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Telstra SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Telstra managers to do a situational analysis of the organization . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Telstra is facing in its current business environment.
The Telstra is one of the leading firms in its industry. Telstra 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 firm 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 known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Telstra 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 core purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Telstra strengths, and eradicate its weaknesses.
Step by Step Guide to Telstra SWOT Analysis
Strengths of Telstra – Internal Strategic Factors
As one of the leading companies in its industry, Telstra 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 Telstra are –
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- 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.
- Superb Performance in New Markets – Telstra 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.
- 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.
- Highly successful at Go To Market strategies for its products.
- Strong distribution network – Over the years Telstra has built a reliable distribution network that can reach majority of its potential market.
- Successful track record of developing new products – product innovation.
- Good Returns on Capital Expenditure – Telstra is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Weakness of Telstra – Internal Strategic Factors
Weakness are the areas where Telstra 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.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Telstra 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.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Telstra 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.
- 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.
- Limited success outside core business – Even though Telstra is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Telstra is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Opportunities for Telstra – External Strategic Factors
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Telstra’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.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Telstra in other product categories.
- 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 Telstra. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Telstra.
- New trends in the consumer behavior can open up new market for the Telstra . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Telstra to increase its profitability.
- The market development will lead to dilution of competitor’s advantage and enable Telstra to increase its competitiveness compare to the other competitors.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Telstra an opportunity to enter a new emerging market.
Threats Telstra Facing - External Strategic Factors
- Imitation of the counterfeit and low quality product is also a threat to Telstra’s product especially in the emerging markets and low income markets.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Telstra in those markets.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards 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.
- 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.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
Limitations of SWOT Analysis for Telstra
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 Telstra
- 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 Telstra
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 Telstra 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 Telstra
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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SWOT Worksheet & Template
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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)