Neste (NTOIY) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Neste (United States)
Based on various researches at Oak Spring University , Neste is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, increasing commodity prices, there is increasing trade war between United States & China, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion,
central banks are concerned over increasing inflation, 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 Neste can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Neste, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Neste 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 Neste can be done for the following purposes –
1. Strategic planning of Neste
2. Improving business portfolio management of Neste
3. Assessing feasibility of the new initiative in United States
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Neste
Strengths of Neste | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Neste are -
Digital Transformation in industry
- digital transformation varies from industry to industry. For Neste digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Neste 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.
Innovation driven organization
– Neste is one of the most innovative firm in sector.
Operational resilience
– The operational resilience strategy of Neste comprises – understanding the underlying the factors in the 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
– Neste is present in almost all the verticals within the industry. This has provided Neste 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.
Effective Research and Development (R&D)
– Neste has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Neste staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Neste 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.
High switching costs
– The high switching costs that Neste 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.
Strong track record of project management in the industry
– Neste is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Neste 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 Neste is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Neste emphasize – knowledge, initiative, and innovation.
Ability to lead change in
– Neste is one of the leading players in the industry in United States. Over the years it has not only transformed the business landscape in the industry in United States but also across the existing markets. The ability to lead change has enabled Neste in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Neste has one of the best training and development program in 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.
High brand equity
– Neste has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Neste to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Neste | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Neste are -
Capital Spending Reduction
– Even during the low interest decade, Neste 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 industry using digital technology.
High cash cycle compare to competitors
Neste has a high cash cycle compare to other players in the 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 operating costs
– Compare to the competitors, Neste has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Neste lucrative customers.
High dependence on Neste ‘s star products
– The top 2 products and services of Neste still accounts for major business revenue. This dependence on star products in industry has resulted into insufficient focus on developing new products, even though Neste has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the industry, Neste 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.
Employees’ less understanding of Neste strategy
– From the outside it seems that the employees of Neste 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.
Slow to strategic competitive environment developments
– As Neste is one of the leading players in the industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Need for greater diversity
– Neste 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.
Low market penetration in new markets
– Outside its home market of United States, Neste needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring in industry
– The stress on hiring functional specialists at Neste 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.
No frontier risks strategy
– From the 10K / annual statement of Neste, it seems that company is thinking out the frontier risks that can impact 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.
Neste Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Neste are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Neste 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.
Creating value in data economy
– The success of analytics program of Neste has opened avenues for new revenue streams for the organization in industry. This can help Neste to build a more holistic ecosystem for Neste products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Neste to increase its market reach. Neste 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.
Buying journey improvements
– Neste can improve the customer journey of consumers in the 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.
Learning at scale
– Online learning technologies has now opened space for Neste 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.
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 Neste 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.
Developing new processes and practices
– Neste can develop new processes and procedures in 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Neste is facing challenges because of the dominance of functional experts in the organization. Neste can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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. Neste can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Neste can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Neste 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.
Building a culture of innovation
– managers at Neste 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 industry.
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Neste in the industry. Now Neste can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Neste External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Neste are -
Increasing wage structure of Neste
– 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 Neste.
Technology acceleration in Forth Industrial Revolution
– Neste has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Neste needs to keep up with the evolution of technology in the 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.
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.
Environmental challenges
– Neste 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. Neste can take advantage of this fund but it will also bring new competitors in the industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Neste in industry. The 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.
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 Neste.
Regulatory challenges
– Neste 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 industry regulations.
Shortening product life cycle
– it is one of the major threat that Neste is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Neste 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 industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents Neste with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Neste 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.
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. Neste needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Neste may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
Weighted SWOT Analysis of Neste Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Neste 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 Neste 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 Neste 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 Neste 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 Neste needs to make to build a sustainable competitive advantage.
