American Railcar (ARII) SWOT Analysis / TOWS Matrix / MBA Resources
Railroads
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for American Railcar (United States)
Based on various researches at Oak Spring University , American Railcar is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, geopolitical disruptions, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models,
there is increasing trade war between United States & China, 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 American Railcar can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the American Railcar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which American Railcar 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 American Railcar can be done for the following purposes –
1. Strategic planning of American Railcar
2. Improving business portfolio management of American Railcar
3. Assessing feasibility of the new initiative in United States
4. Making a Railroads sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of American Railcar
Strengths of American Railcar | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of American Railcar are -
Training and development
– American Railcar has one of the best training and development program in Transportation 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.
Highly skilled collaborators
– American Railcar has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Railroads industry. Secondly the value chain collaborators of American Railcar have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of American Railcar comprises – understanding the underlying the factors in the Railroads 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.
High switching costs
– The high switching costs that American Railcar 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 American Railcar 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.
Innovation driven organization
– American Railcar is one of the most innovative firm in Railroads sector.
Strong track record of project management in the Railroads industry
– American Railcar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of American Railcar in Railroads industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Railroads industry
– American Railcar has clearly differentiated products in the market place. This has enabled American Railcar to fetch slight price premium compare to the competitors in the Railroads industry. The sustainable margins have also helped American Railcar to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– American Railcar has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – American Railcar staying ahead in the Railroads industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– American Railcar has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled American Railcar to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– American Railcar is one of the leading players in the Railroads 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.
Weaknesses of American Railcar | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American Railcar are -
Employees’ less understanding of American Railcar strategy
– From the outside it seems that the employees of American Railcar 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.
Ability to respond to the competition
– As the decision making is very deliberative at American Railcar, in the dynamic environment of Railroads industry it has struggled to respond to the nimble upstart competition. American Railcar has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on American Railcar ‘s star products
– The top 2 products and services of American Railcar still accounts for major business revenue. This dependence on star products in Railroads industry has resulted into insufficient focus on developing new products, even though American Railcar has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, American Railcar 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 Railroads industry
– The stress on hiring functional specialists at American Railcar 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.
High operating costs
– Compare to the competitors, American Railcar has high operating costs in the Railroads industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract American Railcar lucrative customers.
Lack of clear differentiation of American Railcar products
– To increase the profitability and margins on the products, American Railcar needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
American Railcar has a high cash cycle compare to other players in the Railroads industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– American Railcar 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.
Aligning sales with marketing
– From the outside it seems that American Railcar needs to have more collaboration between its sales team and marketing team. Sales professionals in the Railroads industry have deep experience in developing customer relationships. Marketing department at American Railcar can leverage the sales team experience to cultivate customer relationships as American Railcar is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, American Railcar has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Railroads industry over the last five years. American Railcar 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.
American Railcar Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of American Railcar are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, American Railcar 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 American Railcar 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 American Railcar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of American Railcar has opened avenues for new revenue streams for the organization in Railroads industry. This can help American Railcar to build a more holistic ecosystem for American Railcar products in the Railroads industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, American Railcar can use these opportunities to build new business models that can help the communities that American Railcar operates in. Secondly it can use opportunities from government spending in Railroads sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Railroads industry, but it has also influenced the consumer preferences. American Railcar can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 American Railcar 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 American Railcar 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.
Better consumer reach
– The expansion of the 5G network will help American Railcar to increase its market reach. American Railcar 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.
Buying journey improvements
– American Railcar can improve the customer journey of consumers in the Railroads 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.
Loyalty marketing
– American Railcar 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, American Railcar is facing challenges because of the dominance of functional experts in the organization. American Railcar can utilize new technology in the field of Railroads industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– American Railcar 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.
Developing new processes and practices
– American Railcar can develop new processes and procedures in Railroads 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.
Threats American Railcar External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of American Railcar are -
Easy access to finance
– Easy access to finance in Railroads industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. American Railcar can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Railroads industry are lowering. It can presents American Railcar with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Railroads sector.
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 American Railcar.
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. American Railcar 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for American Railcar in Railroads industry. The Railroads 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.
Technology acceleration in Forth Industrial Revolution
– American Railcar has witnessed rapid integration of technology during Covid-19 in the Railroads industry. As one of the leading players in the industry, American Railcar needs to keep up with the evolution of technology in the Railroads 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.
Shortening product life cycle
– it is one of the major threat that American Railcar is facing in Railroads sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Regulatory challenges
– American Railcar 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 Railroads industry regulations.
Environmental challenges
– American Railcar 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. American Railcar can take advantage of this fund but it will also bring new competitors in the Railroads industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, American Railcar 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 American Railcar prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, American Railcar may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Railroads sector.
Stagnating economy with rate increase
– American Railcar 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 Railroads industry.
Weighted SWOT Analysis of American Railcar Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at American Railcar 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 American Railcar 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 American Railcar 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 American Railcar 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 American Railcar needs to make to build a sustainable competitive advantage.