Sonae (0ML0) SWOT Analysis / TOWS Matrix / 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 – banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, supply chains are disrupted by pandemic , there is backlash against globalization, talent flight as more people leaving formal jobs, etc

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Introduction to SWOT Analysis of Sonae

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.

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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

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

The strengths of Sonae are -

Successful track record of launching new products

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

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.

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.

Training and development

– Sonae 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.

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.

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.

High brand equity

– Sonae has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sonae to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Cross disciplinary teams

– Horizontal connected teams at the Sonae 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.

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.

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.

Sustainable margins compare to other players in Retail (Grocery) industry

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

Analytics focus

– Sonae 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 Retail (Grocery) 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.

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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.

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

Capital Spending Reduction

– Even during the low interest decade, Sonae has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Retail (Grocery) industry using digital technology.

Compensation and incentives

– The revenue per employee of Sonae is just above the Retail (Grocery) 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 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.

Slow decision making process

– As mentioned earlier in the report, Sonae has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Grocery) industry over the last five years. Sonae 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.

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.

Slow to strategic competitive environment developments

– As Sonae is one of the leading players in the Retail (Grocery) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Grocery) industry in last five years.

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.

Ability to respond to the competition

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

Need for greater diversity

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

The opportunities of Sonae 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. Sonae can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

Increase in government spending

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

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sonae 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 Sonae to hire the very best people irrespective of their geographical location.

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.

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.

Developing new processes and practices

– Sonae can develop new processes and procedures in Retail (Grocery) 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.

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.

Better consumer reach

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

Low interest rates

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

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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Sonae in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Grocery) industry, and it will provide faster access to the consumers.

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.

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

The threats of Sonae are -

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 wage structure of Sonae

– 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 Sonae.

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.

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.

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.

Stagnating economy with rate increase

– Sonae 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 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.

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.

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.

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.

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.

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.

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.

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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.

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