SWOT Analysis / TOWS Matrix for MGP Ingredients (United States)
Based on various researches at Oak Spring University , MGP Ingredients is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , technology disruption, increasing energy prices, talent flight as more people leaving formal jobs, geopolitical disruptions, increasing transportation and logistics costs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that MGP Ingredients can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the MGP Ingredients, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which MGP Ingredients 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 MGP Ingredients can be done for the following purposes –
1. Strategic planning of MGP Ingredients
2. Improving business portfolio management of MGP Ingredients
3. Assessing feasibility of the new initiative in United States
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of MGP Ingredients
Strengths of MGP Ingredients | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of MGP Ingredients are -
High switching costs
– The high switching costs that MGP Ingredients 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.
Cross disciplinary teams
– Horizontal connected teams at the MGP Ingredients are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Organizational Resilience of MGP Ingredients
– The covid-19 pandemic has put organizational resilience at the centre of everthing MGP Ingredients does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of MGP Ingredients in the Consumer/Non-Cyclical sector have low bargaining power. MGP Ingredients has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps MGP Ingredients to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– MGP Ingredients 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 Food Processing 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.
Digital Transformation in Food Processing industry
- digital transformation varies from industry to industry. For MGP Ingredients digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. MGP Ingredients 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 lead change in Food Processing
– MGP Ingredients is one of the leading players in the Food Processing industry in United States. Over the years it has not only transformed the business landscape in the Food Processing industry in United States but also across the existing markets. The ability to lead change has enabled MGP Ingredients in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of MGP Ingredients comprises – understanding the underlying the factors in the Food Processing 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.
Diverse revenue streams
– MGP Ingredients is present in almost all the verticals within the Food Processing industry. This has provided MGP Ingredients a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- MGP Ingredients 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 MGP Ingredients is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at MGP Ingredients emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– MGP Ingredients is one of the most innovative firm in Food Processing sector.
Sustainable margins compare to other players in Food Processing industry
– MGP Ingredients has clearly differentiated products in the market place. This has enabled MGP Ingredients to fetch slight price premium compare to the competitors in the Food Processing industry. The sustainable margins have also helped MGP Ingredients to invest into research and development (R&D) and innovation.
Weaknesses of MGP Ingredients | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of MGP Ingredients are -
Products dominated business model
– Even though MGP Ingredients has some of the most successful models in the Food Processing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. MGP Ingredients should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, MGP Ingredients has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Food Processing industry over the last five years. MGP Ingredients 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 cash cycle compare to competitors
MGP Ingredients has a high cash cycle compare to other players in the Food Processing 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 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 MGP Ingredients supply chain. Even after few cautionary changes, MGP Ingredients is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left MGP Ingredients vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, MGP Ingredients 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.
High operating costs
– Compare to the competitors, MGP Ingredients has high operating costs in the Food Processing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract MGP Ingredients lucrative customers.
High dependence on MGP Ingredients ‘s star products
– The top 2 products and services of MGP Ingredients still accounts for major business revenue. This dependence on star products in Food Processing industry has resulted into insufficient focus on developing new products, even though MGP Ingredients has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that MGP Ingredients needs to have more collaboration between its sales team and marketing team. Sales professionals in the Food Processing industry have deep experience in developing customer relationships. Marketing department at MGP Ingredients can leverage the sales team experience to cultivate customer relationships as MGP Ingredients is planning to shift buying processes online.
High bargaining power of channel partners in Food Processing industry
– because of the regulatory requirements in United States, MGP Ingredients 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 Food Processing industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, MGP Ingredients is slow explore the new channels of communication. These new channels of communication can help MGP Ingredients to provide better information regarding Food Processing products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring in Food Processing industry
– The stress on hiring functional specialists at MGP Ingredients has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
MGP Ingredients Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of MGP Ingredients are -
Buying journey improvements
– MGP Ingredients can improve the customer journey of consumers in the Food Processing 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for MGP Ingredients 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 MGP Ingredients to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Food Processing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. MGP Ingredients 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. MGP Ingredients 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.
Developing new processes and practices
– MGP Ingredients can develop new processes and procedures in Food Processing 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.
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. MGP Ingredients can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Food Processing industry, but it has also influenced the consumer preferences. MGP Ingredients can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 MGP Ingredients 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.
Building a culture of innovation
– managers at MGP Ingredients 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 Food Processing industry.
Creating value in data economy
– The success of analytics program of MGP Ingredients has opened avenues for new revenue streams for the organization in Food Processing industry. This can help MGP Ingredients to build a more holistic ecosystem for MGP Ingredients products in the Food Processing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– MGP Ingredients 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for MGP Ingredients in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Food Processing industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects MGP Ingredients 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
– MGP Ingredients can use the latest technology developments to improve its manufacturing and designing process in Food Processing 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 MGP Ingredients External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of MGP Ingredients are -
Shortening product life cycle
– it is one of the major threat that MGP Ingredients is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Technology acceleration in Forth Industrial Revolution
– MGP Ingredients has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, MGP Ingredients needs to keep up with the evolution of technology in the Food Processing 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, MGP Ingredients 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 MGP Ingredients prominent markets.
High dependence on third party suppliers
– MGP Ingredients 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.
Easy access to finance
– Easy access to finance in Food Processing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. MGP Ingredients can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 MGP Ingredients in the Food Processing sector and impact the bottomline of the organization.
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.
Regulatory challenges
– MGP Ingredients 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 Food Processing industry regulations.
Stagnating economy with rate increase
– MGP Ingredients 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 Food Processing industry.
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. MGP Ingredients 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, MGP Ingredients may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Food Processing sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of MGP Ingredients business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of MGP Ingredients Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients needs to make to build a sustainable competitive advantage.