Sysco (SYY) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Sysco (United States)

Based on various researches at Oak Spring University , Sysco is operating in a macro-environment that has been destablized by – technology disruption, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, etc

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Introduction to SWOT Analysis of Sysco

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sysco can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sysco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sysco 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Sysco can be done for the following purposes –
1. Strategic planning of Sysco
2. Improving business portfolio management of Sysco
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Grocery) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sysco

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Strengths of Sysco | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Sysco are -

Operational resilience

– The operational resilience strategy of Sysco comprises – understanding the underlying the factors in the Retail (Grocery) 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 recruit top talent

– Sysco is one of the leading players in the Retail (Grocery) 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 brand equity

– Sysco has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sysco to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Analytics focus

– Sysco 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 Retail (Grocery) 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.

Cross disciplinary teams

– Horizontal connected teams at the Sysco 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.

Effective Research and Development (R&D)

– Sysco has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sysco staying ahead in the Retail (Grocery) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Learning organization

- Sysco 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 Sysco is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sysco emphasize – knowledge, initiative, and innovation.

High switching costs

– The high switching costs that Sysco 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.

Sustainable margins compare to other players in Retail (Grocery) industry

– Sysco has clearly differentiated products in the market place. This has enabled Sysco to fetch slight price premium compare to the competitors in the Retail (Grocery) industry. The sustainable margins have also helped Sysco to invest into research and development (R&D) and innovation.

Organizational Resilience of Sysco

– The covid-19 pandemic has put organizational resilience at the centre of everthing Sysco does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Superior customer experience

– The customer experience strategy of Sysco in Retail (Grocery) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Successful track record of launching new products

– Sysco has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sysco 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.

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Weaknesses of Sysco | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Sysco are -

Employees’ less understanding of Sysco strategy

– From the outside it seems that the employees of Sysco 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 cash cycle compare to competitors

Sysco has a high cash cycle compare to other players in the Retail (Grocery) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Slow decision making process

– As mentioned earlier in the report, Sysco has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Grocery) industry over the last five years. Sysco 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.

Workers concerns about automation

– As automation is fast increasing in the Retail (Grocery) industry, Sysco 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.

Increasing silos among functional specialists

– The organizational structure of Sysco is dominated by functional specialists. It is not different from other players in the Retail (Grocery) industry, but Sysco needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sysco to focus more on services in the Retail (Grocery) industry rather than just following the product oriented approach.

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 Sysco supply chain. Even after few cautionary changes, Sysco is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sysco vulnerable to further global disruptions in South East Asia.

Compensation and incentives

– The revenue per employee of Sysco is just above the Retail (Grocery) 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.

Ability to respond to the competition

– As the decision making is very deliberative at Sysco, in the dynamic environment of Retail (Grocery) industry it has struggled to respond to the nimble upstart competition. Sysco has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Interest costs

– Compare to the competition, Sysco 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.

Capital Spending Reduction

– Even during the low interest decade, Sysco 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 Retail (Grocery) industry using digital technology.

Lack of clear differentiation of Sysco products

– To increase the profitability and margins on the products, Sysco needs to provide more differentiated products than what it is currently offering in the marketplace.

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Sysco Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Sysco are -

Use of Bitcoin and other crypto currencies for transactions in Retail (Grocery) industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sysco in the Retail (Grocery) industry. Now Sysco can target international markets with far fewer capital restrictions requirements than the existing system.

Using analytics as competitive advantage

– Sysco has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Grocery) sector. This continuous investment in analytics has enabled Sysco to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sysco to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Low interest rates

– Even though inflation is raising its head in most developed economies, Sysco 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

– Sysco 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.

Developing new processes and practices

– Sysco can develop new processes and procedures in Retail (Grocery) industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing 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, Sysco can use these opportunities to build new business models that can help the communities that Sysco operates in. Secondly it can use opportunities from government spending in Retail (Grocery) sector.

Creating value in data economy

– The success of analytics program of Sysco has opened avenues for new revenue streams for the organization in Retail (Grocery) industry. This can help Sysco to build a more holistic ecosystem for Sysco products in the Retail (Grocery) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Loyalty marketing

– Sysco 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Sysco in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Grocery) industry, and it will provide faster access to the consumers.

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 Sysco 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Sysco 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 Sysco to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sysco 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 Sysco to hire the very best people irrespective of their geographical location.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Sysco can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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Threats Sysco External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Sysco are -

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Sysco in Retail (Grocery) industry. The Retail (Grocery) 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Retail (Grocery) industry are lowering. It can presents Sysco with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Grocery) sector.

Regulatory challenges

– Sysco 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 Retail (Grocery) industry regulations.

Environmental challenges

– Sysco 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. Sysco can take advantage of this fund but it will also bring new competitors in the Retail (Grocery) industry.

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 Sysco.

Easy access to finance

– Easy access to finance in Retail (Grocery) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sysco can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

High dependence on third party suppliers

– Sysco 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 Sysco in the Retail (Grocery) sector and impact the bottomline of the organization.

Shortening product life cycle

– it is one of the major threat that Sysco is facing in Retail (Grocery) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Sysco may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Grocery) sector.

Consumer confidence and its impact on Sysco 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 Retail (Grocery) industry and other sectors.

Stagnating economy with rate increase

– Sysco 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 Retail (Grocery) industry.

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Weighted SWOT Analysis of Sysco Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sysco 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 Sysco 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 Sysco 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 Sysco 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 Sysco needs to make to build a sustainable competitive advantage.

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