Danaos (DAC) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Danaos (United States)

Based on various researches at Oak Spring University , Danaos is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, increasing household debt because of falling income levels, 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, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of Danaos

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

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

The strengths of Danaos are -

Learning organization

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

Highly skilled collaborators

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

High brand equity

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

Organizational Resilience of Danaos

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

Ability to recruit top talent

– Danaos is one of the leading players in the Water Transportation 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

– Danaos 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 Water Transportation 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 Water Transportation industry

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

Training and development

– Danaos has one of the best training and development program in Transportation 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.

Diverse revenue streams

– Danaos is present in almost all the verticals within the Water Transportation industry. This has provided Danaos 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.

Successful track record of launching new products

– Danaos has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Danaos 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 Water Transportation industry

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

Low bargaining power of suppliers

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

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

The weaknesses of Danaos are -

No frontier risks strategy

– From the 10K / annual statement of Danaos, it seems that company is thinking out the frontier risks that can impact Water Transportation 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.

Ability to respond to the competition

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

Workers concerns about automation

– As automation is fast increasing in the Water Transportation industry, Danaos 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 Water Transportation industry

– The stress on hiring functional specialists at Danaos 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.

Interest costs

– Compare to the competition, Danaos 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.

Increasing silos among functional specialists

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

Need for greater diversity

– Danaos 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 Danaos ‘s star products

– The top 2 products and services of Danaos still accounts for major business revenue. This dependence on star products in Water Transportation industry has resulted into insufficient focus on developing new products, even though Danaos has relatively successful track record of launching new products.

High operating costs

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

High cash cycle compare to competitors

Danaos has a high cash cycle compare to other players in the Water Transportation 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 Danaos is just above the Water Transportation 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.

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

The opportunities of Danaos are -

Developing new processes and practices

– Danaos can develop new processes and procedures in Water Transportation 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.

Better consumer reach

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

Use of Bitcoin and other crypto currencies for transactions in Water Transportation industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Danaos in the Water Transportation industry. Now Danaos 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 Danaos can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Creating value in data economy

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

Manufacturing automation

– Danaos can use the latest technology developments to improve its manufacturing and designing process in Water Transportation 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.

Buying journey improvements

– Danaos can improve the customer journey of consumers in the Water Transportation 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.

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. Danaos can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Leveraging digital technologies

– Danaos 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.

Using analytics as competitive advantage

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

Remote work and new talent hiring opportunities

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

Redefining models of collaboration and team work

– As explained in the weaknesses section, Danaos is facing challenges because of the dominance of functional experts in the organization. Danaos can utilize new technology in the field of Water Transportation industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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

The threats of Danaos are -

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 Danaos in the Water Transportation sector and impact the bottomline of the organization.

Learning curve for new practices

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

Technology acceleration in Forth Industrial Revolution

– Danaos has witnessed rapid integration of technology during Covid-19 in the Water Transportation industry. As one of the leading players in the industry, Danaos needs to keep up with the evolution of technology in the Water Transportation 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.

Easy access to finance

– Easy access to finance in Water Transportation industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Danaos can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

High dependence on third party suppliers

– Danaos 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.

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.

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.

Barriers of entry lowering

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

Increasing wage structure of Danaos

– 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 Danaos.

Environmental challenges

– Danaos 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. Danaos can take advantage of this fund but it will also bring new competitors in the Water Transportation industry.

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

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Danaos 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 Danaos prominent markets.

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. Danaos needs to understand the core reasons impacting the Water Transportation industry. This will help it in building a better workplace.

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Weighted SWOT Analysis of Danaos Template, Example

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

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