Innospec (IOSP) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Innospec (United States)

Based on various researches at Oak Spring University , Innospec is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, wage bills are increasing, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , technology disruption, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of Innospec

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

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

The strengths of Innospec are -

Effective Research and Development (R&D)

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

Low bargaining power of suppliers

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

Innovation driven organization

– Innospec is one of the most innovative firm in Chemical Manufacturing sector.

High switching costs

– The high switching costs that Innospec 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 Innospec 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.

Operational resilience

– The operational resilience strategy of Innospec comprises – understanding the underlying the factors in the Chemical Manufacturing 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.

Ability to lead change in Chemical Manufacturing

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

Training and development

– Innospec has one of the best training and development program in Basic Materials 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.

Superior customer experience

– The customer experience strategy of Innospec in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Diverse revenue streams

– Innospec is present in almost all the verticals within the Chemical Manufacturing industry. This has provided Innospec 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.

Strong track record of project management in the Chemical Manufacturing industry

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

Highly skilled collaborators

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

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

The weaknesses of Innospec are -

High dependence on Innospec ‘s star products

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

Ability to respond to the competition

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

Interest costs

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

Employees’ less understanding of Innospec strategy

– From the outside it seems that the employees of Innospec 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.

Skills based hiring in Chemical Manufacturing industry

– The stress on hiring functional specialists at Innospec 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 Chemical Manufacturing industry, Innospec 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

– Innospec 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.

Slow decision making process

– As mentioned earlier in the report, Innospec has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Innospec 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.

Compensation and incentives

– The revenue per employee of Innospec is just above the Chemical Manufacturing 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.

High operating costs

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

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

The opportunities of Innospec are -

Developing new processes and practices

– Innospec can develop new processes and procedures in Chemical Manufacturing 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.

Creating value in data economy

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

Increase in government spending

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

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 Innospec 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.

Buying journey improvements

– Innospec can improve the customer journey of consumers in the Chemical Manufacturing 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.

Loyalty marketing

– Innospec 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 Innospec in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.

Low interest rates

– Even though inflation is raising its head in most developed economies, Innospec 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.

Learning at scale

– Online learning technologies has now opened space for Innospec 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 Chemical Manufacturing industry

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

Remote work and new talent hiring opportunities

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

Reforming the budgeting process

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

Leveraging digital technologies

– Innospec 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.

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

The threats of Innospec are -

High dependence on third party suppliers

– Innospec 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Innospec in Chemical Manufacturing industry. The Chemical Manufacturing 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.

Technology acceleration in Forth Industrial Revolution

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

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

Increasing wage structure of Innospec

– 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 Innospec.

Barriers of entry lowering

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

Environmental challenges

– Innospec 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. Innospec can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.

Shortening product life cycle

– it is one of the major threat that Innospec is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Innospec in the Chemical Manufacturing sector and impact the bottomline of the organization.

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 Innospec.

Stagnating economy with rate increase

– Innospec 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 Chemical Manufacturing industry.

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. Innospec needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

Increasing international competition and downward pressure on margins

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

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Weighted SWOT Analysis of Innospec Template, Example

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

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