Arkema (AKE) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Arkema (France)

Based on various researches at Oak Spring University , Arkema is operating in a macro-environment that has been destablized by – wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, there is backlash against globalization, etc

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Introduction to SWOT Analysis of Arkema

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Arkema can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arkema, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arkema 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 Arkema can be done for the following purposes –
1. Strategic planning of Arkema
2. Improving business portfolio management of Arkema
3. Assessing feasibility of the new initiative in France
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arkema

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

The strengths of Arkema are -

Ability to lead change in Chemical Manufacturing

– Arkema is one of the leading players in the Chemical Manufacturing industry in France. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in France but also across the existing markets. The ability to lead change has enabled Arkema in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Learning organization

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

Low bargaining power of suppliers

– Suppliers of Arkema in the Basic Materials sector have low bargaining power. Arkema has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arkema to manage not only supply disruptions but also source products at highly competitive prices.

Superior customer experience

– The customer experience strategy of Arkema in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Cross disciplinary teams

– Horizontal connected teams at the Arkema 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

– Arkema is present in almost all the verticals within the Chemical Manufacturing industry. This has provided Arkema 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.

Operational resilience

– The operational resilience strategy of Arkema comprises – understanding the underlying the factors in the Chemical Manufacturing 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.

Training and development

– Arkema has one of the best training and development program in Basic Materials 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.

High switching costs

– The high switching costs that Arkema 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.

Digital Transformation in Chemical Manufacturing industry

- digital transformation varies from industry to industry. For Arkema digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arkema 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.

Effective Research and Development (R&D)

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

Strong track record of project management in the Chemical Manufacturing industry

– Arkema is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

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

The weaknesses of Arkema are -

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Arkema is slow explore the new channels of communication. These new channels of communication can help Arkema to provide better information regarding Chemical Manufacturing products and services. It can also build an online community to further reach out to potential customers.

Products dominated business model

– Even though Arkema has some of the most successful models in the Chemical Manufacturing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Arkema should strive to include more intangible value offerings along with its core products and services.

Ability to respond to the competition

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

Skills based hiring in Chemical Manufacturing industry

– The stress on hiring functional specialists at Arkema 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 operating costs

– Compare to the competitors, Arkema has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Arkema lucrative customers.

Slow decision making process

– As mentioned earlier in the report, Arkema has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Arkema 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.

Employees’ less understanding of Arkema strategy

– From the outside it seems that the employees of Arkema 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.

Need for greater diversity

– Arkema 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 bargaining power of channel partners in Chemical Manufacturing industry

– because of the regulatory requirements in France, Arkema 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 Chemical Manufacturing industry.

High cash cycle compare to competitors

Arkema has a high cash cycle compare to other players in the Chemical Manufacturing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Low market penetration in new markets

– Outside its home market of France, Arkema needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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

The opportunities of Arkema are -

Reforming the budgeting process

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

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Chemical Manufacturing industry, but it has also influenced the consumer preferences. Arkema can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arkema can use these opportunities to build new business models that can help the communities that Arkema operates in. Secondly it can use opportunities from government spending in Chemical Manufacturing sector.

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

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

Loyalty marketing

– Arkema 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.

Leveraging digital technologies

– Arkema 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Arkema is facing challenges because of the dominance of functional experts in the organization. Arkema can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Remote work and new talent hiring opportunities

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

Developing new processes and practices

– Arkema can develop new processes and procedures in Chemical Manufacturing 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.

Manufacturing automation

– Arkema can use the latest technology developments to improve its manufacturing and designing process in Chemical Manufacturing 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.

Better consumer reach

– The expansion of the 5G network will help Arkema to increase its market reach. Arkema 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.

Creating value in data economy

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

Using analytics as competitive advantage

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

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

The threats of Arkema are -

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.

Barriers of entry lowering

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

Environmental challenges

– Arkema 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. Arkema can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.

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 Arkema business can come under increasing regulations regarding data privacy, data security, etc.

Consumer confidence and its impact on Arkema 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 Chemical Manufacturing industry and other sectors.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Arkema in Chemical Manufacturing industry. The Chemical Manufacturing 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.

Regulatory challenges

– Arkema 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 Chemical Manufacturing industry regulations.

Increasing wage structure of Arkema

– 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 Arkema.

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. Arkema needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

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 Arkema.

High dependence on third party suppliers

– Arkema 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, Arkema may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing sector.

Technology acceleration in Forth Industrial Revolution

– Arkema has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, Arkema needs to keep up with the evolution of technology in the Chemical Manufacturing 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.

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Weighted SWOT Analysis of Arkema Template, Example

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

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