Sodexo (SDXOF) SWOT Analysis / TOWS Matrix / MBA Resources
Restaurants
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sodexo (United States)
Based on various researches at Oak Spring University , Sodexo is operating in a macro-environment that has been destablized by – increasing energy prices, wage bills are increasing, increasing commodity prices, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sodexo can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sodexo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sodexo 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 Sodexo can be done for the following purposes –
1. Strategic planning of Sodexo
2. Improving business portfolio management of Sodexo
3. Assessing feasibility of the new initiative in United States
4. Making a Restaurants sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sodexo
Strengths of Sodexo | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sodexo are -
Superior customer experience
– The customer experience strategy of Sodexo in Restaurants industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Sodexo has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sodexo to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Sodexo is one of the most innovative firm in Restaurants sector.
Successful track record of launching new products
– Sodexo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sodexo 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.
Highly skilled collaborators
– Sodexo has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Restaurants industry. Secondly the value chain collaborators of Sodexo have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Sodexo is one of the leading players in the Restaurants 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.
Organizational Resilience of Sodexo
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sodexo does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Sodexo 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.
Low bargaining power of suppliers
– Suppliers of Sodexo in the Services sector have low bargaining power. Sodexo has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sodexo to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Sodexo 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.
Operational resilience
– The operational resilience strategy of Sodexo comprises – understanding the underlying the factors in the Restaurants 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.
Ability to lead change in Restaurants
– Sodexo is one of the leading players in the Restaurants industry in United States. Over the years it has not only transformed the business landscape in the Restaurants industry in United States but also across the existing markets. The ability to lead change has enabled Sodexo in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Sodexo | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sodexo are -
Increasing silos among functional specialists
– The organizational structure of Sodexo is dominated by functional specialists. It is not different from other players in the Restaurants industry, but Sodexo needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sodexo to focus more on services in the Restaurants industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of United States, Sodexo needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Sodexo 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.
Aligning sales with marketing
– From the outside it seems that Sodexo needs to have more collaboration between its sales team and marketing team. Sales professionals in the Restaurants industry have deep experience in developing customer relationships. Marketing department at Sodexo can leverage the sales team experience to cultivate customer relationships as Sodexo is planning to shift buying processes online.
High cash cycle compare to competitors
Sodexo has a high cash cycle compare to other players in the Restaurants 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 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 Sodexo supply chain. Even after few cautionary changes, Sodexo is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sodexo vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Sodexo, it seems that company is thinking out the frontier risks that can impact Restaurants 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.
Lack of clear differentiation of Sodexo products
– To increase the profitability and margins on the products, Sodexo needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Sodexo is one of the leading players in the Restaurants industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Restaurants industry in last five years.
Need for greater diversity
– Sodexo 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.
Slow decision making process
– As mentioned earlier in the report, Sodexo has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Restaurants industry over the last five years. Sodexo 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.
Sodexo Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sodexo are -
Loyalty marketing
– Sodexo 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.
Manufacturing automation
– Sodexo can use the latest technology developments to improve its manufacturing and designing process in Restaurants 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sodexo 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 Sodexo to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sodexo can use these opportunities to build new business models that can help the communities that Sodexo operates in. Secondly it can use opportunities from government spending in Restaurants sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sodexo is facing challenges because of the dominance of functional experts in the organization. Sodexo can utilize new technology in the field of Restaurants industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Sodexo can improve the customer journey of consumers in the Restaurants 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
– Sodexo 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.
Learning at scale
– Online learning technologies has now opened space for Sodexo 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.
Better consumer reach
– The expansion of the 5G network will help Sodexo to increase its market reach. Sodexo 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.
Using analytics as competitive advantage
– Sodexo has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Restaurants sector. This continuous investment in analytics has enabled Sodexo to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sodexo to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sodexo 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 Sodexo to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Sodexo has opened avenues for new revenue streams for the organization in Restaurants industry. This can help Sodexo to build a more holistic ecosystem for Sodexo products in the Restaurants industry by providing – data insight services, data privacy related products, data based consulting services, 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 Sodexo 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.
Threats Sodexo External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sodexo are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sodexo may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Restaurants sector.
Consumer confidence and its impact on Sodexo 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 Restaurants industry and other sectors.
High dependence on third party suppliers
– Sodexo 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.
Environmental challenges
– Sodexo 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. Sodexo can take advantage of this fund but it will also bring new competitors in the Restaurants industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Restaurants industry are lowering. It can presents Sodexo with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Restaurants sector.
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 Sodexo in the Restaurants sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Sodexo 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 Restaurants 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.
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 Sodexo.
Shortening product life cycle
– it is one of the major threat that Sodexo is facing in Restaurants sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Sodexo 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 Restaurants 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. Sodexo 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sodexo in Restaurants industry. The Restaurants 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 Sodexo Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sodexo 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 Sodexo 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 Sodexo 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 Sodexo 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 Sodexo needs to make to build a sustainable competitive advantage.