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 – increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China,
increasing government debt because of Covid-19 spendings, technology disruption, 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 -
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.
Ability to lead change in Railroads
– Norfolk 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 Norfolk Southern in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
Sustainable margins compare to other players in Railroads industry
– Norfolk Southern has clearly differentiated products in the market place. This has enabled Norfolk Southern to fetch slight price premium compare to the competitors in the Railroads industry. The sustainable margins have also helped Norfolk Southern to invest into research and development (R&D) and innovation.
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.
Low bargaining power of suppliers
– Suppliers of Norfolk Southern in the Transportation sector have low bargaining power. Norfolk Southern has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Norfolk Southern to manage not only supply disruptions but also source products at highly competitive prices.
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.
Ability to recruit top talent
– Norfolk 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.
Strong track record of project management in the Railroads industry
– Norfolk 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.
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.
Weaknesses of Norfolk Southern | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Norfolk Southern are -
Employees’ less understanding of Norfolk Southern strategy
– From the outside it seems that the employees of Norfolk 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.
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 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.
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.
Workers concerns about automation
– As automation is fast increasing in the Railroads industry, Norfolk 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.
Increasing silos among functional specialists
– The organizational structure of Norfolk Southern is dominated by functional specialists. It is not different from other players in the Railroads industry, but Norfolk Southern needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Norfolk Southern to focus more on services in the Railroads industry rather than just following the product oriented approach.
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.
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.
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 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 Norfolk Southern supply chain. Even after few cautionary changes, Norfolk Southern is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Norfolk Southern vulnerable to further global disruptions in South East Asia.
High dependence on Norfolk Southern ‘s star products
– The top 2 products and services of Norfolk 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 Norfolk Southern has relatively successful track record of launching new products.
Norfolk Southern Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Norfolk Southern are -
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.
Better consumer reach
– The expansion of the 5G network will help Norfolk Southern to increase its market reach. Norfolk 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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Norfolk 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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Norfolk 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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Norfolk Southern is facing challenges because of the dominance of functional experts in the organization. Norfolk 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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Norfolk 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 Norfolk 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.
Threats Norfolk Southern External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Norfolk Southern are -
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.
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.
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.
Increasing wage structure of Norfolk 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 Norfolk Southern.
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.
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.
Stagnating economy with rate increase
– Norfolk 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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Norfolk Southern is facing in Railroads sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Norfolk 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Norfolk Southern can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Norfolk Southern prominent markets.
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.
