SWOT Analysis / TOWS Matrix for Allison Transmission (United States)
Based on various researches at Oak Spring University , Allison Transmission is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, there is backlash against globalization, technology disruption, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion,
increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Allison Transmission
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Allison Transmission can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Allison Transmission, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Allison Transmission 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 Allison Transmission can be done for the following purposes –
1. Strategic planning of Allison Transmission
2. Improving business portfolio management of Allison Transmission
3. Assessing feasibility of the new initiative in United States
4. Making a Auto & Truck Parts sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Allison Transmission
Strengths of Allison Transmission | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Allison Transmission are -
Operational resilience
– The operational resilience strategy of Allison Transmission comprises – understanding the underlying the factors in the Auto & Truck Parts 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.
Effective Research and Development (R&D)
– Allison Transmission has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Allison Transmission staying ahead in the Auto & Truck Parts industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Allison Transmission 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.
Training and development
– Allison Transmission has one of the best training and development program in Consumer Cyclical 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 Allison Transmission 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.
Diverse revenue streams
– Allison Transmission is present in almost all the verticals within the Auto & Truck Parts industry. This has provided Allison Transmission 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 recruit top talent
– Allison Transmission is one of the leading players in the Auto & Truck Parts industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Auto & Truck Parts industry
- digital transformation varies from industry to industry. For Allison Transmission digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Allison Transmission 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.
Analytics focus
– Allison Transmission 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 Auto & Truck Parts industry. The technology infrastructure of United States 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.
Superior customer experience
– The customer experience strategy of Allison Transmission in Auto & Truck Parts industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Allison Transmission has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Allison Transmission 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.
Highly skilled collaborators
– Allison Transmission has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Auto & Truck Parts industry. Secondly the value chain collaborators of Allison Transmission have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Allison Transmission | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Allison Transmission are -
Skills based hiring in Auto & Truck Parts industry
– The stress on hiring functional specialists at Allison Transmission 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 Allison Transmission strategy
– From the outside it seems that the employees of Allison Transmission 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.
Low market penetration in new markets
– Outside its home market of United States, Allison Transmission needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Allison Transmission products
– To increase the profitability and margins on the products, Allison Transmission needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Allison Transmission 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.
Increasing silos among functional specialists
– The organizational structure of Allison Transmission is dominated by functional specialists. It is not different from other players in the Auto & Truck Parts industry, but Allison Transmission needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Allison Transmission to focus more on services in the Auto & Truck Parts industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Allison Transmission has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Auto & Truck Parts industry over the last five years. Allison Transmission 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.
Slow to strategic competitive environment developments
– As Allison Transmission is one of the leading players in the Auto & Truck Parts industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Auto & Truck Parts industry in last five years.
High bargaining power of channel partners in Auto & Truck Parts industry
– because of the regulatory requirements in United States, Allison Transmission 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 Auto & Truck Parts industry.
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 Allison Transmission supply chain. Even after few cautionary changes, Allison Transmission is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Allison Transmission vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, Allison Transmission has high operating costs in the Auto & Truck Parts industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Allison Transmission lucrative customers.
Allison Transmission Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Allison Transmission are -
Leveraging digital technologies
– Allison Transmission 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Auto & Truck Parts industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Allison Transmission 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. Allison Transmission 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.
Buying journey improvements
– Allison Transmission can improve the customer journey of consumers in the Auto & Truck Parts 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Allison Transmission 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.
Creating value in data economy
– The success of analytics program of Allison Transmission has opened avenues for new revenue streams for the organization in Auto & Truck Parts industry. This can help Allison Transmission to build a more holistic ecosystem for Allison Transmission products in the Auto & Truck Parts industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Allison Transmission can develop new processes and procedures in Auto & Truck Parts 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.
Use of Bitcoin and other crypto currencies for transactions in Auto & Truck Parts industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Allison Transmission in the Auto & Truck Parts industry. Now Allison Transmission can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Allison Transmission can use these opportunities to build new business models that can help the communities that Allison Transmission operates in. Secondly it can use opportunities from government spending in Auto & Truck Parts sector.
Better consumer reach
– The expansion of the 5G network will help Allison Transmission to increase its market reach. Allison Transmission 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.
Using analytics as competitive advantage
– Allison Transmission has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Parts sector. This continuous investment in analytics has enabled Allison Transmission to build a competitive advantage using analytics. The analytics driven competitive advantage can help Allison Transmission to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Allison Transmission 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 Allison Transmission to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Allison Transmission can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Parts 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Allison Transmission 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 Allison Transmission to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Allison Transmission External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Allison Transmission are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Allison Transmission 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 Allison Transmission prominent markets.
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.
Consumer confidence and its impact on Allison Transmission 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 Auto & Truck Parts industry and other sectors.
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.
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 Allison Transmission.
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 Allison Transmission in the Auto & Truck Parts sector and impact the bottomline of the organization.
Increasing wage structure of Allison Transmission
– 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 Allison Transmission.
Technology acceleration in Forth Industrial Revolution
– Allison Transmission has witnessed rapid integration of technology during Covid-19 in the Auto & Truck Parts industry. As one of the leading players in the industry, Allison Transmission needs to keep up with the evolution of technology in the Auto & Truck Parts 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 dependence on third party suppliers
– Allison Transmission 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.
Environmental challenges
– Allison Transmission 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. Allison Transmission can take advantage of this fund but it will also bring new competitors in the Auto & Truck Parts industry.
Easy access to finance
– Easy access to finance in Auto & Truck Parts industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Allison Transmission can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Allison Transmission 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 Auto & Truck Parts industry.
Shortening product life cycle
– it is one of the major threat that Allison Transmission is facing in Auto & Truck Parts sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Allison Transmission Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Allison Transmission 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 Allison Transmission 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 Allison Transmission 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 Allison Transmission 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 Allison Transmission needs to make to build a sustainable competitive advantage.