SWOT Analysis / TOWS Matrix for Norfolk Southern (United States)
Based on various researches at Oak Spring University , Norfolk Southern is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
increasing commodity prices, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Norfolk Southern can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Norfolk Southern, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Norfolk 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 Norfolk Southern can be done for the following purposes –
1. Strategic planning of Norfolk Southern
2. Improving business portfolio management of Norfolk 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 Norfolk Southern
Strengths of Norfolk Southern | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Norfolk Southern are -
Innovation driven organization
– Norfolk Southern is one of the most innovative firm in Railroads sector.
High switching costs
– The high switching costs that Norfolk 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.
Highly skilled collaborators
– Norfolk 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 Norfolk Southern have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Norfolk Southern has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Norfolk 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.
Learning organization
- Norfolk 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 Norfolk Southern is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Norfolk Southern emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Norfolk Southern 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.
Successful track record of launching new products
– Norfolk Southern has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Norfolk 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 Norfolk Southern
– The covid-19 pandemic has put organizational resilience at the centre of everthing Norfolk Southern does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Norfolk 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.
Digital Transformation in Railroads industry
- digital transformation varies from industry to industry. For Norfolk Southern digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Norfolk 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.
High brand equity
– Norfolk Southern has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Norfolk Southern to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Norfolk 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 Norfolk Southern | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Norfolk Southern are -
Interest costs
– Compare to the competition, Norfolk 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, Norfolk Southern is slow explore the new channels of communication. These new channels of communication can help Norfolk 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 Norfolk 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 operating costs
– Compare to the competitors, Norfolk Southern has high operating costs in the Railroads industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Norfolk Southern lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Norfolk 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. Norfolk 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.
Low market penetration in new markets
– Outside its home market of United States, Norfolk Southern needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Norfolk 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.
Products dominated business model
– Even though Norfolk 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. Norfolk Southern should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in Railroads industry
– because of the regulatory requirements in United States, Norfolk 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.
Need for greater diversity
– Norfolk 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 Norfolk Southern, in the dynamic environment of Railroads industry it has struggled to respond to the nimble upstart competition. Norfolk Southern has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Norfolk Southern Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Norfolk 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. Norfolk 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. Norfolk 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.
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 Norfolk Southern in the Railroads industry. Now Norfolk Southern can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Norfolk 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.
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. Norfolk Southern 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 Norfolk 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.
Buying journey improvements
– Norfolk 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.
Manufacturing automation
– Norfolk 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Norfolk 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 Norfolk Southern to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Norfolk 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.
Creating value in data economy
– The success of analytics program of Norfolk Southern has opened avenues for new revenue streams for the organization in Railroads industry. This can help Norfolk Southern to build a more holistic ecosystem for Norfolk Southern products in the Railroads industry by providing – data insight services, data privacy related products, data based consulting services, 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. Norfolk Southern can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Norfolk 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Norfolk Southern can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Norfolk Southern External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Norfolk Southern are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Norfolk 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.
Consumer confidence and its impact on Norfolk 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
– Norfolk 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.
Regulatory challenges
– Norfolk 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.
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 Norfolk Southern business can come under increasing regulations regarding data privacy, data security, etc.
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. Norfolk Southern needs to understand the core reasons impacting the Railroads industry. This will help it in building a better workplace.
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. Norfolk Southern 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 Norfolk Southern in the Railroads sector and impact the bottomline of the organization.
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
– Norfolk Southern has witnessed rapid integration of technology during Covid-19 in the Railroads industry. As one of the leading players in the industry, Norfolk 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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Norfolk Southern.
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. Norfolk 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.
Environmental challenges
– Norfolk 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. Norfolk Southern can take advantage of this fund but it will also bring new competitors in the Railroads industry.
Weighted SWOT Analysis of Norfolk Southern Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Norfolk 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 Norfolk 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 Norfolk 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 Norfolk 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 Norfolk Southern needs to make to build a sustainable competitive advantage.