Omnicom (OMC) SWOT Analysis / TOWS Matrix / MBA Resources
Advertising
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Omnicom (United States)
Based on various researches at Oak Spring University , Omnicom is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, increasing energy prices, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing commodity prices,
technology disruption, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Omnicom can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Omnicom, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Omnicom 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 Omnicom can be done for the following purposes –
1. Strategic planning of Omnicom
2. Improving business portfolio management of Omnicom
3. Assessing feasibility of the new initiative in United States
4. Making a Advertising sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Omnicom
Strengths of Omnicom | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Omnicom are -
Successful track record of launching new products
– Omnicom has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Omnicom 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 Omnicom
– The covid-19 pandemic has put organizational resilience at the centre of everthing Omnicom does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Omnicom 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
– Omnicom has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Advertising industry. Secondly the value chain collaborators of Omnicom have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Omnicom has one of the best training and development program in Services 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.
Innovation driven organization
– Omnicom is one of the most innovative firm in Advertising sector.
Effective Research and Development (R&D)
– Omnicom has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Omnicom staying ahead in the Advertising industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Omnicom in the Services sector have low bargaining power. Omnicom has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Omnicom to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Advertising industry
– Omnicom is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Omnicom is one of the leading players in the Advertising 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.
Superior customer experience
– The customer experience strategy of Omnicom in Advertising industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Omnicom 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 Omnicom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Omnicom are -
Slow decision making process
– As mentioned earlier in the report, Omnicom has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Advertising industry over the last five years. Omnicom 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.
Ability to respond to the competition
– As the decision making is very deliberative at Omnicom, in the dynamic environment of Advertising industry it has struggled to respond to the nimble upstart competition. Omnicom has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Omnicom is one of the leading players in the Advertising industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Advertising industry in last five years.
Need for greater diversity
– Omnicom 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.
Compensation and incentives
– The revenue per employee of Omnicom is just above the Advertising 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Omnicom is slow explore the new channels of communication. These new channels of communication can help Omnicom to provide better information regarding Advertising products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Advertising industry
– because of the regulatory requirements in United States, Omnicom 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 Advertising industry.
Interest costs
– Compare to the competition, Omnicom 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.
Workers concerns about automation
– As automation is fast increasing in the Advertising industry, Omnicom 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 Omnicom strategy
– From the outside it seems that the employees of Omnicom 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.
Products dominated business model
– Even though Omnicom has some of the most successful models in the Advertising industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Omnicom should strive to include more intangible value offerings along with its core products and services.
Omnicom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Omnicom are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Omnicom can use these opportunities to build new business models that can help the communities that Omnicom operates in. Secondly it can use opportunities from government spending in Advertising sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Omnicom 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 Omnicom to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Omnicom 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.
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 Omnicom 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
– Omnicom can develop new processes and procedures in Advertising 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Omnicom 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 Omnicom to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Omnicom has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Advertising sector. This continuous investment in analytics has enabled Omnicom to build a competitive advantage using analytics. The analytics driven competitive advantage can help Omnicom to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Omnicom can improve the customer journey of consumers in the Advertising 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.
Leveraging digital technologies
– Omnicom 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.
Better consumer reach
– The expansion of the 5G network will help Omnicom to increase its market reach. Omnicom 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Omnicom 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
– Omnicom can use the latest technology developments to improve its manufacturing and designing process in Advertising 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.
Use of Bitcoin and other crypto currencies for transactions in Advertising industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Omnicom in the Advertising industry. Now Omnicom can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Omnicom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Omnicom are -
Technology acceleration in Forth Industrial Revolution
– Omnicom has witnessed rapid integration of technology during Covid-19 in the Advertising industry. As one of the leading players in the industry, Omnicom needs to keep up with the evolution of technology in the Advertising 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 Advertising industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Omnicom can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Advertising industry are lowering. It can presents Omnicom with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Advertising 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 Omnicom business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Omnicom is facing in Advertising 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. Omnicom 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.
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
– Omnicom 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. Omnicom can take advantage of this fund but it will also bring new competitors in the Advertising industry.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Omnicom 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 Omnicom prominent markets.
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. Omnicom needs to understand the core reasons impacting the Advertising industry. This will help it in building a better workplace.
Consumer confidence and its impact on Omnicom 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 Advertising industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Omnicom in Advertising industry. The Advertising 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.
Weighted SWOT Analysis of Omnicom Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Omnicom 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 Omnicom 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 Omnicom 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 Omnicom 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 Omnicom needs to make to build a sustainable competitive advantage.
