Archer-Daniels-Midland (ADM) SWOT Analysis / TOWS Matrix / 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 – increasing commodity prices, wage bills are increasing, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, increasing energy prices, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, etc

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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.

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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

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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 -

Innovation driven organization

– Archer-Daniels-Midland is one of the most innovative firm in Food Processing sector.

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.

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.

Learning organization

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

Diverse revenue streams

– Archer-Daniels-Midland is present in almost all the verticals within the Food Processing industry. This has provided Archer-Daniels-Midland 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.

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.

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.

Effective Research and Development (R&D)

– Archer-Daniels-Midland has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Archer-Daniels-Midland 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.

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.

Sustainable margins compare to other players in Food Processing industry

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

High brand equity

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

Digital Transformation in Food Processing industry

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

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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 -

No frontier risks strategy

– From the 10K / annual statement of Archer-Daniels-Midland, it seems that company is thinking out the frontier risks that can impact Food Processing 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.

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.

Aligning sales with marketing

– From the outside it seems that Archer-Daniels-Midland 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 Archer-Daniels-Midland can leverage the sales team experience to cultivate customer relationships as Archer-Daniels-Midland is planning to shift buying processes online.

Slow to strategic competitive environment developments

– As Archer-Daniels-Midland 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.

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.

Workers concerns about automation

– As automation is fast increasing in the Food Processing industry, Archer-Daniels-Midland 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.

Ability to respond to the competition

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

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.

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.

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.

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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.

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.

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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Archer-Daniels-Midland 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.

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.

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.

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.

Use of Bitcoin and other crypto currencies for transactions in Food Processing industry

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

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.

Using analytics as competitive advantage

– Archer-Daniels-Midland 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 Archer-Daniels-Midland to build a competitive advantage using analytics. The analytics driven competitive advantage can help Archer-Daniels-Midland to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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.

Building a culture of innovation

– managers at Archer-Daniels-Midland 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.

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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 -

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. Archer-Daniels-Midland 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.

Barriers of entry lowering

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

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.

Stagnating economy with rate increase

– Archer-Daniels-Midland 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.

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.

Increasing wage structure of Archer-Daniels-Midland

– 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 Archer-Daniels-Midland.

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.

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.

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.

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.

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.

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.

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.

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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.

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