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 – supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, increasing household debt because of falling income levels, there is backlash against globalization, geopolitical disruptions, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -

Low bargaining power of suppliers

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

High brand equity

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

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.

Cross disciplinary teams

– Horizontal connected teams at the Canadian National Railway are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Effective Research and Development (R&D)

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

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.

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.

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.

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.

Ability to lead change in Railroads

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

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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 -

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.

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.

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.

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.

Lack of clear differentiation of Canadian National Railway products

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

Aligning sales with marketing

– From the outside it seems that Canadian National Railway needs to have more collaboration between its sales team and marketing team. Sales professionals in the Railroads industry have deep experience in developing customer relationships. Marketing department at Canadian National Railway can leverage the sales team experience to cultivate customer relationships as Canadian National Railway is planning to shift buying processes online.

Increasing silos among functional specialists

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

High cash cycle compare to competitors

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

Compensation and incentives

– The revenue per employee of Canadian National Railway is just above the Railroads industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

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.

Low market penetration in new markets

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

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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 -

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.

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.

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.

Remote work and new talent hiring opportunities

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

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.

Better consumer reach

– The expansion of the 5G network will help Canadian National Railway to increase its market reach. Canadian National Railway 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.

Reforming the budgeting process

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

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.

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.

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.

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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Canadian National Railway 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.

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.

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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 -

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.

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 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.

Stagnating economy with rate increase

– Canadian National Railway 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 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.

Increasing wage structure of Canadian National Railway

– 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 Canadian National Railway.

Regulatory challenges

– Canadian National Railway 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 Railroads industry regulations.

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.

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.

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.

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.

Learning curve for new practices

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

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.

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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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