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 – cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing commodity prices, wage bills are increasing, increasing household debt because of falling income levels, geopolitical disruptions,
challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
Diverse revenue streams
– Knorr-Bremse is present in almost all the verticals within the Railroads industry. This has provided Knorr-Bremse 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.
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.
Operational resilience
– The operational resilience strategy of Knorr-Bremse comprises – understanding the underlying the factors in the Railroads industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to recruit top talent
– Knorr-Bremse is one of the leading players in the Railroads 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.
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.
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.
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.
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.
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.
Strong track record of project management in the Railroads industry
– Knorr-Bremse is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Weaknesses of Knorr-Bremse | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Knorr-Bremse are -
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.
Lack of clear differentiation of Knorr-Bremse products
– To increase the profitability and margins on the products, Knorr-Bremse needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Knorr-Bremse is dominated by functional specialists. It is not different from other players in the Railroads industry, but Knorr-Bremse needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Knorr-Bremse to focus more on services in the Railroads industry rather than just following the product oriented approach.
Need for greater diversity
– Knorr-Bremse 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.
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.
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.
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.
Slow to strategic competitive environment developments
– As Knorr-Bremse is one of the leading players in the Railroads industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Railroads industry in last five years.
No frontier risks strategy
– From the 10K / annual statement of Knorr-Bremse, it seems that company is thinking out the frontier risks that can impact Railroads 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.
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.
Knorr-Bremse Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Knorr-Bremse are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Knorr-Bremse 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.
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.
Leveraging digital technologies
– Knorr-Bremse 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.
Loyalty marketing
– Knorr-Bremse 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.
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.
Manufacturing automation
– Knorr-Bremse can use the latest technology developments to improve its manufacturing and designing process in Railroads 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Railroads industry, but it has also influenced the consumer preferences. Knorr-Bremse can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Creating value in data economy
– The success of analytics program of Knorr-Bremse has opened avenues for new revenue streams for the organization in Railroads industry. This can help Knorr-Bremse to build a more holistic ecosystem for Knorr-Bremse products in the Railroads industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
Threats Knorr-Bremse External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Knorr-Bremse are -
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Knorr-Bremse business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Knorr-Bremse 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 Knorr-Bremse prominent markets.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Knorr-Bremse in Railroads industry. The Railroads industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
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.
Stagnating economy with rate increase
– Knorr-Bremse 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 Railroads 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 Knorr-Bremse.
Increasing wage structure of Knorr-Bremse
– 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 Knorr-Bremse.
Environmental challenges
– Knorr-Bremse 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. Knorr-Bremse can take advantage of this fund but it will also bring new competitors in the Railroads industry.
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.
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.
