SWOT Analysis / TOWS Matrix for Smurfit Kappa (United States)
Based on various researches at Oak Spring University , Smurfit Kappa is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic ,
increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Smurfit Kappa can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Smurfit Kappa, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Smurfit Kappa 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 Smurfit Kappa can be done for the following purposes –
1. Strategic planning of Smurfit Kappa
2. Improving business portfolio management of Smurfit Kappa
3. Assessing feasibility of the new initiative in United States
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Smurfit Kappa
Strengths of Smurfit Kappa | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Smurfit Kappa are -
Low bargaining power of suppliers
– Suppliers of Smurfit Kappa in the sector have low bargaining power. Smurfit Kappa has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Smurfit Kappa to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Smurfit Kappa 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 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.
High brand equity
– Smurfit Kappa has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Smurfit Kappa to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Smurfit Kappa is one of the most innovative firm in sector.
Effective Research and Development (R&D)
– Smurfit Kappa has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Smurfit Kappa staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Smurfit Kappa 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.
Cross disciplinary teams
– Horizontal connected teams at the Smurfit Kappa 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
– Smurfit Kappa is present in almost all the verticals within the industry. This has provided Smurfit Kappa 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.
Organizational Resilience of Smurfit Kappa
– The covid-19 pandemic has put organizational resilience at the centre of everthing Smurfit Kappa does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Smurfit Kappa 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 Smurfit Kappa is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Smurfit Kappa emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Smurfit Kappa has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Smurfit Kappa 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.
Superior customer experience
– The customer experience strategy of Smurfit Kappa in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Smurfit Kappa | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Smurfit Kappa are -
High operating costs
– Compare to the competitors, Smurfit Kappa has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Smurfit Kappa lucrative customers.
Low market penetration in new markets
– Outside its home market of United States, Smurfit Kappa needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Smurfit Kappa has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Smurfit Kappa should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of Smurfit Kappa is just above the 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.
Aligning sales with marketing
– From the outside it seems that Smurfit Kappa needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department at Smurfit Kappa can leverage the sales team experience to cultivate customer relationships as Smurfit Kappa is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Smurfit Kappa, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Smurfit Kappa has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Smurfit Kappa products
– To increase the profitability and margins on the products, Smurfit Kappa needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in industry
– The stress on hiring functional specialists at Smurfit Kappa 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.
High cash cycle compare to competitors
Smurfit Kappa has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Smurfit Kappa 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Smurfit Kappa is slow explore the new channels of communication. These new channels of communication can help Smurfit Kappa to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Smurfit Kappa Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Smurfit Kappa are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Smurfit Kappa 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 Smurfit Kappa to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Smurfit Kappa can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Smurfit Kappa can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Smurfit Kappa is facing challenges because of the dominance of functional experts in the organization. Smurfit Kappa can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Smurfit Kappa 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 industry.
Learning at scale
– Online learning technologies has now opened space for Smurfit Kappa 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Smurfit Kappa 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 Smurfit Kappa to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Smurfit Kappa 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Smurfit Kappa in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Manufacturing automation
– Smurfit Kappa can use the latest technology developments to improve its manufacturing and designing process in 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.
Leveraging digital technologies
– Smurfit Kappa 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Smurfit Kappa can use these opportunities to build new business models that can help the communities that Smurfit Kappa operates in. Secondly it can use opportunities from government spending in sector.
Buying journey improvements
– Smurfit Kappa can improve the customer journey of consumers in the 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.
Threats Smurfit Kappa External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Smurfit Kappa are -
Technology acceleration in Forth Industrial Revolution
– Smurfit Kappa has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Smurfit Kappa needs to keep up with the evolution of technology in the 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 Smurfit Kappa
– 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 Smurfit Kappa.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Smurfit Kappa in industry. The 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.
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 Smurfit Kappa.
Regulatory challenges
– Smurfit Kappa 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 industry regulations.
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 Smurfit Kappa business can come under increasing regulations regarding data privacy, data security, etc.
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. Smurfit Kappa 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.
Consumer confidence and its impact on Smurfit Kappa 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 industry and other sectors.
High dependence on third party suppliers
– Smurfit Kappa 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Smurfit Kappa may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
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. Smurfit Kappa needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Smurfit Kappa can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Smurfit Kappa 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 Smurfit Kappa prominent markets.
Weighted SWOT Analysis of Smurfit Kappa Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Smurfit Kappa 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 Smurfit Kappa 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 Smurfit Kappa 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 Smurfit Kappa 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 Smurfit Kappa needs to make to build a sustainable competitive advantage.