AB SKF (SKFRY) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. & Agric. Machinery
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for AB SKF (United States)
Based on various researches at Oak Spring University , AB SKF is operating in a macro-environment that has been destablized by – wage bills are increasing, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, there is increasing trade war between United States & China, geopolitical disruptions, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AB SKF can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AB SKF, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AB SKF 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 AB SKF can be done for the following purposes –
1. Strategic planning of AB SKF
2. Improving business portfolio management of AB SKF
3. Assessing feasibility of the new initiative in United States
4. Making a Constr. & Agric. Machinery sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AB SKF
Strengths of AB SKF | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of AB SKF are -
Strong track record of project management in the Constr. & Agric. Machinery industry
– AB SKF is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Constr. & Agric. Machinery industry
– AB SKF has clearly differentiated products in the market place. This has enabled AB SKF to fetch slight price premium compare to the competitors in the Constr. & Agric. Machinery industry. The sustainable margins have also helped AB SKF to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– AB SKF has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AB SKF 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.
Innovation driven organization
– AB SKF is one of the most innovative firm in Constr. & Agric. Machinery sector.
Training and development
– AB SKF has one of the best training and development program in Capital Goods 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.
Digital Transformation in Constr. & Agric. Machinery industry
- digital transformation varies from industry to industry. For AB SKF digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AB SKF 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 lead change in Constr. & Agric. Machinery
– AB SKF is one of the leading players in the Constr. & Agric. Machinery industry in United States. Over the years it has not only transformed the business landscape in the Constr. & Agric. Machinery industry in United States but also across the existing markets. The ability to lead change has enabled AB SKF in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– AB SKF is present in almost all the verticals within the Constr. & Agric. Machinery industry. This has provided AB SKF 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.
Superior customer experience
– The customer experience strategy of AB SKF in Constr. & Agric. Machinery industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of AB SKF in the Capital Goods sector have low bargaining power. AB SKF has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AB SKF to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– AB SKF has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AB SKF to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy of AB SKF comprises – understanding the underlying the factors in the Constr. & Agric. Machinery 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.
Weaknesses of AB SKF | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AB SKF are -
Skills based hiring in Constr. & Agric. Machinery industry
– The stress on hiring functional specialists at AB SKF 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.
No frontier risks strategy
– From the 10K / annual statement of AB SKF, it seems that company is thinking out the frontier risks that can impact Constr. & Agric. Machinery 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.
Capital Spending Reduction
– Even during the low interest decade, AB SKF 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 Constr. & Agric. Machinery industry using digital technology.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, AB SKF is slow explore the new channels of communication. These new channels of communication can help AB SKF to provide better information regarding Constr. & Agric. Machinery products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the Constr. & Agric. Machinery industry, AB SKF 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.
High bargaining power of channel partners in Constr. & Agric. Machinery industry
– because of the regulatory requirements in United States, AB SKF 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 Constr. & Agric. Machinery industry.
Lack of clear differentiation of AB SKF products
– To increase the profitability and margins on the products, AB SKF needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, AB SKF 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.
Ability to respond to the competition
– As the decision making is very deliberative at AB SKF, in the dynamic environment of Constr. & Agric. Machinery industry it has struggled to respond to the nimble upstart competition. AB SKF 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 AB SKF is one of the leading players in the Constr. & Agric. Machinery industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Constr. & Agric. Machinery industry in last five years.
Employees’ less understanding of AB SKF strategy
– From the outside it seems that the employees of AB SKF 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.
AB SKF Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AB SKF are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, AB SKF is facing challenges because of the dominance of functional experts in the organization. AB SKF can utilize new technology in the field of Constr. & Agric. Machinery industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AB SKF can use these opportunities to build new business models that can help the communities that AB SKF operates in. Secondly it can use opportunities from government spending in Constr. & Agric. Machinery sector.
Building a culture of innovation
– managers at AB SKF 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 Constr. & Agric. Machinery industry.
Use of Bitcoin and other crypto currencies for transactions in Constr. & Agric. Machinery industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for AB SKF in the Constr. & Agric. Machinery industry. Now AB SKF can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for AB SKF 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 AB SKF to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of AB SKF has opened avenues for new revenue streams for the organization in Constr. & Agric. Machinery industry. This can help AB SKF to build a more holistic ecosystem for AB SKF products in the Constr. & Agric. Machinery industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Constr. & Agric. Machinery industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. AB SKF 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. AB SKF 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, AB SKF 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.
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. AB SKF can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– AB SKF has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Constr. & Agric. Machinery sector. This continuous investment in analytics has enabled AB SKF to build a competitive advantage using analytics. The analytics driven competitive advantage can help AB SKF to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 AB SKF 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.
Better consumer reach
– The expansion of the 5G network will help AB SKF to increase its market reach. AB SKF 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for AB SKF in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Constr. & Agric. Machinery industry, and it will provide faster access to the consumers.
Threats AB SKF External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AB SKF are -
Consumer confidence and its impact on AB SKF 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 Constr. & Agric. Machinery industry and other sectors.
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 Constr. & Agric. Machinery industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. AB SKF can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. AB SKF 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.
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 AB SKF business can come under increasing regulations regarding data privacy, data security, etc.
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 AB SKF.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Constr. & Agric. Machinery industry are lowering. It can presents AB SKF with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Constr. & Agric. Machinery sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, AB SKF 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 AB SKF prominent markets.
Stagnating economy with rate increase
– AB SKF 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 Constr. & Agric. Machinery industry.
Environmental challenges
– AB SKF 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. AB SKF can take advantage of this fund but it will also bring new competitors in the Constr. & Agric. Machinery industry.
Regulatory challenges
– AB SKF 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 Constr. & Agric. Machinery industry regulations.
Technology acceleration in Forth Industrial Revolution
– AB SKF has witnessed rapid integration of technology during Covid-19 in the Constr. & Agric. Machinery industry. As one of the leading players in the industry, AB SKF needs to keep up with the evolution of technology in the Constr. & Agric. Machinery 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.
Increasing wage structure of AB SKF
– 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 AB SKF.
Weighted SWOT Analysis of AB SKF Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AB SKF 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 AB SKF 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 AB SKF 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 AB SKF 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 AB SKF needs to make to build a sustainable competitive advantage.
