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 – banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing government debt because of Covid-19 spendings, increasing energy prices, there is increasing trade war between United States & China, increasing commodity prices, increasing transportation and logistics costs,
customer relationship management is fast transforming because of increasing concerns over data privacy, 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 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.
Organizational Resilience of AB SKF
– The covid-19 pandemic has put organizational resilience at the centre of everthing AB SKF does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– AB SKF 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 Constr. & Agric. Machinery 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.
Highly skilled collaborators
– AB SKF has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Constr. & Agric. Machinery industry. Secondly the value chain collaborators of AB SKF have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
Ability to recruit top talent
– AB SKF is one of the leading players in the Constr. & Agric. Machinery 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.
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.
Innovation driven organization
– AB SKF is one of the most innovative firm in Constr. & Agric. Machinery sector.
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.
Cross disciplinary teams
– Horizontal connected teams at the AB SKF 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.
Weaknesses of AB SKF | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AB SKF are -
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.
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 AB SKF supply chain. Even after few cautionary changes, AB SKF is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left AB SKF vulnerable to further global disruptions in South East Asia.
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.
Slow decision making process
– As mentioned earlier in the report, AB SKF has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Constr. & Agric. Machinery industry over the last five years. AB SKF 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.
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.
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.
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.
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.
Aligning sales with marketing
– From the outside it seems that AB SKF needs to have more collaboration between its sales team and marketing team. Sales professionals in the Constr. & Agric. Machinery industry have deep experience in developing customer relationships. Marketing department at AB SKF can leverage the sales team experience to cultivate customer relationships as AB SKF is planning to shift buying processes online.
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.
Compensation and incentives
– The revenue per employee of AB SKF is just above the Constr. & Agric. Machinery 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.
AB SKF Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AB SKF are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Constr. & Agric. Machinery industry, but it has also influenced the consumer preferences. AB SKF can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Manufacturing automation
– AB SKF can use the latest technology developments to improve its manufacturing and designing process in Constr. & Agric. Machinery 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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for AB SKF 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects AB SKF can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Buying journey improvements
– AB SKF can improve the customer journey of consumers in the Constr. & Agric. Machinery 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.
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.
Leveraging digital technologies
– AB SKF 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.
Threats AB SKF External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AB SKF are -
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.
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.
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.
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. AB SKF needs to understand the core reasons impacting the Constr. & Agric. Machinery industry. This will help it in building a better workplace.
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.
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 AB SKF.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, AB SKF may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Constr. & Agric. Machinery sector.
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.
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 AB SKF in the Constr. & Agric. Machinery sector and impact the bottomline of the organization.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for AB SKF in Constr. & Agric. Machinery industry. The Constr. & Agric. Machinery 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 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.