rental & Leasing industry.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Aggreko may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Rental & Leasing sector.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Aggreko 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 Aggreko prominent markets.

Consumer confidence and its impact on Aggreko 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 Rental & Leasing industry and other sectors.

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. Aggreko needs to understand the core reasons impacting the Rental & Leasing industry. This will help it in building a better workplace.

High dependence on third party suppliers

– Aggreko 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.

Technology acceleration in Forth Industrial Revolution

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

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

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