Krones AG (KRNG) SWOT Analysis / TOWS Matrix / MBA Resources
Containers & Packaging
Strategy / 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 – challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, geopolitical disruptions, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, wage bills are increasing,
customer relationship management is fast transforming because of increasing concerns over data privacy, 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 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.
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
Strengths of Krones AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Krones AG are -
Superior customer experience
– The customer experience strategy of Krones AG in Containers & Packaging industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Krones AG 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 Containers & Packaging 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.
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.
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.
Effective Research and Development (R&D)
– Krones AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Krones AG staying ahead in the Containers & Packaging industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
High switching costs
– The high switching costs that Krones AG 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.
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.
Weaknesses of Krones AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Krones AG are -
Lack of clear differentiation of Krones AG products
– To increase the profitability and margins on the products, Krones AG needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
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.
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.
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.
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.
Slow to strategic competitive environment developments
– As Krones AG is one of the leading players in the Containers & Packaging industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Containers & Packaging industry in last five years.
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.
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.
High operating costs
– Compare to the competitors, Krones AG has high operating costs in the Containers & Packaging industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Krones AG lucrative customers.
Krones AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Krones AG are -
Leveraging digital technologies
– Krones AG 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 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.
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.
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.
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.
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 Krones AG 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 Containers & Packaging industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Krones AG in the Containers & Packaging industry. Now Krones AG can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Krones AG in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Containers & Packaging industry, and it will provide faster access to the consumers.
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.
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.
Developing new processes and practices
– Krones AG can develop new processes and procedures in Containers & Packaging 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Containers & Packaging industry, but it has also influenced the consumer preferences. Krones AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Threats Krones AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Krones AG are -
Stagnating economy with rate increase
– Krones AG 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 Containers & Packaging 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. Krones AG 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.
Increasing wage structure of Krones AG
– 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 Krones AG.
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.
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.
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.
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.
High dependence on third party suppliers
– Krones AG 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.
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.
Easy access to finance
– Easy access to finance in Containers & Packaging industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Krones AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Containers & Packaging industry are lowering. It can presents Krones AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Containers & Packaging sector.
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.
