Kellogg (K) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Kellogg (Germany)

Based on various researches at Oak Spring University , Kellogg 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%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, there is increasing trade war between United States & China, increasing commodity prices, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, etc

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Introduction to SWOT Analysis of Kellogg

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Kellogg can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kellogg, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kellogg 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 Kellogg can be done for the following purposes –
1. Strategic planning of Kellogg
2. Improving business portfolio management of Kellogg
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 Kellogg

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

The strengths of Kellogg are -

Digital Transformation in Food Processing industry

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

Highly skilled collaborators

– Kellogg 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 Kellogg have helped the firm to develop new products and bring them quickly to the marketplace.

Low bargaining power of suppliers

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

Organizational Resilience of Kellogg

– The covid-19 pandemic has put organizational resilience at the centre of everthing Kellogg does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Ability to recruit top talent

– Kellogg 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.

Effective Research and Development (R&D)

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

– Kellogg 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.

Ability to lead change in Food Processing

– Kellogg 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 Kellogg in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Sustainable margins compare to other players in Food Processing industry

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

Innovation driven organization

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

Learning organization

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

Diverse revenue streams

– Kellogg is present in almost all the verticals within the Food Processing industry. This has provided Kellogg 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.

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

The weaknesses of Kellogg are -

Slow decision making process

– As mentioned earlier in the report, Kellogg 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. Kellogg 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.

Lack of clear differentiation of Kellogg products

– To increase the profitability and margins on the products, Kellogg needs to provide more differentiated products than what it is currently offering in the marketplace.

Slow to strategic competitive environment developments

– As Kellogg 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.

Interest costs

– Compare to the competition, Kellogg 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.

Products dominated business model

– Even though Kellogg 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. Kellogg should strive to include more intangible value offerings along with its core products and services.

Compensation and incentives

– The revenue per employee of Kellogg 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.

Capital Spending Reduction

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

High bargaining power of channel partners in Food Processing industry

– because of the regulatory requirements in Germany, Kellogg 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.

No frontier risks strategy

– From the 10K / annual statement of Kellogg, 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.

High dependence on Kellogg ‘s star products

– The top 2 products and services of Kellogg 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 Kellogg has relatively successful track record of launching new products.

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

The opportunities of Kellogg are -

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. Kellogg can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Loyalty marketing

– Kellogg 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.

Better consumer reach

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

Manufacturing automation

– Kellogg 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kellogg can use these opportunities to build new business models that can help the communities that Kellogg 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 Kellogg 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.

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. Kellogg 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. Kellogg 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.

Building a culture of innovation

– managers at Kellogg 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.

Creating value in data economy

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

Leveraging digital technologies

– Kellogg 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.

Reforming the budgeting process

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

Buying journey improvements

– Kellogg can improve the customer journey of consumers in the Food Processing industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Remote work and new talent hiring opportunities

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

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

The threats of Kellogg 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.

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. Kellogg can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Increasing international competition and downward pressure on margins

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

Consumer confidence and its impact on Kellogg 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

– Kellogg 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. Kellogg can take advantage of this fund but it will also bring new competitors in the Food Processing industry.

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. Kellogg 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.

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 Kellogg.

Technology acceleration in Forth Industrial Revolution

– Kellogg has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Kellogg 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 Kellogg in the Food Processing sector and impact the bottomline of the organization.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

High dependence on third party suppliers

– Kellogg 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.

Regulatory challenges

– Kellogg 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 wage structure of Kellogg

– 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 Kellogg.

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Weighted SWOT Analysis of Kellogg Template, Example

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

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