Brown Forman (BFb) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Brown Forman (United States)

Based on various researches at Oak Spring University , Brown Forman is operating in a macro-environment that has been destablized by – geopolitical disruptions, supply chains are disrupted by pandemic , technology disruption, wage bills are increasing, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, there is backlash against globalization, etc

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Introduction to SWOT Analysis of Brown Forman

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

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

The strengths of Brown Forman are -

High switching costs

– The high switching costs that Brown Forman 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.

Operational resilience

– The operational resilience strategy of Brown Forman comprises – understanding the underlying the factors in the Beverages (Alcoholic) 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.

Organizational Resilience of Brown Forman

– The covid-19 pandemic has put organizational resilience at the centre of everthing Brown Forman does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Ability to recruit top talent

– Brown Forman is one of the leading players in the Beverages (Alcoholic) 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.

High brand equity

– Brown Forman has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Brown Forman to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Effective Research and Development (R&D)

– Brown Forman has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Brown Forman staying ahead in the Beverages (Alcoholic) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Ability to lead change in Beverages (Alcoholic)

– Brown Forman is one of the leading players in the Beverages (Alcoholic) industry in United States. Over the years it has not only transformed the business landscape in the Beverages (Alcoholic) industry in United States but also across the existing markets. The ability to lead change has enabled Brown Forman in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Low bargaining power of suppliers

– Suppliers of Brown Forman in the Consumer/Non-Cyclical sector have low bargaining power. Brown Forman has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Brown Forman to manage not only supply disruptions but also source products at highly competitive prices.

Strong track record of project management in the Beverages (Alcoholic) industry

– Brown Forman is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Highly skilled collaborators

– Brown Forman has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Beverages (Alcoholic) industry. Secondly the value chain collaborators of Brown Forman have helped the firm to develop new products and bring them quickly to the marketplace.

Analytics focus

– Brown Forman 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 Beverages (Alcoholic) 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.

Sustainable margins compare to other players in Beverages (Alcoholic) industry

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

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

The weaknesses of Brown Forman are -

Low market penetration in new markets

– Outside its home market of United States, Brown Forman needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Lack of clear differentiation of Brown Forman products

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

Increasing silos among functional specialists

– The organizational structure of Brown Forman is dominated by functional specialists. It is not different from other players in the Beverages (Alcoholic) industry, but Brown Forman needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Brown Forman to focus more on services in the Beverages (Alcoholic) industry rather than just following the product oriented approach.

Need for greater diversity

– Brown Forman 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.

High dependence on Brown Forman ‘s star products

– The top 2 products and services of Brown Forman still accounts for major business revenue. This dependence on star products in Beverages (Alcoholic) industry has resulted into insufficient focus on developing new products, even though Brown Forman has relatively successful track record of launching new products.

Employees’ less understanding of Brown Forman strategy

– From the outside it seems that the employees of Brown Forman 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.

Capital Spending Reduction

– Even during the low interest decade, Brown Forman 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 Beverages (Alcoholic) industry using digital technology.

High cash cycle compare to competitors

Brown Forman has a high cash cycle compare to other players in the Beverages (Alcoholic) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Slow to strategic competitive environment developments

– As Brown Forman is one of the leading players in the Beverages (Alcoholic) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Beverages (Alcoholic) industry in last five years.

Slow decision making process

– As mentioned earlier in the report, Brown Forman has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Beverages (Alcoholic) industry over the last five years. Brown Forman 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 harness new channels of communication

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

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

The opportunities of Brown Forman are -

Loyalty marketing

– Brown Forman 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, Brown Forman is facing challenges because of the dominance of functional experts in the organization. Brown Forman can utilize new technology in the field of Beverages (Alcoholic) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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 Brown Forman 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.

Buying journey improvements

– Brown Forman can improve the customer journey of consumers in the Beverages (Alcoholic) 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, Brown Forman 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.

Learning at scale

– Online learning technologies has now opened space for Brown Forman 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Beverages (Alcoholic) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Brown Forman 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. Brown Forman 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.

Using analytics as competitive advantage

– Brown Forman has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Beverages (Alcoholic) sector. This continuous investment in analytics has enabled Brown Forman to build a competitive advantage using analytics. The analytics driven competitive advantage can help Brown Forman to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Beverages (Alcoholic) industry, but it has also influenced the consumer preferences. Brown Forman can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Remote work and new talent hiring opportunities

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

Creating value in data economy

– The success of analytics program of Brown Forman has opened avenues for new revenue streams for the organization in Beverages (Alcoholic) industry. This can help Brown Forman to build a more holistic ecosystem for Brown Forman products in the Beverages (Alcoholic) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Leveraging digital technologies

– Brown Forman 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.

Reforming the budgeting process

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

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

The threats of Brown Forman are -

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Brown Forman may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Beverages (Alcoholic) sector.

Technology acceleration in Forth Industrial Revolution

– Brown Forman has witnessed rapid integration of technology during Covid-19 in the Beverages (Alcoholic) industry. As one of the leading players in the industry, Brown Forman needs to keep up with the evolution of technology in the Beverages (Alcoholic) 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.

Environmental challenges

– Brown Forman 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. Brown Forman can take advantage of this fund but it will also bring new competitors in the Beverages (Alcoholic) industry.

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 Brown Forman in the Beverages (Alcoholic) sector and impact the bottomline of the organization.

Consumer confidence and its impact on Brown Forman 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 Beverages (Alcoholic) industry and other sectors.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Brown Forman 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 Brown Forman prominent markets.

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. Brown Forman needs to understand the core reasons impacting the Beverages (Alcoholic) industry. This will help it in building a better workplace.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Brown Forman in Beverages (Alcoholic) industry. The Beverages (Alcoholic) 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.

Stagnating economy with rate increase

– Brown Forman 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 Beverages (Alcoholic) industry.

Increasing wage structure of Brown Forman

– 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 Brown Forman.

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

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. Brown Forman 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.

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.

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Weighted SWOT Analysis of Brown Forman Template, Example

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

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