Knorr-Bremse (KBX) SWOT Analysis / TOWS Matrix / MBA Resources
Railroads
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Knorr-Bremse (Germany)
Based on various researches at Oak Spring University , Knorr-Bremse is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, wage bills are increasing, geopolitical disruptions, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, technology disruption,
digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Knorr-Bremse can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Knorr-Bremse, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Knorr-Bremse 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 Knorr-Bremse can be done for the following purposes –
1. Strategic planning of Knorr-Bremse
2. Improving business portfolio management of Knorr-Bremse
3. Assessing feasibility of the new initiative in Germany
4. Making a Railroads sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Knorr-Bremse
Strengths of Knorr-Bremse | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Knorr-Bremse are -
High brand equity
– Knorr-Bremse has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Knorr-Bremse to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Railroads industry
- digital transformation varies from industry to industry. For Knorr-Bremse digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Knorr-Bremse 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
– Knorr-Bremse has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Railroads industry. Secondly the value chain collaborators of Knorr-Bremse have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Knorr-Bremse has one of the best training and development program in Transportation 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.
High switching costs
– The high switching costs that Knorr-Bremse 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.
Sustainable margins compare to other players in Railroads industry
– Knorr-Bremse has clearly differentiated products in the market place. This has enabled Knorr-Bremse to fetch slight price premium compare to the competitors in the Railroads industry. The sustainable margins have also helped Knorr-Bremse to invest into research and development (R&D) and innovation.
Analytics focus
– Knorr-Bremse 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 Railroads 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.
Effective Research and Development (R&D)
– Knorr-Bremse has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Knorr-Bremse staying ahead in the Railroads industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Knorr-Bremse has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Knorr-Bremse 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.
Low bargaining power of suppliers
– Suppliers of Knorr-Bremse in the Transportation sector have low bargaining power. Knorr-Bremse has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Knorr-Bremse to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Knorr-Bremse
– The covid-19 pandemic has put organizational resilience at the centre of everthing Knorr-Bremse does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Knorr-Bremse in Railroads industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Knorr-Bremse | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Knorr-Bremse are -
Skills based hiring in Railroads industry
– The stress on hiring functional specialists at Knorr-Bremse 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.
Employees’ less understanding of Knorr-Bremse strategy
– From the outside it seems that the employees of Knorr-Bremse 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.
Compensation and incentives
– The revenue per employee of Knorr-Bremse is just above the Railroads 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.
Products dominated business model
– Even though Knorr-Bremse has some of the most successful models in the Railroads industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Knorr-Bremse should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Knorr-Bremse has a high cash cycle compare to other players in the Railroads industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Ability to respond to the competition
– As the decision making is very deliberative at Knorr-Bremse, in the dynamic environment of Railroads industry it has struggled to respond to the nimble upstart competition. Knorr-Bremse has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Knorr-Bremse is slow explore the new channels of communication. These new channels of communication can help Knorr-Bremse to provide better information regarding Railroads products and services. It can also build an online community to further reach out to potential customers.
High dependence on Knorr-Bremse ‘s star products
– The top 2 products and services of Knorr-Bremse still accounts for major business revenue. This dependence on star products in Railroads industry has resulted into insufficient focus on developing new products, even though Knorr-Bremse has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Knorr-Bremse has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Railroads industry over the last five years. Knorr-Bremse 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 Knorr-Bremse needs to have more collaboration between its sales team and marketing team. Sales professionals in the Railroads industry have deep experience in developing customer relationships. Marketing department at Knorr-Bremse can leverage the sales team experience to cultivate customer relationships as Knorr-Bremse is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Knorr-Bremse 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 Railroads industry using digital technology.
Knorr-Bremse Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Knorr-Bremse are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Knorr-Bremse is facing challenges because of the dominance of functional experts in the organization. Knorr-Bremse can utilize new technology in the field of Railroads industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Knorr-Bremse has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Railroads sector. This continuous investment in analytics has enabled Knorr-Bremse to build a competitive advantage using analytics. The analytics driven competitive advantage can help Knorr-Bremse to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Knorr-Bremse to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Knorr-Bremse in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Railroads industry, and it will provide faster access to the consumers.
Developing new processes and practices
– Knorr-Bremse can develop new processes and procedures in Railroads 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Knorr-Bremse can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Railroads industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Knorr-Bremse 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. Knorr-Bremse 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.
Better consumer reach
– The expansion of the 5G network will help Knorr-Bremse to increase its market reach. Knorr-Bremse 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.
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 Knorr-Bremse 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.
Use of Bitcoin and other crypto currencies for transactions in Railroads industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Knorr-Bremse in the Railroads industry. Now Knorr-Bremse can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Knorr-Bremse can use these opportunities to build new business models that can help the communities that Knorr-Bremse operates in. Secondly it can use opportunities from government spending in Railroads sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Knorr-Bremse 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 Knorr-Bremse 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. Knorr-Bremse can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Knorr-Bremse External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Knorr-Bremse are -
Regulatory challenges
– Knorr-Bremse 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 Railroads industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Railroads industry are lowering. It can presents Knorr-Bremse with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Railroads sector.
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. Knorr-Bremse 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.
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 Knorr-Bremse in the Railroads sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Knorr-Bremse high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Knorr-Bremse may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Railroads sector.
Shortening product life cycle
– it is one of the major threat that Knorr-Bremse is facing in Railroads sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Railroads industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Knorr-Bremse can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Knorr-Bremse has witnessed rapid integration of technology during Covid-19 in the Railroads industry. As one of the leading players in the industry, Knorr-Bremse needs to keep up with the evolution of technology in the Railroads 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.
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.
Consumer confidence and its impact on Knorr-Bremse 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 Railroads industry and other sectors.
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 Knorr-Bremse.
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. Knorr-Bremse needs to understand the core reasons impacting the Railroads industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Knorr-Bremse Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Knorr-Bremse 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 Knorr-Bremse 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 Knorr-Bremse 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 Knorr-Bremse 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 Knorr-Bremse needs to make to build a sustainable competitive advantage.