International Paper (IP) SWOT Analysis / TOWS Matrix / MBA Resources
Paper & Paper Products
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for International Paper (Germany)
Based on various researches at Oak Spring University , International Paper is operating in a macro-environment that has been destablized by – geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, technology disruption, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, etc
Introduction to SWOT Analysis of International Paper
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that International Paper can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the International Paper, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which International Paper 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 International Paper can be done for the following purposes –
1. Strategic planning of International Paper
2. Improving business portfolio management of International Paper
3. Assessing feasibility of the new initiative in Germany
4. Making a Paper & Paper Products sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of International Paper
Strengths of International Paper | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of International Paper are -
Effective Research and Development (R&D)
– International Paper has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – International Paper staying ahead in the Paper & Paper Products industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– International Paper is present in almost all the verticals within the Paper & Paper Products industry. This has provided International Paper 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.
Highly skilled collaborators
– International Paper has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Paper & Paper Products industry. Secondly the value chain collaborators of International Paper have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– International Paper 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 Paper & Paper Products 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.
High switching costs
– The high switching costs that International Paper 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.
Organizational Resilience of International Paper
– The covid-19 pandemic has put organizational resilience at the centre of everthing International Paper does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Paper & Paper Products industry
– International Paper is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- International Paper 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 International Paper is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at International Paper emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of International Paper in the Basic Materials sector have low bargaining power. International Paper has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps International Paper to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– International Paper has one of the best training and development program in Basic Materials industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– International Paper is one of the most innovative firm in Paper & Paper Products sector.
Superior customer experience
– The customer experience strategy of International Paper in Paper & Paper Products industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of International Paper | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of International Paper are -
Employees’ less understanding of International Paper strategy
– From the outside it seems that the employees of International Paper don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– International Paper 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 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 International Paper supply chain. Even after few cautionary changes, International Paper is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left International Paper vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, International Paper has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Paper & Paper Products industry over the last five years. International Paper 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.
Slow to strategic competitive environment developments
– As International Paper is one of the leading players in the Paper & Paper Products industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Paper & Paper Products industry in last five years.
No frontier risks strategy
– From the 10K / annual statement of International Paper, it seems that company is thinking out the frontier risks that can impact Paper & Paper Products 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.
Low market penetration in new markets
– Outside its home market of Germany, International Paper needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative at International Paper, in the dynamic environment of Paper & Paper Products industry it has struggled to respond to the nimble upstart competition. International Paper has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, International Paper 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 Paper & Paper Products industry using digital technology.
Interest costs
– Compare to the competition, International Paper 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 International Paper has some of the most successful models in the Paper & Paper Products industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. International Paper should strive to include more intangible value offerings along with its core products and services.
International Paper Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of International Paper are -
Manufacturing automation
– International Paper can use the latest technology developments to improve its manufacturing and designing process in Paper & Paper Products 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.
Using analytics as competitive advantage
– International Paper has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Paper & Paper Products sector. This continuous investment in analytics has enabled International Paper to build a competitive advantage using analytics. The analytics driven competitive advantage can help International Paper to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, International Paper 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 International Paper to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. International Paper can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, International Paper can use these opportunities to build new business models that can help the communities that International Paper operates in. Secondly it can use opportunities from government spending in Paper & Paper Products sector.
Buying journey improvements
– International Paper can improve the customer journey of consumers in the Paper & Paper Products 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.
Loyalty marketing
– International Paper 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Paper & Paper Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. International Paper 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. International Paper 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.
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 International Paper 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Paper & Paper Products industry, but it has also influenced the consumer preferences. International Paper can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects International Paper 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 International Paper 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 Paper & Paper Products industry.
Use of Bitcoin and other crypto currencies for transactions in Paper & Paper Products industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for International Paper in the Paper & Paper Products industry. Now International Paper can target international markets with far fewer capital restrictions requirements than the existing system.
Threats International Paper External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of International Paper are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, International Paper may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Paper & Paper Products sector.
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 International Paper.
Environmental challenges
– International Paper 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. International Paper can take advantage of this fund but it will also bring new competitors in the Paper & Paper Products industry.
Regulatory challenges
– International Paper 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 Paper & Paper Products industry regulations.
Technology acceleration in Forth Industrial Revolution
– International Paper has witnessed rapid integration of technology during Covid-19 in the Paper & Paper Products industry. As one of the leading players in the industry, International Paper needs to keep up with the evolution of technology in the Paper & Paper Products 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.
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. International Paper 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.
Shortening product life cycle
– it is one of the major threat that International Paper is facing in Paper & Paper Products sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– International Paper 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.
Consumer confidence and its impact on International Paper 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 Paper & Paper Products 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.
Increasing wage structure of International Paper
– 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 International Paper.
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.
Stagnating economy with rate increase
– International Paper 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 Paper & Paper Products industry.
Weighted SWOT Analysis of International Paper Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at International Paper 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 International Paper 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 International Paper 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 International Paper 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 International Paper needs to make to build a sustainable competitive advantage.
