Danone (DANO) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Danone (Germany)

Based on various researches at Oak Spring University , Danone is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , geopolitical disruptions, increasing energy prices, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of Danone

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

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

The strengths of Danone are -

Training and development

– Danone has one of the best training and development program in Consumer/Non-Cyclical 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.

Operational resilience

– The operational resilience strategy of Danone comprises – understanding the underlying the factors in the Food Processing 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.

High switching costs

– The high switching costs that Danone 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.

Ability to lead change in Food Processing

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

Innovation driven organization

– Danone is one of the most innovative firm in Food Processing sector.

Sustainable margins compare to other players in Food Processing industry

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

Digital Transformation in Food Processing industry

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

Learning organization

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

Effective Research and Development (R&D)

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

Superior customer experience

– The customer experience strategy of Danone in Food Processing 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 Danone 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.

Highly skilled collaborators

– Danone has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Food Processing industry. Secondly the value chain collaborators of Danone have helped the firm to develop new products and bring them quickly to the marketplace.

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

The weaknesses of Danone are -

Aligning sales with marketing

– From the outside it seems that Danone needs to have more collaboration between its sales team and marketing team. Sales professionals in the Food Processing industry have deep experience in developing customer relationships. Marketing department at Danone can leverage the sales team experience to cultivate customer relationships as Danone is planning to shift buying processes online.

Need for greater diversity

– Danone 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 Food Processing industry

– because of the regulatory requirements in Germany, Danone 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 Food Processing industry.

Increasing silos among functional specialists

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

High dependence on Danone ‘s star products

– The top 2 products and services of Danone still accounts for major business revenue. This dependence on star products in Food Processing industry has resulted into insufficient focus on developing new products, even though Danone has relatively successful track record of launching new products.

Employees’ less understanding of Danone strategy

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

Skills based hiring in Food Processing industry

– The stress on hiring functional specialists at Danone 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.

Capital Spending Reduction

– Even during the low interest decade, Danone 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 Food Processing industry using digital technology.

Slow to strategic competitive environment developments

– As Danone is one of the leading players in the Food Processing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Food Processing industry in last five years.

Products dominated business model

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

High cash cycle compare to competitors

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

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

The opportunities of Danone are -

Loyalty marketing

– Danone 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.

Reforming the budgeting process

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

Better consumer reach

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

Learning at scale

– Online learning technologies has now opened space for Danone 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.

Leveraging digital technologies

– Danone 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.

Manufacturing automation

– Danone can use the latest technology developments to improve its manufacturing and designing process in Food Processing 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.

Developing new processes and practices

– Danone can develop new processes and procedures in Food Processing 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.

Lowering marketing communication costs

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

Using analytics as competitive advantage

– Danone has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Food Processing sector. This continuous investment in analytics has enabled Danone to build a competitive advantage using analytics. The analytics driven competitive advantage can help Danone 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 Danone 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.

Building a culture of innovation

– managers at Danone 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 Food Processing industry.

Remote work and new talent hiring opportunities

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

Harnessing reconfiguration of the global supply chains

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

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

The threats of Danone are -

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Danone 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 Danone prominent markets.

Barriers of entry lowering

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

Easy access to finance

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

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 Danone.

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. Danone 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.

Stagnating economy with rate increase

– Danone 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 Food Processing industry.

Environmental challenges

– Danone 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. Danone can take advantage of this fund but it will also bring new competitors in the Food Processing 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. Danone needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.

High dependence on third party suppliers

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

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.

Technology acceleration in Forth Industrial Revolution

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

Shortening product life cycle

– it is one of the major threat that Danone is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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Weighted SWOT Analysis of Danone Template, Example

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

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