Olam International SWOT and PESTLE Analysis

Strength

1. Strong Overall Performance: OIL has recently taken a change of course as far as strategy is concerned. Until now, the company had ventured into a lot of products, out of which some, like wood products, rubber and sugar, turned out to be less profitable. The company has adopted a focus strategy, which has worked out well for the company in the year 2019. It has registered a strong growth on all financial parameters. In FY19, total sales volume increased by 21%, although sales revenue increased by only 8.2%, indicating that sales volume increased in a lower priced product category. However, the EBITDA value has gained by 25.6%, indicating that sales volume increased in a high-margin product. After taking all other expenses into account, the PATMI has increased by 62.2% over last year, indicating much better returns as a result of better decisions. Cash and cash equivalents have also increased by 28.2%, indicating a better position in term of liquidity. All these indicators show that the company is in a strong position and can look forward to grow even further.

2. Global presence in over 60 countries: OIL operates in more than 60 countries around the world. It has more than 25,000 customers worldwide, who procure different raw materials and food ingredients for further processing to final consumables. The company boasts of a network of 4.8 million farmers, which is the largest for any company in the world. It has farms in 13 different countries where 16 different crops are grown. The company has 170 facilities across the world where these raw materials are processed into custom-made ingredients. This huge network of farms, farmers and processing facilities gives a huge competitive advantage to OIL firstly in the form of economies of scale, and secondly in the form of shared learning and efficiencies. Apart from these entities, the company also 12 innovation centers which work towards offering value-added solutions throughout the supply chain. These centers help in the integration of the diversified businesses and improvement of operational efficiencies. Overall, the company has built a unique value chain with a global presence which makes Olam a scaled, well-informed and efficient business.

The remaining section of “Strength” is available only in the 'Complete Report' on purchase.

Weakness

This section is available only in the 'Complete Report' on purchase.

Opportunity

This section is available only in the 'Complete Report' on purchase.

Threat

This section is available only in the 'Complete Report' on purchase.

Political

This section is available only in the 'Complete Report' on purchase.

Economic

This section is available only in the 'Complete Report' on purchase.

Social

This section is available only in the 'Complete Report' on purchase.

Technological

This section is available only in the 'Complete Report' on purchase.

Legal

This section is available only in the 'Complete Report' on purchase.

Environmental

1. Mitigating the impact of climate change: Global temperature is reaching its limits as we only need to increase it further by 1.5 °C to create a “hot house” like situation. This is a special term coined for the scenario when global temperature becomes higher than any point of time in the past 1.2 million years. The main cause for a hot house earth under current circumstances would be unchecked human activity rendering the planet’s temperature maintaining feedback loops ineffective. Our planets resources are being stretched and boundaries breached, resulting in stressors before we even get to 2050. Although efforts are being made to produce in greenhouses and underground farms, a vast majority of agricultural production still happens with the use of natural resources. Hence, the majority of agriculture today is not resilient to natural forces like temperature, disease, pest, floods or droughts. Another fact to be noted is that agricultural activity contributes to 11% of man-made greenhouse emissions, hence agriculture must be made environment friendly. Further people globally have realized now that there is overwhelming evidence that climate change is real and this indicates to an opportunity that people are ready to do their part towards combating climate change as consumers. Hence, the company has taken steps in this direction like Environment Foot printing and Solutions App and Carbon Trading and Land Tokenization.

2. Success in business linked to Sustainable Development Goals (SDGs): According to OIL CEO, over the next decades, the definition of success in business itself would change, the definition being closely hinged on achieving the Sustainable Development Goals (SDGs). “Business as usual” or going just one step further with one or two disruptions will not help in achieving the transformative agenda of the United Nations SDGs. The need of the hour is a globalized food and agricultural system, which is in line with the SDGs. For example, it should be robust enough to feed the entire population, which is still growing, although at a much slower pace than a few decades earlier. Secondly, it should generate higher incomes for all participants in the supply chain, directly or indirectly. And lastly, it should keep restoring vital ecosystems and natural resources. Such a system would be able to tap an economic value estimated to be around $ 2 trillion.

3. Green financing linked to sustainability KPIs: One measure undertaken by financial institutions across the world is to give sustainability linked loans to corporations. These loans are granted after taking a guarantee from the organization that it will perform well on the given sustainability key performance indicators (KPIs). For example, Olam has secured a sustainability linked loan of S$ 740 million along with its subsidiary Olam Treasury. The interest rate of the loan will be evaluated based on three sustainable KPIs- (i) prosperous farmers and food systems, (ii) thriving communities, and (iii) regeneration of the living world.