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 – there is backlash against globalization, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, 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 -

Learning organization

- Brown Forman 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 Brown Forman is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Brown Forman emphasize – knowledge, initiative, and innovation.

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.

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.

Training and development

– Brown Forman has one of the best training and development program in Consumer/Non-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.

Successful track record of launching new products

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

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.

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.

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.

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.

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.

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.

Diverse revenue streams

– Brown Forman is present in almost all the verticals within the Beverages (Alcoholic) industry. This has provided Brown Forman 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.

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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 -

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.

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.

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.

No frontier risks strategy

– From the 10K / annual statement of Brown Forman, it seems that company is thinking out the frontier risks that can impact Beverages (Alcoholic) 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 Beverages (Alcoholic) industry

– because of the regulatory requirements in United States, Brown Forman 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 Beverages (Alcoholic) industry.

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.

Skills based hiring in Beverages (Alcoholic) industry

– The stress on hiring functional specialists at Brown Forman 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.

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.

Ability to respond to the competition

– As the decision making is very deliberative at Brown Forman, in the dynamic environment of Beverages (Alcoholic) industry it has struggled to respond to the nimble upstart competition. Brown Forman has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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.

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.

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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 -

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.

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.

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.

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.

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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Brown Forman in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Beverages (Alcoholic) industry, and it will provide faster access to the consumers.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Brown Forman can use these opportunities to build new business models that can help the communities that Brown Forman operates in. Secondly it can use opportunities from government spending in Beverages (Alcoholic) sector.

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.

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.

Building a culture of innovation

– managers at Brown Forman 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 Beverages (Alcoholic) industry.

Harnessing reconfiguration of the global supply chains

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

Use of Bitcoin and other crypto currencies for transactions in Beverages (Alcoholic) industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Brown Forman in the Beverages (Alcoholic) industry. Now Brown Forman can target international markets with far fewer capital restrictions requirements than the existing system.

Manufacturing automation

– Brown Forman can use the latest technology developments to improve its manufacturing and designing process in Beverages (Alcoholic) 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.

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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 -

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.

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.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Beverages (Alcoholic) industry are lowering. It can presents Brown Forman with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Beverages (Alcoholic) 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.

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.

Easy access to finance

– Easy access to finance in Beverages (Alcoholic) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Brown Forman can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

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.

Shortening product life cycle

– it is one of the major threat that Brown Forman is facing in Beverages (Alcoholic) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 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

– Brown Forman 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 Beverages (Alcoholic) industry regulations.

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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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