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 – increasing household debt because of falling income levels, technology disruption, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, 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 -
Ability to lead change in Railroads
– Kansas City Southern is one of the leading players in the Railroads industry in United States. Over the years it has not only transformed the business landscape in the Railroads industry in United States but also across the existing markets. The ability to lead change has enabled Kansas City Southern in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Kansas City Southern is one of the most innovative firm in Railroads sector.
Digital Transformation in Railroads industry
- digital transformation varies from industry to industry. For Kansas City Southern digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kansas City Southern 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
– 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.
Successful track record of launching new products
– Kansas City Southern has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kansas City Southern 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.
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.
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.
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.
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.
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.
High switching costs
– The high switching costs that Kansas City Southern 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.
Superior customer experience
– The customer experience strategy of Kansas City Southern in Railroads industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kansas City Southern is slow explore the new channels of communication. These new channels of communication can help Kansas City Southern to provide better information regarding Railroads products and services. It can also build an online community to further reach out to potential customers.
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.
Need for greater diversity
– Kansas City Southern 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.
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.
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.
Interest costs
– Compare to the competition, Kansas City Southern 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.
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.
Workers concerns about automation
– As automation is fast increasing in the Railroads industry, Kansas City Southern 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.
Products dominated business model
– Even though Kansas City Southern has some of the most successful models in the Railroads industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Kansas City Southern should strive to include more intangible value offerings along with its core products and services.
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.
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 -
Using analytics as competitive advantage
– Kansas City Southern has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Railroads sector. This continuous investment in analytics has enabled Kansas City Southern to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kansas City Southern to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Kansas City Southern 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 Kansas City Southern to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kansas City Southern 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 Kansas City Southern to hire the very best people irrespective of their geographical location.
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.
Leveraging digital technologies
– Kansas City Southern 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Kansas City Southern 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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Kansas City Southern to increase its market reach. Kansas City Southern 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.
Loyalty marketing
– Kansas City Southern 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.
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.
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.
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 -
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.
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.
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 Kansas City Southern business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Kansas City Southern is facing in Railroads sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
Stagnating economy with rate increase
– Kansas City Southern 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 Railroads industry.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Kansas City Southern may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Railroads sector.
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.
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.
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.
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.
