Krones AG (KRNG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Krones AG (Germany)

Based on various researches at Oak Spring University , Krones AG is operating in a macro-environment that has been destablized by – increasing commodity prices, there is backlash against globalization, increasing transportation and logistics costs, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of Krones AG

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Krones AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Krones AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Krones AG 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 Krones AG can be done for the following purposes –
1. Strategic planning of Krones AG
2. Improving business portfolio management of Krones AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Containers & Packaging sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Krones AG

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

The strengths of Krones AG are -

Low bargaining power of suppliers

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

Organizational Resilience of Krones AG

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

Ability to lead change in Containers & Packaging

– Krones AG is one of the leading players in the Containers & Packaging industry in Germany. Over the years it has not only transformed the business landscape in the Containers & Packaging industry in Germany but also across the existing markets. The ability to lead change has enabled Krones AG 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 Containers & Packaging industry

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

High brand equity

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

Innovation driven organization

– Krones AG is one of the most innovative firm in Containers & Packaging sector.

Highly skilled collaborators

– Krones AG has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Containers & Packaging industry. Secondly the value chain collaborators of Krones AG have helped the firm to develop new products and bring them quickly to the marketplace.

Operational resilience

– The operational resilience strategy of Krones AG comprises – understanding the underlying the factors in the Containers & Packaging 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.

Cross disciplinary teams

– Horizontal connected teams at the Krones AG 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.

Strong track record of project management in the Containers & Packaging industry

– Krones AG 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

– Krones AG 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.

Digital Transformation in Containers & Packaging industry

- digital transformation varies from industry to industry. For Krones AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Krones AG 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 Krones AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Krones AG are -

High bargaining power of channel partners in Containers & Packaging industry

– because of the regulatory requirements in Germany, Krones AG 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 Containers & Packaging industry.

Employees’ less understanding of Krones AG strategy

– From the outside it seems that the employees of Krones AG 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

– Krones AG 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.

Increasing silos among functional specialists

– The organizational structure of Krones AG is dominated by functional specialists. It is not different from other players in the Containers & Packaging industry, but Krones AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Krones AG to focus more on services in the Containers & Packaging industry rather than just following the product oriented approach.

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 Krones AG supply chain. Even after few cautionary changes, Krones AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Krones AG vulnerable to further global disruptions in South East Asia.

Capital Spending Reduction

– Even during the low interest decade, Krones AG 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 Containers & Packaging industry using digital technology.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Krones AG is slow explore the new channels of communication. These new channels of communication can help Krones AG to provide better information regarding Containers & Packaging products and services. It can also build an online community to further reach out to potential customers.

Skills based hiring in Containers & Packaging industry

– The stress on hiring functional specialists at Krones AG 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.

High dependence on Krones AG ‘s star products

– The top 2 products and services of Krones AG still accounts for major business revenue. This dependence on star products in Containers & Packaging industry has resulted into insufficient focus on developing new products, even though Krones AG has relatively successful track record of launching new products.

Ability to respond to the competition

– As the decision making is very deliberative at Krones AG, in the dynamic environment of Containers & Packaging industry it has struggled to respond to the nimble upstart competition. Krones AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Products dominated business model

– Even though Krones AG has some of the most successful models in the Containers & Packaging industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Krones AG should strive to include more intangible value offerings along with its core products and services.

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

The opportunities of Krones AG are -

Building a culture of innovation

– managers at Krones AG 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 Containers & Packaging industry.

Loyalty marketing

– Krones AG 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 Containers & Packaging industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Krones AG 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. Krones AG 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Krones AG can use these opportunities to build new business models that can help the communities that Krones AG operates in. Secondly it can use opportunities from government spending in Containers & Packaging sector.

Creating value in data economy

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

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

Learning at scale

– Online learning technologies has now opened space for Krones AG 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.

Manufacturing automation

– Krones AG can use the latest technology developments to improve its manufacturing and designing process in Containers & Packaging 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Krones AG 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 Krones AG 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 Krones AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Krones AG is facing challenges because of the dominance of functional experts in the organization. Krones AG can utilize new technology in the field of Containers & Packaging industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Better consumer reach

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

Remote work and new talent hiring opportunities

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

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

The threats of Krones AG 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Krones AG in Containers & Packaging industry. The Containers & Packaging 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.

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 Krones AG business can come under increasing regulations regarding data privacy, data security, etc.

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.

Regulatory challenges

– Krones AG 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 Containers & Packaging industry regulations.

Increasing international competition and downward pressure on margins

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

Consumer confidence and its impact on Krones AG 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 Containers & Packaging industry and other sectors.

Technology acceleration in Forth Industrial Revolution

– Krones AG has witnessed rapid integration of technology during Covid-19 in the Containers & Packaging industry. As one of the leading players in the industry, Krones AG needs to keep up with the evolution of technology in the Containers & Packaging 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 Krones AG in the Containers & Packaging sector and impact the bottomline of the organization.

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 Krones AG.

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. Krones AG needs to understand the core reasons impacting the Containers & Packaging industry. This will help it in building a better workplace.

Shortening product life cycle

– it is one of the major threat that Krones AG is facing in Containers & Packaging sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Krones AG may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Containers & Packaging sector.

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Weighted SWOT Analysis of Krones AG Template, Example

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

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