BorgWarner (BWA) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Parts
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for BorgWarner (United States)
Based on various researches at Oak Spring University , BorgWarner is operating in a macro-environment that has been destablized by – increasing energy prices, central banks are concerned over increasing inflation, technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing,
increasing government debt because of Covid-19 spendings, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that BorgWarner can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the BorgWarner, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which BorgWarner 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 BorgWarner can be done for the following purposes –
1. Strategic planning of BorgWarner
2. Improving business portfolio management of BorgWarner
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 BorgWarner
Strengths of BorgWarner | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of BorgWarner are -
Innovation driven organization
– BorgWarner is one of the most innovative firm in Auto & Truck Parts sector.
Low bargaining power of suppliers
– Suppliers of BorgWarner in the Consumer Cyclical sector have low bargaining power. BorgWarner has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps BorgWarner to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of BorgWarner
– The covid-19 pandemic has put organizational resilience at the centre of everthing BorgWarner does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– BorgWarner 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.
Sustainable margins compare to other players in Auto & Truck Parts industry
– BorgWarner has clearly differentiated products in the market place. This has enabled BorgWarner to fetch slight price premium compare to the competitors in the Auto & Truck Parts industry. The sustainable margins have also helped BorgWarner to invest into research and development (R&D) and innovation.
Diverse revenue streams
– BorgWarner is present in almost all the verticals within the Auto & Truck Parts industry. This has provided BorgWarner 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.
Learning organization
- BorgWarner 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 BorgWarner is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at BorgWarner emphasize – knowledge, initiative, and innovation.
Ability to lead change in Auto & Truck Parts
– BorgWarner is one of the leading players in the Auto & Truck Parts industry in United States. Over the years it has not only transformed the business landscape in the Auto & Truck Parts industry in United States but also across the existing markets. The ability to lead change has enabled BorgWarner in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– BorgWarner 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.
Strong track record of project management in the Auto & Truck Parts industry
– BorgWarner is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– BorgWarner has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled BorgWarner to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of BorgWarner in Auto & Truck Parts industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of BorgWarner | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of BorgWarner are -
High cash cycle compare to competitors
BorgWarner has a high cash cycle compare to other players in the Auto & Truck Parts 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 BorgWarner 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.
Skills based hiring in Auto & Truck Parts industry
– The stress on hiring functional specialists at BorgWarner 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.
Need for greater diversity
– BorgWarner 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 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 BorgWarner supply chain. Even after few cautionary changes, BorgWarner is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left BorgWarner vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Auto & Truck Parts industry
– because of the regulatory requirements in United States, BorgWarner 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.
Slow decision making process
– As mentioned earlier in the report, BorgWarner 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. BorgWarner 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.
No frontier risks strategy
– From the 10K / annual statement of BorgWarner, it seems that company is thinking out the frontier risks that can impact Auto & Truck Parts 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, BorgWarner is slow explore the new channels of communication. These new channels of communication can help BorgWarner to provide better information regarding Auto & Truck Parts products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of BorgWarner products
– To increase the profitability and margins on the products, BorgWarner needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on BorgWarner ‘s star products
– The top 2 products and services of BorgWarner still accounts for major business revenue. This dependence on star products in Auto & Truck Parts industry has resulted into insufficient focus on developing new products, even though BorgWarner has relatively successful track record of launching new products.
BorgWarner Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of BorgWarner are -
Low interest rates
– Even though inflation is raising its head in most developed economies, BorgWarner 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.
Buying journey improvements
– BorgWarner 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.
Manufacturing automation
– BorgWarner 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.
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 BorgWarner in the Auto & Truck Parts industry. Now BorgWarner can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects BorgWarner can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, BorgWarner can use these opportunities to build new business models that can help the communities that BorgWarner operates in. Secondly it can use opportunities from government spending in Auto & Truck Parts sector.
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. BorgWarner 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. BorgWarner 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
– BorgWarner 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 BorgWarner to build a competitive advantage using analytics. The analytics driven competitive advantage can help BorgWarner to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 BorgWarner 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, BorgWarner is facing challenges because of the dominance of functional experts in the organization. BorgWarner can utilize new technology in the field of Auto & Truck Parts industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for BorgWarner 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 BorgWarner to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help BorgWarner to increase its market reach. BorgWarner 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.
Creating value in data economy
– The success of analytics program of BorgWarner has opened avenues for new revenue streams for the organization in Auto & Truck Parts industry. This can help BorgWarner to build a more holistic ecosystem for BorgWarner products in the Auto & Truck Parts industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats BorgWarner External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of BorgWarner are -
Regulatory challenges
– BorgWarner 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 Auto & Truck Parts industry regulations.
Increasing wage structure of BorgWarner
– 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 BorgWarner.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, BorgWarner 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 BorgWarner prominent markets.
Consumer confidence and its impact on BorgWarner 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Auto & Truck Parts industry are lowering. It can presents BorgWarner with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Auto & Truck Parts sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for BorgWarner in Auto & Truck Parts industry. The Auto & Truck Parts 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.
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 BorgWarner.
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 BorgWarner in the Auto & Truck Parts sector and impact the bottomline of the organization.
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 BorgWarner business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– BorgWarner 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. BorgWarner can take advantage of this fund but it will also bring new competitors in the Auto & Truck Parts industry.
Shortening product life cycle
– it is one of the major threat that BorgWarner is facing in Auto & Truck Parts 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, BorgWarner may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Auto & Truck Parts sector.
Weighted SWOT Analysis of BorgWarner Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at BorgWarner 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 BorgWarner 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 BorgWarner 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 BorgWarner 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 BorgWarner needs to make to build a sustainable competitive advantage.