International Paper (IP) SWOT Analysis / TOWS Matrix / MBA Resources
Paper & Paper Products
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for International Paper (United States)
Based on various researches at Oak Spring University , International Paper is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of International Paper
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that International Paper can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the International Paper, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which International Paper 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 International Paper can be done for the following purposes –
1. Strategic planning of International Paper
2. Improving business portfolio management of International Paper
3. Assessing feasibility of the new initiative in United States
4. Making a Paper & Paper Products sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of International Paper
Strengths of International Paper | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of International Paper are -
Learning organization
- International Paper 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 International Paper is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at International Paper emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the International Paper 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.
Diverse revenue streams
– International Paper is present in almost all the verticals within the Paper & Paper Products industry. This has provided International Paper 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.
Effective Research and Development (R&D)
– International Paper has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – International Paper staying ahead in the Paper & Paper Products industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of International Paper in Paper & Paper Products industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Paper & Paper Products industry
- digital transformation varies from industry to industry. For International Paper digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. International Paper 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.
Ability to recruit top talent
– International Paper is one of the leading players in the Paper & Paper Products 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.
Highly skilled collaborators
– International Paper has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Paper & Paper Products industry. Secondly the value chain collaborators of International Paper have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Paper & Paper Products industry
– International Paper is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of International Paper
– The covid-19 pandemic has put organizational resilience at the centre of everthing International Paper does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that International Paper 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.
Sustainable margins compare to other players in Paper & Paper Products industry
– International Paper has clearly differentiated products in the market place. This has enabled International Paper to fetch slight price premium compare to the competitors in the Paper & Paper Products industry. The sustainable margins have also helped International Paper to invest into research and development (R&D) and innovation.
Weaknesses of International Paper | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of International Paper are -
High bargaining power of channel partners in Paper & Paper Products industry
– because of the regulatory requirements in United States, International Paper 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 Paper & Paper Products industry.
Low market penetration in new markets
– Outside its home market of United States, International Paper needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, International Paper has high operating costs in the Paper & Paper Products industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract International Paper lucrative customers.
Products dominated business model
– Even though International Paper has some of the most successful models in the Paper & Paper Products industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. International Paper should strive to include more intangible value offerings along with its core products and services.
Skills based hiring in Paper & Paper Products industry
– The stress on hiring functional specialists at International Paper 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.
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 International Paper supply chain. Even after few cautionary changes, International Paper is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left International Paper vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at International Paper, in the dynamic environment of Paper & Paper Products industry it has struggled to respond to the nimble upstart competition. International Paper has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
International Paper has a high cash cycle compare to other players in the Paper & Paper Products industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to strategic competitive environment developments
– As International Paper is one of the leading players in the Paper & Paper Products industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Paper & Paper Products industry in last five years.
Compensation and incentives
– The revenue per employee of International Paper is just above the Paper & Paper Products 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.
Need for greater diversity
– International Paper 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.
International Paper Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of International Paper are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects International Paper can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions in Paper & Paper Products industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for International Paper in the Paper & Paper Products industry. Now International Paper can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, International Paper 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 International Paper to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for International Paper 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Paper & Paper Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. International Paper 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. International Paper 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, International Paper 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.
Building a culture of innovation
– managers at International Paper can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Paper & Paper Products industry.
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 International Paper 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
– International Paper 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.
Creating value in data economy
– The success of analytics program of International Paper has opened avenues for new revenue streams for the organization in Paper & Paper Products industry. This can help International Paper to build a more holistic ecosystem for International Paper products in the Paper & Paper Products industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for International Paper in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Paper & Paper Products 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, International Paper can use these opportunities to build new business models that can help the communities that International Paper operates in. Secondly it can use opportunities from government spending in Paper & Paper Products sector.
Developing new processes and practices
– International Paper can develop new processes and procedures in Paper & Paper Products 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.
Threats International Paper External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of International Paper are -
High dependence on third party suppliers
– International Paper 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, International Paper 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 International Paper prominent markets.
Shortening product life cycle
– it is one of the major threat that International Paper is facing in Paper & Paper Products sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. International Paper 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.
Technology acceleration in Forth Industrial Revolution
– International Paper has witnessed rapid integration of technology during Covid-19 in the Paper & Paper Products industry. As one of the leading players in the industry, International Paper needs to keep up with the evolution of technology in the Paper & Paper Products 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Paper & Paper Products industry are lowering. It can presents International Paper with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Paper & Paper Products 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 International Paper business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of International Paper
– 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 International Paper.
Stagnating economy with rate increase
– International Paper 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 Paper & Paper Products industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, International Paper may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Paper & Paper Products sector.
Regulatory challenges
– International Paper 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 Paper & Paper Products industry regulations.
Consumer confidence and its impact on International Paper 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 Paper & Paper Products industry and other sectors.
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. International Paper needs to understand the core reasons impacting the Paper & Paper Products industry. This will help it in building a better workplace.
Weighted SWOT Analysis of International Paper Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at International Paper 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 International Paper 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 International Paper 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 International Paper 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 International Paper needs to make to build a sustainable competitive advantage.