SWOT Analysis / TOWS Matrix for Sappi Ltd (South Africa)
Based on various researches at Oak Spring University , Sappi Ltd is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models,
technology disruption, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sappi Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sappi Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sappi Ltd 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 Sappi Ltd can be done for the following purposes –
1. Strategic planning of Sappi Ltd
2. Improving business portfolio management of Sappi Ltd
3. Assessing feasibility of the new initiative in South Africa
4. Making a Paper & Paper Products sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sappi Ltd
Strengths of Sappi Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sappi Ltd are -
Successful track record of launching new products
– Sappi Ltd has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sappi Ltd 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.
Innovation driven organization
– Sappi Ltd is one of the most innovative firm in Paper & Paper Products sector.
Diverse revenue streams
– Sappi Ltd is present in almost all the verticals within the Paper & Paper Products industry. This has provided Sappi Ltd 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
– Sappi Ltd has one of the best training and development program in Basic Materials 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.
Cross disciplinary teams
– Horizontal connected teams at the Sappi Ltd 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.
High brand equity
– Sappi Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sappi Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Paper & Paper Products industry
– Sappi Ltd has clearly differentiated products in the market place. This has enabled Sappi Ltd to fetch slight price premium compare to the competitors in the Paper & Paper Products industry. The sustainable margins have also helped Sappi Ltd to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Sappi Ltd 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.
Learning organization
- Sappi Ltd 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 Sappi Ltd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sappi Ltd emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Sappi Ltd is one of the leading players in the Paper & Paper Products industry in South Africa. It is in a position to attract the best talent available in South Africa. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Sappi Ltd in the Basic Materials sector have low bargaining power. Sappi Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sappi Ltd to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Sappi Ltd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sappi Ltd staying ahead in the Paper & Paper Products industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Sappi Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sappi Ltd are -
Slow decision making process
– As mentioned earlier in the report, Sappi Ltd has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Paper & Paper Products industry over the last five years. Sappi Ltd 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.
Ability to respond to the competition
– As the decision making is very deliberative at Sappi Ltd, in the dynamic environment of Paper & Paper Products industry it has struggled to respond to the nimble upstart competition. Sappi Ltd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Sappi Ltd 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 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 Sappi Ltd supply chain. Even after few cautionary changes, Sappi Ltd is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sappi Ltd vulnerable to further global disruptions in South East Asia.
High dependence on Sappi Ltd ‘s star products
– The top 2 products and services of Sappi Ltd still accounts for major business revenue. This dependence on star products in Paper & Paper Products industry has resulted into insufficient focus on developing new products, even though Sappi Ltd has relatively successful track record of launching new products.
Employees’ less understanding of Sappi Ltd strategy
– From the outside it seems that the employees of Sappi Ltd 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.
Products dominated business model
– Even though Sappi Ltd has some of the most successful models in the Paper & Paper Products industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sappi Ltd should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– From the outside it seems that Sappi Ltd needs to have more collaboration between its sales team and marketing team. Sales professionals in the Paper & Paper Products industry have deep experience in developing customer relationships. Marketing department at Sappi Ltd can leverage the sales team experience to cultivate customer relationships as Sappi Ltd is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Sappi Ltd 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 Paper & Paper Products industry using digital technology.
High cash cycle compare to competitors
Sappi Ltd has a high cash cycle compare to other players in the Paper & Paper Products industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in Paper & Paper Products industry
– The stress on hiring functional specialists at Sappi Ltd 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.
Sappi Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sappi Ltd are -
Building a culture of innovation
– managers at Sappi Ltd 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 Paper & Paper Products industry.
Manufacturing automation
– Sappi Ltd can use the latest technology developments to improve its manufacturing and designing process in Paper & Paper Products 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
– Sappi Ltd has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Paper & Paper Products sector. This continuous investment in analytics has enabled Sappi Ltd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sappi Ltd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Sappi Ltd can develop new processes and procedures in Paper & Paper Products 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.
Creating value in data economy
– The success of analytics program of Sappi Ltd has opened avenues for new revenue streams for the organization in Paper & Paper Products industry. This can help Sappi Ltd to build a more holistic ecosystem for Sappi Ltd products in the Paper & Paper Products industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sappi Ltd can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Sappi Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sappi Ltd 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sappi Ltd in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Paper & Paper Products industry, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions in Paper & Paper Products industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sappi Ltd in the Paper & Paper Products industry. Now Sappi Ltd can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Sappi Ltd can improve the customer journey of consumers in the Paper & Paper Products 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sappi Ltd is facing challenges because of the dominance of functional experts in the organization. Sappi Ltd can utilize new technology in the field of Paper & Paper Products industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Sappi Ltd 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.
Threats Sappi Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sappi Ltd 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. Sappi Ltd 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 Sappi Ltd business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Sappi Ltd is facing in Paper & Paper Products sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Paper & Paper Products industry are lowering. It can presents Sappi Ltd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Paper & Paper Products sector.
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 Sappi Ltd in the Paper & Paper Products 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.
Regulatory challenges
– Sappi Ltd 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 Paper & Paper Products industry regulations.
Technology acceleration in Forth Industrial Revolution
– Sappi Ltd has witnessed rapid integration of technology during Covid-19 in the Paper & Paper Products industry. As one of the leading players in the industry, Sappi Ltd needs to keep up with the evolution of technology in the Paper & Paper Products 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.
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. Sappi Ltd needs to understand the core reasons impacting the Paper & Paper Products industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sappi Ltd 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 Sappi Ltd prominent markets.
Stagnating economy with rate increase
– Sappi Ltd 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 Paper & Paper Products industry.
Consumer confidence and its impact on Sappi Ltd 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 Paper & Paper Products industry and other sectors.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Sappi Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sappi Ltd 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 Sappi Ltd 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 Sappi Ltd 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 Sappi Ltd 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 Sappi Ltd needs to make to build a sustainable competitive advantage.
