While preparing Able Corporation’s business plan, we developed a SWOT analysis, which provided us with valuable insight into the strengths, weaknesses, opportunities, and threats of our company. Strengths and weaknesses are internal factors that affect an organization and opportunities and threats are the external factors that affect an organization. It is not only vital for us to discover our strengths, but our competitors as well. Understanding the strengths, weaknesses, opportunities, and threats of our strongest competitors will help us predict their competitive position so that we may effectively accomplish our newly developed strategies (MindTools, 2009).
According to the rigorous research Able has been conducting, it has been determined that Smith & White Corporation (S&W;) and Makatume are two key contenders in the U.S. PEPT industry. S&W; sells a complete product line of reasonable quality tools to both consumer and professional channels. In addition, they also sell other items under the same name such as kitchen appliances, lawn and garden products, and hobby tools. Makatume simply sells professional tools (CTU Online, 2009). We can take our analysis one step further and apply a SWOT analysis to our competition. The following table represents a SWOT analysis for S&W; and Makatume:
Strengths
• S&W;’s integrated strategy throughout all of their product lines
• S&W; brand equity
• Makatume’s fast growing cordless segment and dominant market share in professional cordless market
• Highly regarded by tradesmen for their quality, robustness, and durability.
Weaknesses
• S&W;’s huge size
• Makatume is locked into lower voltages
• S&W;’s lack of presence in cordless segment
• S&W; high operating costs
Opportunities
• Low (less than 5%) market share by several domestic and foreign competitors
Threats
• Growing strength of Far East imports from China
Both companies have significant strengths that have helped them position themselves as industry leaders. S&W;’s biggest strength is the integrated strategy throughout all of their product lines and their ability to preserve brand equity through mass advertising enables them to remain dominant in the markets in which they operate. Well-built brand equity creates high consumer demand and influences many retailers to supply S&W; products. Makatume’s biggest strength growth they are experiencing in the cordless sector. They control 70% of the professional cordless market and have developed into the U.S.’s second leading competitor within their industry (CTU Online, 2009).
S&W; and Makatume are not without their weaknesses. For instance, S&W; incurs high operating costs. This is a result from their outdated and badly placed plants. It also doesn’t have much of a presence in the fast growing cordless segment. Another weakness is S&W;’s huge size, which makes it hard from them to respond to change. Makatume also has some significant weakness. While their early market entry has helped them dominant their industry markets, it has limited their products to lower voltages because of it well established interchangeable battery. As innovations in battery effectiveness moves forward, Makatume will have to make some serious decisions in order to grow as well (CTU Online, 2009).
Lastly are the possible opportunities and threats for S&W; and Makatume. One opportunity for both companies is the low market share of competing businesses within the industry. The remaining players in the market represent both national and international niche competitors and only account for 5% of the total market. On the flip side, a potential threat to both S&W; and Makatume are imports from China. The good value and low price of Chinese imports are starting to create an influence on consumer tools (CTU Online, 2009).
Carrying out a SWOT analysis identifies strategies for minimizing weaknesses, neutralizing threats, and maximizing strengths and opportunities. Weaknesses and threats lessen a company’s competitiveness within a specific industry/market. Strategies are developed to reduce weaknesses and avoid external threats. For instance, S&W; can develop strategic objectives to increase their presence in the cordless sector of power tools. They can also focus on renovating or relocating their existing manufacturing plants to lower their operating costs. Makatume can develop strategic objectives to possibly expand their product lines to accommodate higher voltage batteries. Although these two companies have no control over external factors that may affect them, as with the rising strength of Chinese imports, the solution is to recognize potential threats and then draft contingency strategies to counteract the threat or lessen its potential impact (Simmering, 2007).
S&W; and Makatume want to maximize their strengths and opportunities. Not only will this give them an increased competitive advantage, it will also lessen potential threats and weaknesses. S&W; and Makatume can identify which strengths can be used to make the most of its opportunities. They can identify the appropriate strengths that can used to take advantage of and maximize its opportunities. For instance, the strengths of these companies that could help them infiltrate a new market include brand equity, highly regarded product quality, and quickly growing cordless sector (Simmering, 2007).
Makatume should definitely implement strategic objectives to move towards changing their interchangeable battery system to a higher voltage. They must keep up with the technology of battery efficiency to maintain their competitive advantage. While there is a risk that their innovations in battery efficiency will give other companies the initiative to employ the same product, it is a risk worth taking. They will be able to better serve their customers, which in turn will continue to build brand equity and to attract and retain its customers.
A SWOT analysis can be one-sided, so it should not be used as a be all to an end all, but rather as a guide. Using a SWOT analysis will give us the opportunity to take a look at ourselves and our competitors so we may develop effective strategic objectives to sustain a competitive advantage. Obtaining an awareness of our competition is vital in creating a winning strategy.
References
CTU Online. (2009). Course Materials: MGM465-0903B-03: Business Strategy. Retrieved on
September 22, 2009 from https://campus.ctuonline.edu/MainFrame.aspx?ContentFrame=/Default.aspx
MindTools. (2009). SWOT Analysis. Retrieved on September 22, 2009 from
http://www.mindtools.com/pages/article/newTMC_05.htm
Simmering, M.(2007). SWOT Analysis. Retrieved on September 23, 2009 from http://www.referenceforbusiness.com/management/Pr-Sa/SWOT-Analysis.html
