Stepan (SCL) SWOT Analysis / TOWS Matrix / MBA Resources
Chemicals - Plastics & Rubber
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Stepan (United States)
Based on various researches at Oak Spring University , Stepan 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%, challanges to central banks by blockchain based private currencies, increasing energy prices, increasing transportation and logistics costs, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic ,
customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Stepan can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Stepan, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Stepan 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 Stepan can be done for the following purposes –
1. Strategic planning of Stepan
2. Improving business portfolio management of Stepan
3. Assessing feasibility of the new initiative in United States
4. Making a Chemicals - Plastics & Rubber sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Stepan
Strengths of Stepan | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Stepan are -
Organizational Resilience of Stepan
– The covid-19 pandemic has put organizational resilience at the centre of everthing Stepan does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Stepan has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemicals - Plastics & Rubber industry. Secondly the value chain collaborators of Stepan have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Stepan in the Basic Materials sector have low bargaining power. Stepan has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Stepan to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Stepan in Chemicals - Plastics & Rubber industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Stepan 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 Stepan is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Stepan emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Stepan has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Stepan 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.
Training and development
– Stepan has one of the best training and development program in Basic Materials 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.
Analytics focus
– Stepan 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 Chemicals - Plastics & Rubber 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 Chemicals - Plastics & Rubber industry
- digital transformation varies from industry to industry. For Stepan digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Stepan 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.
Ability to recruit top talent
– Stepan is one of the leading players in the Chemicals - Plastics & Rubber 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.
High switching costs
– The high switching costs that Stepan 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 Chemicals - Plastics & Rubber industry
– Stepan is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Stepan | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Stepan are -
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 Stepan supply chain. Even after few cautionary changes, Stepan is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Stepan vulnerable to further global disruptions in South East Asia.
Skills based hiring in Chemicals - Plastics & Rubber industry
– The stress on hiring functional specialists at Stepan 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.
Slow to strategic competitive environment developments
– As Stepan is one of the leading players in the Chemicals - Plastics & Rubber industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Chemicals - Plastics & Rubber industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Stepan 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 Chemicals - Plastics & Rubber industry using digital technology.
Lack of clear differentiation of Stepan products
– To increase the profitability and margins on the products, Stepan needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Stepan has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemicals - Plastics & Rubber industry over the last five years. Stepan 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.
Products dominated business model
– Even though Stepan has some of the most successful models in the Chemicals - Plastics & Rubber industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Stepan should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Stepan 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.
Employees’ less understanding of Stepan strategy
– From the outside it seems that the employees of Stepan 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.
No frontier risks strategy
– From the 10K / annual statement of Stepan, it seems that company is thinking out the frontier risks that can impact Chemicals - Plastics & Rubber 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.
Ability to respond to the competition
– As the decision making is very deliberative at Stepan, in the dynamic environment of Chemicals - Plastics & Rubber industry it has struggled to respond to the nimble upstart competition. Stepan has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Stepan Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Stepan are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Stepan 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.
Leveraging digital technologies
– Stepan 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.
Creating value in data economy
– The success of analytics program of Stepan has opened avenues for new revenue streams for the organization in Chemicals - Plastics & Rubber industry. This can help Stepan to build a more holistic ecosystem for Stepan products in the Chemicals - Plastics & Rubber 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, Stepan is facing challenges because of the dominance of functional experts in the organization. Stepan can utilize new technology in the field of Chemicals - Plastics & Rubber industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Stepan in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemicals - Plastics & Rubber industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Stepan can use these opportunities to build new business models that can help the communities that Stepan operates in. Secondly it can use opportunities from government spending in Chemicals - Plastics & Rubber sector.
Manufacturing automation
– Stepan can use the latest technology developments to improve its manufacturing and designing process in Chemicals - Plastics & Rubber 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.
Building a culture of innovation
– managers at Stepan 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 Chemicals - Plastics & Rubber industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Stepan can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Stepan 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemicals - Plastics & Rubber industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Stepan 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. Stepan 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.
Using analytics as competitive advantage
– Stepan has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemicals - Plastics & Rubber sector. This continuous investment in analytics has enabled Stepan to build a competitive advantage using analytics. The analytics driven competitive advantage can help Stepan to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Stepan 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.
Threats Stepan External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Stepan are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Chemicals - Plastics & Rubber industry are lowering. It can presents Stepan with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemicals - Plastics & Rubber sector.
High dependence on third party suppliers
– Stepan 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.
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 Stepan in the Chemicals - Plastics & Rubber sector and impact the bottomline of the organization.
Consumer confidence and its impact on Stepan 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 Chemicals - Plastics & Rubber 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. Stepan 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.
Environmental challenges
– Stepan 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. Stepan can take advantage of this fund but it will also bring new competitors in the Chemicals - Plastics & Rubber industry.
Shortening product life cycle
– it is one of the major threat that Stepan is facing in Chemicals - Plastics & Rubber sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Easy access to finance
– Easy access to finance in Chemicals - Plastics & Rubber industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Stepan can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Stepan in Chemicals - Plastics & Rubber industry. The Chemicals - Plastics & Rubber 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.
Technology acceleration in Forth Industrial Revolution
– Stepan has witnessed rapid integration of technology during Covid-19 in the Chemicals - Plastics & Rubber industry. As one of the leading players in the industry, Stepan needs to keep up with the evolution of technology in the Chemicals - Plastics & Rubber 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
– Stepan 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 Chemicals - Plastics & Rubber industry.
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.
Weighted SWOT Analysis of Stepan Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Stepan 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 Stepan 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 Stepan 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 Stepan 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 Stepan needs to make to build a sustainable competitive advantage.