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 – talent flight as more people leaving formal jobs, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , geopolitical disruptions,
there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
Analytics focus
– Omnicom 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 Advertising 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.
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.
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.
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.
Digital Transformation in Advertising industry
- digital transformation varies from industry to industry. For Omnicom digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Omnicom 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.
Learning organization
- Omnicom 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 Omnicom is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Omnicom emphasize – knowledge, initiative, and innovation.
High brand equity
– Omnicom has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Omnicom to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Innovation driven organization
– Omnicom is one of the most innovative firm in Advertising sector.
Sustainable margins compare to other players in Advertising industry
– Omnicom has clearly differentiated products in the market place. This has enabled Omnicom to fetch slight price premium compare to the competitors in the Advertising industry. The sustainable margins have also helped Omnicom to invest into research and development (R&D) and innovation.
Weaknesses of Omnicom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Omnicom are -
High operating costs
– Compare to the competitors, Omnicom has high operating costs in the Advertising industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Omnicom lucrative customers.
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.
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.
High cash cycle compare to competitors
Omnicom has a high cash cycle compare to other players in the Advertising industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
Increasing silos among functional specialists
– The organizational structure of Omnicom is dominated by functional specialists. It is not different from other players in the Advertising industry, but Omnicom needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Omnicom to focus more on services in the Advertising industry rather than just following the product oriented approach.
Aligning sales with marketing
– From the outside it seems that Omnicom needs to have more collaboration between its sales team and marketing team. Sales professionals in the Advertising industry have deep experience in developing customer relationships. Marketing department at Omnicom can leverage the sales team experience to cultivate customer relationships as Omnicom is planning to shift buying processes online.
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.
Skills based hiring in Advertising industry
– The stress on hiring functional specialists at Omnicom 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.
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 Omnicom supply chain. Even after few cautionary changes, Omnicom is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Omnicom vulnerable to further global disruptions in South East Asia.
Omnicom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Omnicom are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Omnicom is facing challenges because of the dominance of functional experts in the organization. Omnicom can utilize new technology in the field of Advertising industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Building a culture of innovation
– managers at Omnicom 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 Advertising industry.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Advertising industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Omnicom 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. Omnicom 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.
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.
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.
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. Omnicom can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
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.
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.
Threats Omnicom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Omnicom are -
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.
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.
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.
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.
Increasing wage structure of Omnicom
– 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 Omnicom.
Regulatory challenges
– Omnicom 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 Advertising industry regulations.
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.
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 Omnicom.
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.
Stagnating economy with rate increase
– Omnicom 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 Advertising industry.
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.
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.
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 Omnicom in the Advertising sector and impact the bottomline of the organization.
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.