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 – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, technology disruption, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, increasing government debt because of Covid-19 spendings, 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 -

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.

Ability to lead change in Rental & Leasing

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

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.

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.

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.

Organizational Resilience of Aggreko

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

Cross disciplinary teams

– Horizontal connected teams at the Aggreko 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.

Innovation driven organization

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

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.

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.

Superior customer experience

– The customer experience strategy of Aggreko in Rental & Leasing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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.

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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 -

Compensation and incentives

– The revenue per employee of Aggreko is just above the Rental & Leasing 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.

Products dominated business model

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

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.

High cash cycle compare to competitors

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

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.

Aligning sales with marketing

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

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.

Increasing silos among functional specialists

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

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.

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

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.

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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 -

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.

Lowering marketing communication costs

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

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.

Better consumer reach

– The expansion of the 5G network will help Aggreko to increase its market reach. Aggreko 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.

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.

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.

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.

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.

Using analytics as competitive advantage

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

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.

Harnessing reconfiguration of the global supply chains

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

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.

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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 -

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.

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.

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.

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.

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.

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.

Shortening product life cycle

– it is one of the major threat that Aggreko is facing in Rental & Leasing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

Easy access to finance

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

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.

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.

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.

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.

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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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