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Ericsson SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Ericsson 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) Ericsson is facing in its current business environment.
The Ericsson is one of the leading firms in its industry. Ericsson maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly 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 enables 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 helps the managers of the Ericsson 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 primary purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Ericsson strengths, and eradicate its weaknesses.
Step by Step Guide to Ericsson SWOT Analysis
Strengths of Ericsson – Internal Strategic Factors
As one of the leading organizations in its industry, Ericsson has numerous strengths that enable 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 Ericsson are –
- Successful track record of developing new products – product innovation.
- Strong Brand Portfolio – Over the years Ericsson has invested in building a strong brand portfolio. The SWOT analysis of Ericsson just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Strong distribution network – Over the years Ericsson has built a reliable distribution network that can reach majority of its potential market.
- Highly skilled workforce through successful training and learning programs. Ericsson is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- 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 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.
- Automation of activities brought consistency of quality to Ericsson products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- 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.
Weakness of Ericsson – Internal Strategic Factors
Weakness are the areas where Ericsson can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Ericsson has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Ericsson is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Ericsson 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.
- 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 Ericsson
- The profitability ratio and Net Contribution % of Ericsson are below the industry average.
- Limited success outside core business – Even though Ericsson 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.
Opportunities for Ericsson – External Strategic Factors
- New trends in the consumer behavior can open up new market for the Ericsson . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Ericsson’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 Ericsson in other product categories.
- The new technology provides an opportunity to Ericsson 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.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Ericsson to capture new customers and increase its market share.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Ericsson.
- The market development will lead to dilution of competitor’s advantage and enable Ericsson to increase its competitiveness compare to the other competitors.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Ericsson to drive home its advantage in new technology and gain market share in the new product category.
Threats Ericsson Facing - External Strategic Factors
- 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.
- Imitation of the counterfeit and low quality product is also a threat to Ericsson’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.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- 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.
- 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 Ericsson
Limitations of SWOT Analysis for Ericsson
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 Ericsson
- 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 Ericsson
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 Ericsson 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 Ericsson
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.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
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)