Atlas Copco SWOT and PESTLE Analysis

Strength

1. Strong strategy for sustainable growth: Atlas Copco has formulated a strong sustainable strategy. This strategy helps the company to create and deliver the value proposition in an environmentally, socially and economically viable form. The Group has recognized five key foundations that are critical for achieving its goal and objectives. These foundations are people, presence, service, innovation & operational excellence. The group is progressing towards an organisation that will deliver results for a long time to come.

2. Heavily Diversified Business: Atlas Copco has strong presence in five business areas: Compressor technique, vacuum technique, industrial technique, Mining and rock excavation technique and construction technique. The shares in revenue of these five areas are 35%, 13%, 15%, 25% and 12% respectively. Such diverse business helps the company to sustain operations in all the areas as one profitable area can compensate for the other area which is not doing so well.

3. Focus on innovation and adoptive to changes: Atlas Copco has always been an early adopter to changes happening in the industry and has also been the cause for some of those changes. Its focus towards innovation has helped Atlas Copco to outperform its competitors. Atlas Copco has started to use digitalization in its various production processes and operations and is also providing safe digitalization solution for the industries. For this reason it has collaborated with Saab and Combitech to develop safe mining digitalization solutions.

Weakness

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Opportunity

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Threat

1. Strong global and regional Competitors: Atlas Copco faces tough competition across its business segments from global and regional competitors. Its main competitor Ingersoll Rand has been a market leader in industrial compressors and tools segment. It is pursuing aggressive growth and expansion strategies in other segments. Regional Competitors like ELGI and RMP compressors are posing direct challenge to Atlas Copco in Asia Pacific region.

2. Declining market share in small compressors segment: Atlas Copco has been facing worldwide competition from low-cost countries which is disrupting the competitive landscape in the form of commoditization and price decline. The market segment demanding small compressor is affected to a great extent by this and the sales in this segment are primarily driven by taking the cost factor into account. The local compressor manufacturers seems to win the race here as they offer much cheaper products as compared to Atlas Copco which are low in quality but serve the purpose for local and small industrial entities. Product differentiation in this segment is a challenge and there is a little scope for innovation that can drive the market in favour of Atlas Copco.

Political

1. Trade protectionist policies of Trump administration: Increased protectionist policies impacts global trade and more often than not these are influenced by political factors and issues. Atlas Copco being a European company may find market conditions difficult for operating in the U.S as new regulations are likely to be introduced affecting foreign companies. Trump administration has already withdrawn from Trans-Pacific Partnership trade agreement and is expected to take many more administrative changes in trade deals and partnerships.

Economic

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Social

1. Growing demand for resources, properties: Disposable consumer income is increasing across developing and emerging markets. These markets also have a high percentage of young population which is also leading to expansion in the middle class segment. In developing and emerging markets like the Indian-subcontinent and Middle East, demand for real estate properties is increasing exponentially due to which the construction industry is booming in these markets. Similarly people are having more amounts at their disposal for consumption of available resources which provides high potential of growth to mining and manufacturing industry. And ultimately here lies the great opportunity of business for companies like Atlas Copco.

Technological

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Legal

1. Changes in tax laws and regulations: Atlas Copco’s business operations are affected by numerous laws and regulations as well as commercial and financial agreements with customers, suppliers, and other counterparties, and by licenses, patents and other intangible property rights. This area is particularly in focus after major political and administrative changes globally, mainly the Brexit referendum and election of Donald Trump as U.S. president.

Environmental

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