Archer-Daniels-Midland (ADM) SWOT Analysis / TOWS Matrix / MBA Resources
Food Processing
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Archer-Daniels-Midland (Germany)
Based on various researches at Oak Spring University , Archer-Daniels-Midland is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing government debt because of Covid-19 spendings, increasing energy prices, etc
Introduction to SWOT Analysis of Archer-Daniels-Midland
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Archer-Daniels-Midland can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Archer-Daniels-Midland, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Archer-Daniels-Midland 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 Archer-Daniels-Midland can be done for the following purposes –
1. Strategic planning of Archer-Daniels-Midland
2. Improving business portfolio management of Archer-Daniels-Midland
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 Archer-Daniels-Midland
Strengths of Archer-Daniels-Midland | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Archer-Daniels-Midland are -
Analytics focus
– Archer-Daniels-Midland 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 Food Processing industry. The technology infrastructure of Germany 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.
Operational resilience
– The operational resilience strategy of Archer-Daniels-Midland 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.
Organizational Resilience of Archer-Daniels-Midland
– The covid-19 pandemic has put organizational resilience at the centre of everthing Archer-Daniels-Midland does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Archer-Daniels-Midland has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Archer-Daniels-Midland 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.
Highly skilled collaborators
– Archer-Daniels-Midland 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 Archer-Daniels-Midland have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Archer-Daniels-Midland is one of the most innovative firm in Food Processing sector.
Superior customer experience
– The customer experience strategy of Archer-Daniels-Midland 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 Archer-Daniels-Midland 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.
Ability to recruit top talent
– Archer-Daniels-Midland is one of the leading players in the Food Processing industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Archer-Daniels-Midland in the Consumer/Non-Cyclical sector have low bargaining power. Archer-Daniels-Midland has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Archer-Daniels-Midland to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Archer-Daniels-Midland 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.
Ability to lead change in Food Processing
– Archer-Daniels-Midland 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 Archer-Daniels-Midland in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Archer-Daniels-Midland | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Archer-Daniels-Midland are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Archer-Daniels-Midland is slow explore the new channels of communication. These new channels of communication can help Archer-Daniels-Midland to provide better information regarding Food Processing products and services. It can also build an online community to further reach out to potential customers.
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 Archer-Daniels-Midland supply chain. Even after few cautionary changes, Archer-Daniels-Midland is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Archer-Daniels-Midland vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee of Archer-Daniels-Midland is just above the Food Processing 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.
Lack of clear differentiation of Archer-Daniels-Midland products
– To increase the profitability and margins on the products, Archer-Daniels-Midland needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Food Processing industry
– because of the regulatory requirements in Germany, Archer-Daniels-Midland 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.
Skills based hiring in Food Processing industry
– The stress on hiring functional specialists at Archer-Daniels-Midland 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.
Slow decision making process
– As mentioned earlier in the report, Archer-Daniels-Midland has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Food Processing industry over the last five years. Archer-Daniels-Midland 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 operating costs
– Compare to the competitors, Archer-Daniels-Midland has high operating costs in the Food Processing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Archer-Daniels-Midland lucrative customers.
Interest costs
– Compare to the competition, Archer-Daniels-Midland 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, Archer-Daniels-Midland 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.
Increasing silos among functional specialists
– The organizational structure of Archer-Daniels-Midland is dominated by functional specialists. It is not different from other players in the Food Processing industry, but Archer-Daniels-Midland needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Archer-Daniels-Midland to focus more on services in the Food Processing industry rather than just following the product oriented approach.
Archer-Daniels-Midland Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Archer-Daniels-Midland are -
Loyalty marketing
– Archer-Daniels-Midland 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Archer-Daniels-Midland 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 Archer-Daniels-Midland 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 Archer-Daniels-Midland 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 Archer-Daniels-Midland 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 Archer-Daniels-Midland can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Archer-Daniels-Midland 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.
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. Archer-Daniels-Midland can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Archer-Daniels-Midland 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Archer-Daniels-Midland 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Archer-Daniels-Midland can use these opportunities to build new business models that can help the communities that Archer-Daniels-Midland operates in. Secondly it can use opportunities from government spending in Food Processing sector.
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 Archer-Daniels-Midland 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Archer-Daniels-Midland is facing challenges because of the dominance of functional experts in the organization. Archer-Daniels-Midland can utilize new technology in the field of Food Processing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Archer-Daniels-Midland 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Food Processing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Archer-Daniels-Midland 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. Archer-Daniels-Midland 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.
Threats Archer-Daniels-Midland External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Archer-Daniels-Midland are -
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. Archer-Daniels-Midland needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.
Consumer confidence and its impact on Archer-Daniels-Midland 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 Food Processing industry and other sectors.
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.
Environmental challenges
– Archer-Daniels-Midland 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. Archer-Daniels-Midland can take advantage of this fund but it will also bring new competitors in the Food Processing industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Archer-Daniels-Midland 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.
High dependence on third party suppliers
– Archer-Daniels-Midland 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.
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 Archer-Daniels-Midland.
Technology acceleration in Forth Industrial Revolution
– Archer-Daniels-Midland has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Archer-Daniels-Midland 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.
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 Archer-Daniels-Midland in the Food Processing sector and impact the bottomline of the organization.
Regulatory challenges
– Archer-Daniels-Midland 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 Food Processing industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Archer-Daniels-Midland 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 Archer-Daniels-Midland prominent markets.
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 Archer-Daniels-Midland business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Archer-Daniels-Midland is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Archer-Daniels-Midland Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Archer-Daniels-Midland 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 Archer-Daniels-Midland 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 Archer-Daniels-Midland 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 Archer-Daniels-Midland 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 Archer-Daniels-Midland needs to make to build a sustainable competitive advantage.