GATX (GATX) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for GATX (United States)

Based on various researches at Oak Spring University , GATX is operating in a macro-environment that has been destablized by – geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, there is backlash against globalization, wage bills are increasing, etc

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Introduction to SWOT Analysis of GATX

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

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

The strengths of GATX are -

Analytics focus

– GATX 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 Rental & Leasing 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 Rental & Leasing industry

– GATX has clearly differentiated products in the market place. This has enabled GATX to fetch slight price premium compare to the competitors in the Rental & Leasing industry. The sustainable margins have also helped GATX to invest into research and development (R&D) and innovation.

High switching costs

– The high switching costs that GATX has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.

Digital Transformation in Rental & Leasing industry

- digital transformation varies from industry to industry. For GATX digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. GATX 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 GATX comprises – understanding the underlying the factors in the Rental & Leasing 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.

Strong track record of project management in the Rental & Leasing industry

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

Effective Research and Development (R&D)

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

Diverse revenue streams

– GATX is present in almost all the verticals within the Rental & Leasing industry. This has provided GATX 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.

High brand equity

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

Low bargaining power of suppliers

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

Successful track record of launching new products

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

Highly skilled collaborators

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

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

The weaknesses of GATX are -

High operating costs

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

Aligning sales with marketing

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

Compensation and incentives

– The revenue per employee of GATX is just above the Rental & Leasing 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.

Products dominated business model

– Even though GATX has some of the most successful models in the Rental & Leasing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. GATX should strive to include more intangible value offerings along with its core products and services.

Ability to respond to the competition

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

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

Low market penetration in new markets

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

Slow to strategic competitive environment developments

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

Employees’ less understanding of GATX strategy

– From the outside it seems that the employees of GATX don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

Lack of clear differentiation of GATX products

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

High cash cycle compare to competitors

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

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

The opportunities of GATX are -

Increase in government spending

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

Better consumer reach

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

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

Buying journey improvements

– GATX can improve the customer journey of consumers in the Rental & Leasing 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.

Harnessing reconfiguration of the global supply chains

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

Redefining models of collaboration and team work

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

Learning at scale

– Online learning technologies has now opened space for GATX 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.

Use of Bitcoin and other crypto currencies for transactions in Rental & Leasing industry

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

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Rental & Leasing industry, but it has also influenced the consumer preferences. GATX can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Lowering marketing communication costs

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

Manufacturing automation

– GATX can use the latest technology developments to improve its manufacturing and designing process in Rental & Leasing 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Rental & Leasing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. GATX 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. GATX 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.

Loyalty marketing

– GATX 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.

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

The threats of GATX are -

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. GATX 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.

Consumer confidence and its impact on GATX 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 Rental & Leasing industry and other sectors.

Environmental challenges

– GATX 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. GATX can take advantage of this fund but it will also bring new competitors in the Rental & Leasing industry.

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 GATX.

Easy access to finance

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

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for GATX in Rental & Leasing industry. The Rental & Leasing 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.

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 GATX in the Rental & Leasing sector and impact the bottomline of the organization.

Technology acceleration in Forth Industrial Revolution

– GATX has witnessed rapid integration of technology during Covid-19 in the Rental & Leasing industry. As one of the leading players in the industry, GATX needs to keep up with the evolution of technology in the Rental & Leasing 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.

Regulatory challenges

– GATX 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 Rental & Leasing industry regulations.

Increasing wage structure of GATX

– 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 GATX.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Rental & Leasing industry are lowering. It can presents GATX with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Rental & Leasing 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 GATX business can come under increasing regulations regarding data privacy, data security, etc.

High dependence on third party suppliers

– GATX 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.

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Weighted SWOT Analysis of GATX Template, Example

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

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