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 – central banks are concerned over increasing inflation, wage bills are increasing, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings,
digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, 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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
Increasing silos among functional specialists
– The organizational structure of Kansas City Southern is dominated by functional specialists. It is not different from other players in the Railroads industry, but Kansas City Southern needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kansas City Southern to focus more on services in the Railroads industry rather than just following the product oriented approach.
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.
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.
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.
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.
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.
Employees’ less understanding of Kansas City Southern strategy
– From the outside it seems that the employees of Kansas City Southern don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
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 -
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.
Learning at scale
– Online learning technologies has now opened space for Kansas City Southern 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.
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.
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.
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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Railroads industry, but it has also influenced the consumer preferences. Kansas City Southern can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
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 -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Railroads industry are lowering. It can presents Kansas City Southern with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Railroads sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Kansas City Southern in the Railroads sector and impact the bottomline of the organization.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.