Alstom (ALSO) SWOT Analysis / TOWS Matrix / MBA Resources
Conglomerates
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Alstom (France)
Based on various researches at Oak Spring University , Alstom is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation,
increasing household debt because of falling income levels, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Alstom can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alstom, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alstom 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 Alstom can be done for the following purposes –
1. Strategic planning of Alstom
2. Improving business portfolio management of Alstom
3. Assessing feasibility of the new initiative in France
4. Making a Conglomerates sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Alstom
Strengths of Alstom | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alstom are -
Superior customer experience
– The customer experience strategy of Alstom in Conglomerates industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Alstom 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 Alstom is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Alstom emphasize – knowledge, initiative, and innovation.
Digital Transformation in Conglomerates industry
- digital transformation varies from industry to industry. For Alstom digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Alstom 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.
Training and development
– Alstom has one of the best training and development program in Conglomerates 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.
Strong track record of project management in the Conglomerates industry
– Alstom 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 Alstom
– The covid-19 pandemic has put organizational resilience at the centre of everthing Alstom does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Alstom has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Alstom staying ahead in the Conglomerates industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy of Alstom comprises – understanding the underlying the factors in the Conglomerates 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.
Low bargaining power of suppliers
– Suppliers of Alstom in the Conglomerates sector have low bargaining power. Alstom has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Alstom to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Alstom has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Conglomerates industry. Secondly the value chain collaborators of Alstom have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Conglomerates
– Alstom is one of the leading players in the Conglomerates industry in France. Over the years it has not only transformed the business landscape in the Conglomerates industry in France but also across the existing markets. The ability to lead change has enabled Alstom in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Alstom is present in almost all the verticals within the Conglomerates industry. This has provided Alstom 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.
Weaknesses of Alstom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alstom are -
Capital Spending Reduction
– Even during the low interest decade, Alstom 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 Conglomerates industry using digital technology.
Lack of clear differentiation of Alstom products
– To increase the profitability and margins on the products, Alstom needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of Alstom is just above the Conglomerates 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.
No frontier risks strategy
– From the 10K / annual statement of Alstom, it seems that company is thinking out the frontier risks that can impact Conglomerates 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.
Need for greater diversity
– Alstom 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.
High dependence on Alstom ‘s star products
– The top 2 products and services of Alstom still accounts for major business revenue. This dependence on star products in Conglomerates industry has resulted into insufficient focus on developing new products, even though Alstom has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Alstom has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Conglomerates industry over the last five years. Alstom 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.
High bargaining power of channel partners in Conglomerates industry
– because of the regulatory requirements in France, Alstom 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 Conglomerates industry.
Ability to respond to the competition
– As the decision making is very deliberative at Alstom, in the dynamic environment of Conglomerates industry it has struggled to respond to the nimble upstart competition. Alstom has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Alstom has a high cash cycle compare to other players in the Conglomerates industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Increasing silos among functional specialists
– The organizational structure of Alstom is dominated by functional specialists. It is not different from other players in the Conglomerates industry, but Alstom needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Alstom to focus more on services in the Conglomerates industry rather than just following the product oriented approach.
Alstom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Alstom are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Alstom is facing challenges because of the dominance of functional experts in the organization. Alstom can utilize new technology in the field of Conglomerates industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions in Conglomerates industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Alstom in the Conglomerates industry. Now Alstom can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Conglomerates industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Alstom 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. Alstom 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Alstom 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 Alstom to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Alstom can use the latest technology developments to improve its manufacturing and designing process in Conglomerates 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.
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. Alstom can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Alstom can use these opportunities to build new business models that can help the communities that Alstom operates in. Secondly it can use opportunities from government spending in Conglomerates sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Conglomerates industry, but it has also influenced the consumer preferences. Alstom can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Alstom to increase its market reach. Alstom 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Alstom 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 Alstom to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Alstom 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.
Using analytics as competitive advantage
– Alstom has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Conglomerates sector. This continuous investment in analytics has enabled Alstom to build a competitive advantage using analytics. The analytics driven competitive advantage can help Alstom 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 Alstom 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 Alstom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Alstom are -
Consumer confidence and its impact on Alstom 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 Conglomerates industry and other sectors.
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 Alstom.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Alstom may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Conglomerates sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Alstom 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 Alstom prominent markets.
Shortening product life cycle
– it is one of the major threat that Alstom is facing in Conglomerates sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Alstom
– 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 Alstom.
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 Alstom business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Alstom 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. Alstom can take advantage of this fund but it will also bring new competitors in the Conglomerates 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.
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. Alstom 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.
Regulatory challenges
– Alstom 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 Conglomerates industry regulations.
Stagnating economy with rate increase
– Alstom 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 Conglomerates industry.
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. Alstom needs to understand the core reasons impacting the Conglomerates industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Alstom Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Alstom 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 Alstom 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 Alstom 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 Alstom 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 Alstom needs to make to build a sustainable competitive advantage.