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Danone SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Danone managers to do a situational analysis of the company . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Danone is facing in its current business environment.
The Danone is one of the leading companies in its industry. Danone maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Danone to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The main purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect Danone strengths, and eradicate its weaknesses.
Step by Step Guide to Danone SWOT Analysis
Strengths of Danone – Internal Strategic Factors
As one of the leading firms in its industry, Danone has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Danone are –
- Successful track record of developing new products – product innovation.
- Automation of activities brought consistency of quality to Danone products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Strong Brand Portfolio – Over the years Danone has invested in building a strong brand portfolio. The SWOT analysis of Danone just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Superb Performance in New Markets – Danone has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Strong Free Cash Flow – Danone has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
Weakness of Danone – Internal Strategic Factors
Weakness are the areas where Danone can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- High attrition rate in work force – compare to other organizations in the industry Danone has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- The profitability ratio and Net Contribution % of Danone are below the industry average.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Danone has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Danone is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Danone is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Danone needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Opportunities for Danone – External Strategic Factors
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Danone to increase its profitability.
- Government green drive also opens an opportunity for procurement of Danone products by the state as well as federal government contractors.
- New trends in the consumer behavior can open up new market for the Danone . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Danone’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Danone to drive home its advantage in new technology and gain market share in the new product category.
- The market development will lead to dilution of competitor’s advantage and enable Danone to increase its competitiveness compare to the other competitors.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Danone to capture new customers and increase its market share.
Threats Danone Facing - External Strategic Factors
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Liability laws in different countries are different and Danone may be exposed to various liability claims given change in policies in those markets.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Imitation of the counterfeit and low quality product is also a threat to Danone’s product especially in the emerging markets and low income markets.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
- Rising raw material can pose a threat to the Danone profitability.
Limitations of SWOT Analysis for Danone
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Danone
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Danone
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Danone managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Danone
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)