Alstom (AOMFF) SWOT Analysis / TOWS Matrix / MBA Resources
Conglomerates
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Alstom (United States)
Based on various researches at Oak Spring University , Alstom is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, increasing government debt because of Covid-19 spendings, wage bills are increasing, increasing commodity prices, cloud computing is disrupting traditional business models,
supply chains are disrupted by pandemic , there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Alstom can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alstom, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alstom 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 Alstom can be done for the following purposes –
1. Strategic planning of Alstom
2. Improving business portfolio management of Alstom
3. Assessing feasibility of the new initiative in United States
4. Making a Conglomerates sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Alstom
Strengths of Alstom | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alstom are -
High brand equity
– Alstom has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Alstom to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Alstom 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 Alstom is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Alstom emphasize – knowledge, initiative, and innovation.
Analytics focus
– Alstom 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 Conglomerates 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.
Ability to lead change in Conglomerates
– Alstom is one of the leading players in the Conglomerates industry in United States. Over the years it has not only transformed the business landscape in the Conglomerates industry in United States but also across the existing markets. The ability to lead change has enabled Alstom in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Alstom has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Alstom staying ahead in the Conglomerates industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Alstom 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.
Low bargaining power of suppliers
– Suppliers of Alstom in the Conglomerates sector have low bargaining power. Alstom has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Alstom to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Alstom is present in almost all the verticals within the Conglomerates industry. This has provided Alstom 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.
High switching costs
– The high switching costs that Alstom 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.
Sustainable margins compare to other players in Conglomerates industry
– Alstom has clearly differentiated products in the market place. This has enabled Alstom to fetch slight price premium compare to the competitors in the Conglomerates industry. The sustainable margins have also helped Alstom to invest into research and development (R&D) and innovation.
Organizational Resilience of Alstom
– The covid-19 pandemic has put organizational resilience at the centre of everthing Alstom does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Conglomerates industry
– Alstom is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Alstom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alstom are -
Skills based hiring in Conglomerates industry
– The stress on hiring functional specialists at Alstom 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.
Interest costs
– Compare to the competition, Alstom 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.
No frontier risks strategy
– From the 10K / annual statement of Alstom, it seems that company is thinking out the frontier risks that can impact Conglomerates 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.
High bargaining power of channel partners in Conglomerates industry
– because of the regulatory requirements in United States, Alstom 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 Conglomerates 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 Alstom supply chain. Even after few cautionary changes, Alstom is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Alstom vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Alstom is dominated by functional specialists. It is not different from other players in the Conglomerates industry, but Alstom needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Alstom to focus more on services in the Conglomerates industry rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee of Alstom is just above the Conglomerates 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.
Workers concerns about automation
– As automation is fast increasing in the Conglomerates industry, Alstom needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Aligning sales with marketing
– From the outside it seems that Alstom needs to have more collaboration between its sales team and marketing team. Sales professionals in the Conglomerates industry have deep experience in developing customer relationships. Marketing department at Alstom can leverage the sales team experience to cultivate customer relationships as Alstom is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of United States, Alstom needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on Alstom ‘s star products
– The top 2 products and services of Alstom still accounts for major business revenue. This dependence on star products in Conglomerates industry has resulted into insufficient focus on developing new products, even though Alstom has relatively successful track record of launching new products.
Alstom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Alstom are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Alstom can use these opportunities to build new business models that can help the communities that Alstom operates in. Secondly it can use opportunities from government spending in Conglomerates sector.
Loyalty marketing
– Alstom 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.
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 Alstom 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.
Learning at scale
– Online learning technologies has now opened space for Alstom 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Alstom 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 Alstom to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Conglomerates industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Alstom 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. Alstom 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.
Creating value in data economy
– The success of analytics program of Alstom has opened avenues for new revenue streams for the organization in Conglomerates industry. This can help Alstom to build a more holistic ecosystem for Alstom products in the Conglomerates industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Alstom has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Conglomerates sector. This continuous investment in analytics has enabled Alstom to build a competitive advantage using analytics. The analytics driven competitive advantage can help Alstom to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Alstom 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 Conglomerates industry.
Better consumer reach
– The expansion of the 5G network will help Alstom to increase its market reach. Alstom 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, Alstom 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.
Developing new processes and practices
– Alstom can develop new processes and procedures in Conglomerates 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 Conglomerates industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Alstom in the Conglomerates industry. Now Alstom can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Alstom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Alstom 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 Alstom business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Alstom is facing in Conglomerates sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Alstom 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. Alstom can take advantage of this fund but it will also bring new competitors in the Conglomerates industry.
Consumer confidence and its impact on Alstom 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 Conglomerates industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Conglomerates industry are lowering. It can presents Alstom with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Conglomerates sector.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Alstom 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 Alstom prominent markets.
High dependence on third party suppliers
– Alstom 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Alstom may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Conglomerates sector.
Easy access to finance
– Easy access to finance in Conglomerates industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Alstom can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Alstom 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 Conglomerates industry regulations.
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 Alstom in the Conglomerates sector and impact the bottomline of the organization.
Increasing wage structure of Alstom
– 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 Alstom.
Weighted SWOT Analysis of Alstom Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Alstom 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 Alstom 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 Alstom 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 Alstom 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 Alstom needs to make to build a sustainable competitive advantage.