Ferbasa (FESA3) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Ferbasa (Brazil)

Based on various researches at Oak Spring University , Ferbasa is operating in a macro-environment that has been destablized by – increasing commodity prices, central banks are concerned over increasing inflation, wage bills are increasing, increasing energy prices, technology disruption, increasing transportation and logistics costs, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of Ferbasa

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Ferbasa can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ferbasa, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ferbasa 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 Ferbasa can be done for the following purposes –
1. Strategic planning of Ferbasa
2. Improving business portfolio management of Ferbasa
3. Assessing feasibility of the new initiative in Brazil
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ferbasa

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

The strengths of Ferbasa are -

Highly skilled collaborators

– Ferbasa has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Iron & Steel industry. Secondly the value chain collaborators of Ferbasa have helped the firm to develop new products and bring them quickly to the marketplace.

Successful track record of launching new products

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

– Ferbasa is present in almost all the verticals within the Iron & Steel industry. This has provided Ferbasa 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.

Operational resilience

– The operational resilience strategy of Ferbasa comprises – understanding the underlying the factors in the Iron & Steel 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.

Superior customer experience

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

Analytics focus

– Ferbasa 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 Iron & Steel industry. The technology infrastructure of Brazil 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.

Training and development

– Ferbasa 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.

High switching costs

– The high switching costs that Ferbasa 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.

Cross disciplinary teams

– Horizontal connected teams at the Ferbasa 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.

Sustainable margins compare to other players in Iron & Steel industry

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

Ability to recruit top talent

– Ferbasa is one of the leading players in the Iron & Steel industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.

Digital Transformation in Iron & Steel industry

- digital transformation varies from industry to industry. For Ferbasa digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ferbasa 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.

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Weaknesses of Ferbasa | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Ferbasa are -

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

Capital Spending Reduction

– Even during the low interest decade, Ferbasa 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 Iron & Steel industry using digital technology.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ferbasa is slow explore the new channels of communication. These new channels of communication can help Ferbasa to provide better information regarding Iron & Steel products and services. It can also build an online community to further reach out to potential customers.

Lack of clear differentiation of Ferbasa products

– To increase the profitability and margins on the products, Ferbasa needs to provide more differentiated products than what it is currently offering in the marketplace.

High bargaining power of channel partners in Iron & Steel industry

– because of the regulatory requirements in Brazil, Ferbasa 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 Iron & Steel industry.

Employees’ less understanding of Ferbasa strategy

– From the outside it seems that the employees of Ferbasa 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.

Skills based hiring in Iron & Steel industry

– The stress on hiring functional specialists at Ferbasa 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.

Ability to respond to the competition

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

Low market penetration in new markets

– Outside its home market of Brazil, Ferbasa needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Compensation and incentives

– The revenue per employee of Ferbasa is just above the Iron & Steel 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.

Slow decision making process

– As mentioned earlier in the report, Ferbasa has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Iron & Steel industry over the last five years. Ferbasa 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.

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

The opportunities of Ferbasa are -

Creating value in data economy

– The success of analytics program of Ferbasa has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help Ferbasa to build a more holistic ecosystem for Ferbasa products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Loyalty marketing

– Ferbasa 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.

Buying journey improvements

– Ferbasa can improve the customer journey of consumers in the Iron & Steel 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.

Learning at scale

– Online learning technologies has now opened space for Ferbasa 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, Ferbasa can use these opportunities to build new business models that can help the communities that Ferbasa operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.

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. Ferbasa can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Ferbasa is facing challenges because of the dominance of functional experts in the organization. Ferbasa can utilize new technology in the field of Iron & Steel industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Lowering marketing communication costs

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

Harnessing reconfiguration of the global supply chains

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

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Ferbasa can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Remote work and new talent hiring opportunities

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

Building a culture of innovation

– managers at Ferbasa 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 Iron & Steel industry.

Low interest rates

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

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

The threats of Ferbasa are -

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 Ferbasa in the Iron & Steel sector and impact the bottomline of the organization.

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 Ferbasa business can come under increasing regulations regarding data privacy, data security, etc.

Stagnating economy with rate increase

– Ferbasa 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 Iron & Steel 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.

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. Ferbasa needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.

Technology acceleration in Forth Industrial Revolution

– Ferbasa has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Ferbasa needs to keep up with the evolution of technology in the Iron & Steel 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.

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 Ferbasa.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Ferbasa with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Ferbasa in Iron & Steel industry. The Iron & Steel 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.

Consumer confidence and its impact on Ferbasa 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 Iron & Steel industry and other sectors.

High dependence on third party suppliers

– Ferbasa 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.

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.

Shortening product life cycle

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

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Weighted SWOT Analysis of Ferbasa Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Ferbasa 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 Ferbasa 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 Ferbasa 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 Ferbasa 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 Ferbasa needs to make to build a sustainable competitive advantage.

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