Kansas City Southern (KSU) SWOT Analysis / TOWS Matrix / MBA Resources
Railroads
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Kansas City Southern (United States)
Based on various researches at Oak Spring University , Kansas City Southern is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, there is increasing trade war between United States & China, increasing energy prices, technology disruption,
supply chains are disrupted by pandemic , increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Kansas City Southern
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Kansas City Southern can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kansas City Southern, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kansas City Southern 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 Kansas City Southern can be done for the following purposes –
1. Strategic planning of Kansas City Southern
2. Improving business portfolio management of Kansas City Southern
3. Assessing feasibility of the new initiative in United States
4. Making a Railroads sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Kansas City Southern
Strengths of Kansas City Southern | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kansas City Southern are -
Effective Research and Development (R&D)
– Kansas City Southern has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Kansas City Southern staying ahead in the Railroads industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Kansas City Southern is one of the most innovative firm in Railroads sector.
Learning organization
- Kansas City Southern 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 Kansas City Southern is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Kansas City Southern emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Kansas City Southern comprises – understanding the underlying the factors in the Railroads 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.
Analytics focus
– Kansas City Southern 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 Railroads 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.
High brand equity
– Kansas City Southern has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kansas City Southern to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Kansas City Southern has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Railroads industry. Secondly the value chain collaborators of Kansas City Southern have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Kansas City Southern is one of the leading players in the Railroads 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.
Sustainable margins compare to other players in Railroads industry
– Kansas City Southern has clearly differentiated products in the market place. This has enabled Kansas City Southern to fetch slight price premium compare to the competitors in the Railroads industry. The sustainable margins have also helped Kansas City Southern to invest into research and development (R&D) and innovation.
Strong track record of project management in the Railroads industry
– Kansas City Southern 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 Kansas City Southern
– The covid-19 pandemic has put organizational resilience at the centre of everthing Kansas City Southern does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Kansas City Southern 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.
Weaknesses of Kansas City Southern | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kansas City Southern are -
No frontier risks strategy
– From the 10K / annual statement of Kansas City Southern, it seems that company is thinking out the frontier risks that can impact Railroads 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.
Compensation and incentives
– The revenue per employee of Kansas City Southern is just above the Railroads 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.
Slow decision making process
– As mentioned earlier in the report, Kansas City Southern has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Railroads industry over the last five years. Kansas City Southern 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.
Aligning sales with marketing
– From the outside it seems that Kansas City Southern needs to have more collaboration between its sales team and marketing team. Sales professionals in the Railroads industry have deep experience in developing customer relationships. Marketing department at Kansas City Southern can leverage the sales team experience to cultivate customer relationships as Kansas City Southern is planning to shift buying processes online.
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 Kansas City Southern supply chain. Even after few cautionary changes, Kansas City Southern is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Kansas City Southern vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Kansas City Southern has a high cash cycle compare to other players in the Railroads 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 Kansas City Southern is one of the leading players in the Railroads industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Railroads industry in last five years.
High dependence on Kansas City Southern ‘s star products
– The top 2 products and services of Kansas City Southern still accounts for major business revenue. This dependence on star products in Railroads industry has resulted into insufficient focus on developing new products, even though Kansas City Southern has relatively successful track record of launching new products.
High bargaining power of channel partners in Railroads industry
– because of the regulatory requirements in United States, Kansas City Southern 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 Railroads industry.
Ability to respond to the competition
– As the decision making is very deliberative at Kansas City Southern, in the dynamic environment of Railroads industry it has struggled to respond to the nimble upstart competition. Kansas City Southern has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Kansas City Southern 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 Railroads industry using digital technology.
Kansas City Southern Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Kansas City Southern are -
Building a culture of innovation
– managers at Kansas City Southern 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 Railroads industry.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Railroads industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Kansas City Southern 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. Kansas City Southern 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.
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. Kansas City Southern can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Kansas City Southern 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.
Use of Bitcoin and other crypto currencies for transactions in Railroads industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Kansas City Southern in the Railroads industry. Now Kansas City Southern can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Kansas City Southern has opened avenues for new revenue streams for the organization in Railroads industry. This can help Kansas City Southern to build a more holistic ecosystem for Kansas City Southern products in the Railroads industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Kansas City Southern can improve the customer journey of consumers in the Railroads 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kansas City Southern in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Railroads industry, and it will provide faster access to the consumers.
Developing new processes and practices
– Kansas City Southern can develop new processes and procedures in Railroads 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Kansas City Southern is facing challenges because of the dominance of functional experts in the organization. Kansas City Southern can utilize new technology in the field of Railroads 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, Kansas City Southern can use these opportunities to build new business models that can help the communities that Kansas City Southern operates in. Secondly it can use opportunities from government spending in Railroads sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Kansas City Southern can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Kansas City Southern can use the latest technology developments to improve its manufacturing and designing process in Railroads 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.
Threats Kansas City Southern External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Kansas City Southern are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kansas City Southern in Railroads industry. The Railroads 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
– Kansas City Southern has witnessed rapid integration of technology during Covid-19 in the Railroads industry. As one of the leading players in the industry, Kansas City Southern needs to keep up with the evolution of technology in the Railroads 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.
Environmental challenges
– Kansas City Southern 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. Kansas City Southern can take advantage of this fund but it will also bring new competitors in the Railroads industry.
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.
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. Kansas City Southern needs to understand the core reasons impacting the Railroads industry. This will help it in building a better workplace.
Regulatory challenges
– Kansas City Southern 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 Railroads industry regulations.
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. Kansas City Southern 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.
Easy access to finance
– Easy access to finance in Railroads industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Kansas City Southern can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Kansas City Southern 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 Kansas City Southern prominent markets.
Increasing wage structure of Kansas City Southern
– 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 Kansas City Southern.
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.
Consumer confidence and its impact on Kansas City Southern 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 Railroads industry and other sectors.
High dependence on third party suppliers
– Kansas City Southern 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.
Weighted SWOT Analysis of Kansas City Southern Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Kansas City Southern 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 Kansas City Southern 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 Kansas City Southern 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 Kansas City Southern 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 Kansas City Southern needs to make to build a sustainable competitive advantage.