SWOT Analysis / TOWS Matrix for Covestro ADR (United States)
Based on various researches at Oak Spring University , Covestro ADR is operating in a macro-environment that has been destablized by – increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion,
digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Covestro ADR can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Covestro ADR, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Covestro ADR 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 Covestro ADR can be done for the following purposes –
1. Strategic planning of Covestro ADR
2. Improving business portfolio management of Covestro ADR
3. Assessing feasibility of the new initiative in United States
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Covestro ADR
Strengths of Covestro ADR | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Covestro ADR are -
High switching costs
– The high switching costs that Covestro ADR 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.
Low bargaining power of suppliers
– Suppliers of Covestro ADR in the sector have low bargaining power. Covestro ADR has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Covestro ADR to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Covestro ADR has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Covestro ADR 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.
Ability to recruit top talent
– Covestro ADR is one of the leading players in the 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
– Covestro ADR 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 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.
Sustainable margins compare to other players in industry
– Covestro ADR has clearly differentiated products in the market place. This has enabled Covestro ADR to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Covestro ADR to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of Covestro ADR comprises – understanding the underlying the factors in the 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
– Covestro ADR has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Covestro ADR to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Covestro ADR in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Covestro ADR 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.
Innovation driven organization
– Covestro ADR is one of the most innovative firm in sector.
Learning organization
- Covestro ADR 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 Covestro ADR is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Covestro ADR emphasize – knowledge, initiative, and innovation.
Weaknesses of Covestro ADR | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Covestro ADR are -
Interest costs
– Compare to the competition, Covestro ADR 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 bargaining power of channel partners in industry
– because of the regulatory requirements in United States, Covestro ADR 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 industry.
Ability to respond to the competition
– As the decision making is very deliberative at Covestro ADR, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Covestro ADR has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee of Covestro ADR is just above the 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.
Skills based hiring in industry
– The stress on hiring functional specialists at Covestro ADR 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.
Workers concerns about automation
– As automation is fast increasing in the industry, Covestro ADR 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.
No frontier risks strategy
– From the 10K / annual statement of Covestro ADR, it seems that company is thinking out the frontier risks that can impact 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.
Increasing silos among functional specialists
– The organizational structure of Covestro ADR is dominated by functional specialists. It is not different from other players in the industry, but Covestro ADR needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Covestro ADR to focus more on services in the industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Covestro ADR is slow explore the new channels of communication. These new channels of communication can help Covestro ADR to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Covestro ADR products
– To increase the profitability and margins on the products, Covestro ADR needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Covestro ADR supply chain. Even after few cautionary changes, Covestro ADR is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Covestro ADR vulnerable to further global disruptions in South East Asia.
Covestro ADR Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Covestro ADR are -
Loyalty marketing
– Covestro ADR 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.
Developing new processes and practices
– Covestro ADR can develop new processes and procedures in industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Covestro ADR can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Covestro ADR can use the latest technology developments to improve its manufacturing and designing process in 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Covestro ADR 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Covestro ADR 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 Covestro ADR to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Covestro ADR can use these opportunities to build new business models that can help the communities that Covestro ADR operates in. Secondly it can use opportunities from government spending in sector.
Learning at scale
– Online learning technologies has now opened space for Covestro ADR 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Covestro ADR can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Covestro ADR can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Covestro ADR can improve the customer journey of consumers in the 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.
Leveraging digital technologies
– Covestro ADR 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.
Better consumer reach
– The expansion of the 5G network will help Covestro ADR to increase its market reach. Covestro ADR 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.
Threats Covestro ADR External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Covestro ADR are -
Increasing wage structure of Covestro ADR
– 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 Covestro ADR.
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 Covestro ADR.
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 Covestro ADR in the sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Covestro ADR 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 Covestro ADR prominent markets.
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 Covestro ADR business can come under increasing regulations regarding data privacy, data security, etc.
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. Covestro ADR needs to understand the core reasons impacting the 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. Covestro ADR 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 Covestro ADR in industry. The 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.
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.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Covestro ADR can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Covestro ADR 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 industry and other sectors.
High dependence on third party suppliers
– Covestro ADR 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.
Shortening product life cycle
– it is one of the major threat that Covestro ADR is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Covestro ADR Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Covestro ADR 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 Covestro ADR 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 Covestro ADR 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 Covestro ADR 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 Covestro ADR needs to make to build a sustainable competitive advantage.