Archer Daniels Midland SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Archer Daniels Midland 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) Archer Daniels Midland is facing in its current business environment.

The Archer Daniels Midland is one of the leading firms in its industry. Archer Daniels Midland maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis.  SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework helps 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 enables the managers of the Archer Daniels Midland to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Archer Daniels Midland swot analysis / matrix

SWOT Matrix Strategies Objective

The core purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Archer Daniels Midland strengths, and eradicate its weaknesses.

Step by Step Guide to Archer Daniels Midland SWOT Analysis

Strengths of Archer Daniels Midland – Internal Strategic Factors

As one of the leading companies in its industry, Archer Daniels Midland has numerous strengths that help 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 Archer Daniels Midland are –

  • Good Returns on Capital Expenditure – Archer Daniels Midland is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
  • Superb Performance in New Markets – Archer Daniels Midland 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.
  • Automation of activities brought consistency of quality to Archer Daniels Midland products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
  • Successful track record of developing new products – product innovation.
  • 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.
  • Strong Free Cash Flow – Archer Daniels Midland has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Highly successful at Go To Market strategies for its products.

Weakness of Archer Daniels Midland – Internal Strategic Factors

Weakness are the areas where Archer Daniels Midland can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

  • Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Archer Daniels Midland
  • Investment in Research and Development is below the fastest growing players in the industry. Even though Archer Daniels Midland is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
  • Limited success outside core business – Even though Archer Daniels Midland is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though Archer Daniels Midland is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
  • The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Archer Daniels Midland 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 Archer Daniels Midland – External Strategic Factors

  • New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Archer Daniels Midland. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Archer Daniels Midland to increase its profitability.
  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Archer Daniels Midland to capture new customers and increase its market share.
  • The new technology provides an opportunity to Archer Daniels Midland to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
  • The market development will lead to dilution of competitor’s advantage and enable Archer Daniels Midland to increase its competitiveness compare to the other competitors.
  • 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.
  • Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Archer Daniels Midland an opportunity to enter a new emerging market.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Archer Daniels Midland’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.

Threats Archer Daniels Midland Facing - External Strategic Factors

  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • 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.
  • The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
  • Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Archer Daniels Midland
  • Imitation of the counterfeit and low quality product is also a threat to Archer Daniels Midland’s product especially in the emerging markets and low income markets.
  • Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
  • New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.

Limitations of SWOT Analysis for Archer Daniels Midland

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 Archer Daniels Midland
  • 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 Archer Daniels Midland

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 Archer Daniels Midland 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 Archer Daniels Midland

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.

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Example of Weighted SWOT Analysis

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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)