Illinois Tool Works (ITW) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Parts
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Illinois Tool Works (United States)
Based on various researches at Oak Spring University , Illinois Tool Works is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, increasing energy prices, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy,
supply chains are disrupted by pandemic , increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Illinois Tool Works
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Illinois Tool Works can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Illinois Tool Works, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Illinois Tool Works 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 Illinois Tool Works can be done for the following purposes –
1. Strategic planning of Illinois Tool Works
2. Improving business portfolio management of Illinois Tool Works
3. Assessing feasibility of the new initiative in United States
4. Making a Auto & Truck Parts sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Illinois Tool Works
Strengths of Illinois Tool Works | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Illinois Tool Works are -
Innovation driven organization
– Illinois Tool Works is one of the most innovative firm in Auto & Truck Parts sector.
Effective Research and Development (R&D)
– Illinois Tool Works has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Illinois Tool Works staying ahead in the Auto & Truck Parts industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Illinois Tool Works 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 Auto & Truck Parts 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 Auto & Truck Parts industry
– Illinois Tool Works 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 Illinois Tool Works
– The covid-19 pandemic has put organizational resilience at the centre of everthing Illinois Tool Works does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Illinois Tool Works comprises – understanding the underlying the factors in the Auto & Truck Parts 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 switching costs
– The high switching costs that Illinois Tool Works 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.
Training and development
– Illinois Tool Works has one of the best training and development program in Consumer Cyclical 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.
Ability to lead change in Auto & Truck Parts
– Illinois Tool Works is one of the leading players in the Auto & Truck Parts industry in United States. Over the years it has not only transformed the business landscape in the Auto & Truck Parts industry in United States but also across the existing markets. The ability to lead change has enabled Illinois Tool Works in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Illinois Tool Works in Auto & Truck Parts industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Illinois Tool Works in the Consumer Cyclical sector have low bargaining power. Illinois Tool Works has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Illinois Tool Works to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Illinois Tool Works 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 Illinois Tool Works is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Illinois Tool Works emphasize – knowledge, initiative, and innovation.
Weaknesses of Illinois Tool Works | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Illinois Tool Works are -
High bargaining power of channel partners in Auto & Truck Parts industry
– because of the regulatory requirements in United States, Illinois Tool Works 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 Auto & Truck Parts industry.
Aligning sales with marketing
– From the outside it seems that Illinois Tool Works needs to have more collaboration between its sales team and marketing team. Sales professionals in the Auto & Truck Parts industry have deep experience in developing customer relationships. Marketing department at Illinois Tool Works can leverage the sales team experience to cultivate customer relationships as Illinois Tool Works is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of United States, Illinois Tool Works needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, Illinois Tool Works has high operating costs in the Auto & Truck Parts industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Illinois Tool Works lucrative customers.
Lack of clear differentiation of Illinois Tool Works products
– To increase the profitability and margins on the products, Illinois Tool Works needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Illinois Tool Works is dominated by functional specialists. It is not different from other players in the Auto & Truck Parts industry, but Illinois Tool Works needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Illinois Tool Works to focus more on services in the Auto & Truck Parts industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Illinois Tool Works has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Auto & Truck Parts industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, Illinois Tool Works has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Auto & Truck Parts industry over the last five years. Illinois Tool Works 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.
High dependence on Illinois Tool Works ‘s star products
– The top 2 products and services of Illinois Tool Works still accounts for major business revenue. This dependence on star products in Auto & Truck Parts industry has resulted into insufficient focus on developing new products, even though Illinois Tool Works has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Auto & Truck Parts industry, Illinois Tool Works 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Illinois Tool Works is slow explore the new channels of communication. These new channels of communication can help Illinois Tool Works to provide better information regarding Auto & Truck Parts products and services. It can also build an online community to further reach out to potential customers.
Illinois Tool Works Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Illinois Tool Works are -
Using analytics as competitive advantage
– Illinois Tool Works has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Parts sector. This continuous investment in analytics has enabled Illinois Tool Works to build a competitive advantage using analytics. The analytics driven competitive advantage can help Illinois Tool Works to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Illinois Tool Works is facing challenges because of the dominance of functional experts in the organization. Illinois Tool Works can utilize new technology in the field of Auto & Truck Parts industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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, Illinois Tool Works can use these opportunities to build new business models that can help the communities that Illinois Tool Works operates in. Secondly it can use opportunities from government spending in Auto & Truck Parts sector.
Building a culture of innovation
– managers at Illinois Tool Works 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 Auto & Truck Parts industry.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Illinois Tool Works 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 Illinois Tool Works 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 Illinois Tool Works 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Illinois Tool Works 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.
Better consumer reach
– The expansion of the 5G network will help Illinois Tool Works to increase its market reach. Illinois Tool Works 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. Illinois Tool Works can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Illinois Tool Works 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.
Developing new processes and practices
– Illinois Tool Works can develop new processes and procedures in Auto & Truck Parts 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.
Manufacturing automation
– Illinois Tool Works can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Parts 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Parts industry, but it has also influenced the consumer preferences. Illinois Tool Works can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Illinois Tool Works External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Illinois Tool Works are -
Easy access to finance
– Easy access to finance in Auto & Truck Parts industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Illinois Tool Works 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
– Illinois Tool Works 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.
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 Illinois Tool Works.
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. Illinois Tool Works needs to understand the core reasons impacting the Auto & Truck Parts industry. This will help it in building a better workplace.
Regulatory challenges
– Illinois Tool Works 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 Auto & Truck Parts industry regulations.
Shortening product life cycle
– it is one of the major threat that Illinois Tool Works is facing in Auto & Truck Parts sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Illinois Tool Works 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 Auto & Truck Parts industry.
Consumer confidence and its impact on Illinois Tool Works 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 Auto & Truck Parts industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Auto & Truck Parts industry are lowering. It can presents Illinois Tool Works with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Auto & Truck Parts sector.
Increasing wage structure of Illinois Tool Works
– 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 Illinois Tool Works.
Environmental challenges
– Illinois Tool Works 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. Illinois Tool Works can take advantage of this fund but it will also bring new competitors in the Auto & Truck Parts industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Illinois Tool Works 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 Illinois Tool Works 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 Illinois Tool Works business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Illinois Tool Works Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Illinois Tool Works 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 Illinois Tool Works 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 Illinois Tool Works 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 Illinois Tool Works 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 Illinois Tool Works needs to make to build a sustainable competitive advantage.