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 – increasing commodity prices, challanges to central banks by blockchain based private currencies, technology disruption, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%,
cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , 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 -
Superior customer experience
– The customer experience strategy of Sappi Ltd in Paper & Paper Products industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management in the Paper & Paper Products industry
– Sappi Ltd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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.
Organizational Resilience of Sappi Ltd
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sappi Ltd does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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 lead change in Paper & Paper Products
– Sappi Ltd is one of the leading players in the Paper & Paper Products industry in South Africa. Over the years it has not only transformed the business landscape in the Paper & Paper Products industry in South Africa but also across the existing markets. The ability to lead change has enabled Sappi Ltd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Sappi Ltd is one of the most innovative firm in Paper & Paper Products sector.
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.
Operational resilience
– The operational resilience strategy of Sappi Ltd comprises – understanding the underlying the factors in the Paper & Paper Products 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.
Weaknesses of Sappi Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sappi Ltd are -
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.
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.
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.
Lack of clear differentiation of Sappi Ltd products
– To increase the profitability and margins on the products, Sappi Ltd needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Sappi Ltd 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.
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 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.
Low market penetration in new markets
– Outside its home market of South Africa, Sappi Ltd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– From the 10K / annual statement of Sappi Ltd, it seems that company is thinking out the frontier risks that can impact Paper & Paper Products 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sappi Ltd is slow explore the new channels of communication. These new channels of communication can help Sappi Ltd to provide better information regarding Paper & Paper Products products and services. It can also build an online community to further reach out to potential customers.
Sappi Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sappi Ltd are -
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.
Learning at scale
– Online learning technologies has now opened space for Sappi Ltd 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sappi Ltd 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 Sappi Ltd to hire the very best people irrespective of their geographical location.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sappi Ltd 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 Sappi Ltd to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Sappi Ltd 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.
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.
Better consumer reach
– The expansion of the 5G network will help Sappi Ltd to increase its market reach. Sappi Ltd 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Paper & Paper Products industry, but it has also influenced the consumer preferences. Sappi Ltd 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. Sappi Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Threats Sappi Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sappi Ltd are -
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.
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.
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.
High dependence on third party suppliers
– Sappi Ltd 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.
Increasing wage structure of Sappi Ltd
– 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 Sappi Ltd.
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.
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.
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.
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.
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.
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 Sappi Ltd.
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.
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.