Sonae (0ML0) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Grocery)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sonae (United Kingdom)
Based on various researches at Oak Spring University , Sonae is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing energy prices, increasing transportation and logistics costs, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy,
there is backlash against globalization, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sonae can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sonae, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sonae operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Sonae can be done for the following purposes –
1. Strategic planning of Sonae
2. Improving business portfolio management of Sonae
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Retail (Grocery) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sonae
Strengths of Sonae | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sonae are -
Diverse revenue streams
– Sonae is present in almost all the verticals within the Retail (Grocery) industry. This has provided Sonae 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.
Learning organization
- Sonae 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 Sonae is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sonae emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Sonae in Retail (Grocery) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Sonae is one of the leading players in the Retail (Grocery) 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.
Strong track record of project management in the Retail (Grocery) industry
– Sonae is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Sonae comprises – understanding the underlying the factors in the Retail (Grocery) 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 Retail (Grocery)
– Sonae is one of the leading players in the Retail (Grocery) industry in United Kingdom. Over the years it has not only transformed the business landscape in the Retail (Grocery) industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Sonae in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Sonae has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sonae staying ahead in the Retail (Grocery) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Sonae is one of the most innovative firm in Retail (Grocery) sector.
Organizational Resilience of Sonae
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sonae does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Sonae 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.
Highly skilled collaborators
– Sonae has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Grocery) industry. Secondly the value chain collaborators of Sonae have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Sonae | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sonae are -
Low market penetration in new markets
– Outside its home market of United Kingdom, Sonae needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Sonae strategy
– From the outside it seems that the employees of Sonae 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.
Lack of clear differentiation of Sonae products
– To increase the profitability and margins on the products, Sonae needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– From the 10K / annual statement of Sonae, it seems that company is thinking out the frontier risks that can impact Retail (Grocery) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High bargaining power of channel partners in Retail (Grocery) industry
– because of the regulatory requirements in United Kingdom, Sonae 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 Retail (Grocery) industry.
Increasing silos among functional specialists
– The organizational structure of Sonae is dominated by functional specialists. It is not different from other players in the Retail (Grocery) industry, but Sonae needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sonae to focus more on services in the Retail (Grocery) industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Sonae 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sonae is slow explore the new channels of communication. These new channels of communication can help Sonae to provide better information regarding Retail (Grocery) products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– From the outside it seems that Sonae needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Grocery) industry have deep experience in developing customer relationships. Marketing department at Sonae can leverage the sales team experience to cultivate customer relationships as Sonae is planning to shift buying processes online.
High operating costs
– Compare to the competitors, Sonae has high operating costs in the Retail (Grocery) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sonae lucrative customers.
Products dominated business model
– Even though Sonae has some of the most successful models in the Retail (Grocery) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sonae should strive to include more intangible value offerings along with its core products and services.
Sonae Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sonae are -
Leveraging digital technologies
– Sonae 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.
Buying journey improvements
– Sonae can improve the customer journey of consumers in the Retail (Grocery) 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sonae 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 Sonae to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Sonae can use the latest technology developments to improve its manufacturing and designing process in Retail (Grocery) 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.
Using analytics as competitive advantage
– Sonae has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Grocery) sector. This continuous investment in analytics has enabled Sonae to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sonae to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sonae is facing challenges because of the dominance of functional experts in the organization. Sonae can utilize new technology in the field of Retail (Grocery) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Sonae to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Grocery) industry, but it has also influenced the consumer preferences. Sonae can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Sonae can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sonae can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Sonae has opened avenues for new revenue streams for the organization in Retail (Grocery) industry. This can help Sonae to build a more holistic ecosystem for Sonae products in the Retail (Grocery) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Sonae 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Grocery) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sonae 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. Sonae 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.
Threats Sonae External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sonae are -
Environmental challenges
– Sonae 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. Sonae can take advantage of this fund but it will also bring new competitors in the Retail (Grocery) industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sonae may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Grocery) sector.
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.
Easy access to finance
– Easy access to finance in Retail (Grocery) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sonae can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Sonae 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 Retail (Grocery) industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sonae in Retail (Grocery) industry. The Retail (Grocery) 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.
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. Sonae will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Sonae.
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 Sonae business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sonae 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 Sonae prominent markets.
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. Sonae needs to understand the core reasons impacting the Retail (Grocery) industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Grocery) industry are lowering. It can presents Sonae with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Grocery) sector.
Regulatory challenges
– Sonae 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 Retail (Grocery) industry regulations.
Weighted SWOT Analysis of Sonae Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sonae 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 Sonae 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 Sonae 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 Sonae 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 Sonae needs to make to build a sustainable competitive advantage.