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 – geopolitical disruptions, there is backlash against globalization, increasing energy prices, wage bills are increasing, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, technology disruption,
banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
Innovation driven organization
– Omnicom is one of the most innovative firm in Advertising sector.
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.
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.
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.
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.
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.
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.
Diverse revenue streams
– Omnicom is present in almost all the verticals within the Advertising industry. This has provided Omnicom 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.
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.
Ability to lead change in Advertising
– Omnicom is one of the leading players in the Advertising industry in United States. Over the years it has not only transformed the business landscape in the Advertising industry in United States but also across the existing markets. The ability to lead change has enabled Omnicom in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Omnicom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Omnicom are -
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.
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.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Omnicom 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 Advertising industry using digital technology.
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.
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.
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.
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.
Omnicom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Omnicom are -
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.
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.
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.
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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Advertising industry, but it has also influenced the consumer preferences. Omnicom can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Omnicom 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
– 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.
Creating value in data economy
– The success of analytics program of Omnicom has opened avenues for new revenue streams for the organization in Advertising industry. This can help Omnicom to build a more holistic ecosystem for Omnicom products in the Advertising industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Omnicom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Omnicom are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Omnicom may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Advertising sector.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
High dependence on third party suppliers
– Omnicom 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.
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.