Methanex (MX) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Methanex (Canada)

Based on various researches at Oak Spring University , Methanex is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing transportation and logistics costs, supply chains are disrupted by pandemic , technology disruption, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of Methanex

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

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

The strengths of Methanex are -

Operational resilience

– The operational resilience strategy of Methanex comprises – understanding the underlying the factors in the Chemical Manufacturing 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 brand equity

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

Strong track record of project management in the Chemical Manufacturing industry

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

Analytics focus

– Methanex 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 Chemical Manufacturing industry. The technology infrastructure of Canada 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.

High switching costs

– The high switching costs that Methanex 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.

Digital Transformation in Chemical Manufacturing industry

- digital transformation varies from industry to industry. For Methanex digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Methanex has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Organizational Resilience of Methanex

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

Training and development

– Methanex has one of the best training and development program in Basic Materials 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.

Low bargaining power of suppliers

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

Superior customer experience

– The customer experience strategy of Methanex in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Highly skilled collaborators

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

Learning organization

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

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

The weaknesses of Methanex are -

Workers concerns about automation

– As automation is fast increasing in the Chemical Manufacturing industry, Methanex 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.

Skills based hiring in Chemical Manufacturing industry

– The stress on hiring functional specialists at Methanex 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.

Low market penetration in new markets

– Outside its home market of Canada, Methanex needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Ability to respond to the competition

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

High bargaining power of channel partners in Chemical Manufacturing industry

– because of the regulatory requirements in Canada, Methanex 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 Chemical Manufacturing industry.

Slow decision making process

– As mentioned earlier in the report, Methanex has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Methanex 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.

Interest costs

– Compare to the competition, Methanex 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.

High cash cycle compare to competitors

Methanex has a high cash cycle compare to other players in the Chemical Manufacturing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Lack of clear differentiation of Methanex products

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

High operating costs

– Compare to the competitors, Methanex has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Methanex lucrative customers.

Slow to harness new channels of communication

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

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

The opportunities of Methanex are -

Leveraging digital technologies

– Methanex 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.

Buying journey improvements

– Methanex can improve the customer journey of consumers in the Chemical Manufacturing 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

– Methanex 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, Methanex is facing challenges because of the dominance of functional experts in the organization. Methanex can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Learning at scale

– Online learning technologies has now opened space for Methanex 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.

Reforming the budgeting process

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

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

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

Using analytics as competitive advantage

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Methanex in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Methanex 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. Methanex 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.

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 Methanex 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Methanex 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.

Remote work and new talent hiring opportunities

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

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

The threats of Methanex are -

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. Methanex needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

Learning curve for new practices

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

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 Methanex in the Chemical Manufacturing sector and impact the bottomline of the organization.

Consumer confidence and its impact on Methanex 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 Chemical Manufacturing industry and other sectors.

Environmental challenges

– Methanex 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. Methanex can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents Methanex with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Methanex in Chemical Manufacturing industry. The Chemical Manufacturing 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.

Increasing wage structure of Methanex

– 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 Methanex.

High dependence on third party suppliers

– Methanex 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.

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

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.

Shortening product life cycle

– it is one of the major threat that Methanex is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Stagnating economy with rate increase

– Methanex 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 Chemical Manufacturing industry.

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Weighted SWOT Analysis of Methanex Template, Example

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

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