Canadian National Railway (CNI) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Canadian National Railway (United States)

Based on various researches at Oak Spring University , Canadian National Railway is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, there is backlash against globalization, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , increasing commodity prices, etc

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Introduction to SWOT Analysis of Canadian National Railway

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Canadian National Railway can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Canadian National Railway, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Canadian National Railway 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 Canadian National Railway can be done for the following purposes –
1. Strategic planning of Canadian National Railway
2. Improving business portfolio management of Canadian National Railway
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 Canadian National Railway

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Strengths of Canadian National Railway | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Canadian National Railway are -

High switching costs

– The high switching costs that Canadian National Railway 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.

Organizational Resilience of Canadian National Railway

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

Superior customer experience

– The customer experience strategy of Canadian National Railway in Railroads industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Highly skilled collaborators

– Canadian National Railway 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 Canadian National Railway have helped the firm to develop new products and bring them quickly to the marketplace.

Successful track record of launching new products

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

Digital Transformation in Railroads industry

- digital transformation varies from industry to industry. For Canadian National Railway digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Canadian National Railway 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.

Innovation driven organization

– Canadian National Railway is one of the most innovative firm in Railroads sector.

Diverse revenue streams

– Canadian National Railway is present in almost all the verticals within the Railroads industry. This has provided Canadian National Railway 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.

Ability to recruit top talent

– Canadian National Railway 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.

Analytics focus

– Canadian National Railway 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 Railroads 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 Canadian National Railway 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.

Learning organization

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

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Weaknesses of Canadian National Railway | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Canadian National Railway are -

Workers concerns about automation

– As automation is fast increasing in the Railroads industry, Canadian National Railway 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.

Need for greater diversity

– Canadian National Railway 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 Canadian National Railway supply chain. Even after few cautionary changes, Canadian National Railway is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Canadian National Railway vulnerable to further global disruptions in South East Asia.

Slow to harness new channels of communication

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

No frontier risks strategy

– From the 10K / annual statement of Canadian National Railway, it seems that company is thinking out the frontier risks that can impact Railroads 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.

Interest costs

– Compare to the competition, Canadian National Railway 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.

Capital Spending Reduction

– Even during the low interest decade, Canadian National Railway 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 Railroads industry using digital technology.

Ability to respond to the competition

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

Slow decision making process

– As mentioned earlier in the report, Canadian National Railway 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. Canadian National Railway 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 strategic competitive environment developments

– As Canadian National Railway is one of the leading players in the Railroads industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Railroads industry in last five years.

Skills based hiring in Railroads industry

– The stress on hiring functional specialists at Canadian National Railway 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.

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Canadian National Railway Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Canadian National Railway are -

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Railroads industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Canadian National Railway 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. Canadian National Railway 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.

Building a culture of innovation

– managers at Canadian National Railway 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 Railroads industry.

Buying journey improvements

– Canadian National Railway 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.

Using analytics as competitive advantage

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

Leveraging digital technologies

– Canadian National Railway 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.

Creating value in data economy

– The success of analytics program of Canadian National Railway has opened avenues for new revenue streams for the organization in Railroads industry. This can help Canadian National Railway to build a more holistic ecosystem for Canadian National Railway products in the Railroads industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Harnessing reconfiguration of the global supply chains

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

Lowering marketing communication costs

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

Loyalty marketing

– Canadian National Railway 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 Canadian National Railway 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.

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. Canadian National Railway can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Use of Bitcoin and other crypto currencies for transactions in Railroads industry

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Canadian National Railway can use these opportunities to build new business models that can help the communities that Canadian National Railway operates in. Secondly it can use opportunities from government spending in Railroads sector.

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Threats Canadian National Railway External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Canadian National Railway 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. Canadian National Railway needs to understand the core reasons impacting the Railroads industry. This will help it in building a better workplace.

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. Canadian National Railway 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 Canadian National Railway 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.

Consumer confidence and its impact on Canadian National Railway 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 Railroads industry and other sectors.

Barriers of entry lowering

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

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 Canadian National Railway business can come under increasing regulations regarding data privacy, data security, 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.

Environmental challenges

– Canadian National Railway 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. Canadian National Railway can take advantage of this fund but it will also bring new competitors in the Railroads industry.

High dependence on third party suppliers

– Canadian National Railway 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.

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 Canadian National Railway in the Railroads sector and impact the bottomline of the organization.

Technology acceleration in Forth Industrial Revolution

– Canadian National Railway has witnessed rapid integration of technology during Covid-19 in the Railroads industry. As one of the leading players in the industry, Canadian National Railway 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 Canadian National Railway is facing in Railroads sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Canadian National Railway 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 Canadian National Railway prominent markets.

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Weighted SWOT Analysis of Canadian National Railway Template, Example

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

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