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Northrop Grumman SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Northrop Grumman managers to do a situational analysis of the firm . It is a useful technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Northrop Grumman is facing in its current business environment.
The Northrop Grumman is one of the leading firms in its industry. Northrop Grumman maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization 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 called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Northrop Grumman 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 main purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Northrop Grumman strengths, and eradicate its weaknesses.
Step by Step Guide to Northrop Grumman SWOT Analysis
Strengths of Northrop Grumman – Internal Strategic Factors
As one of the leading companies in its industry, Northrop Grumman 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 Northrop Grumman are –
- Superb Performance in New Markets – Northrop Grumman 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.
- Good Returns on Capital Expenditure – Northrop Grumman is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Successful track record of developing new products – product innovation.
- Automation of activities brought consistency of quality to Northrop Grumman products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Highly successful at Go To Market strategies for its products.
- Strong Brand Portfolio – Over the years Northrop Grumman has invested in building a strong brand portfolio. The SWOT analysis of Northrop Grumman just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Strong Free Cash Flow – Northrop Grumman has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- 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.
Weakness of Northrop Grumman – Internal Strategic Factors
Weakness are the areas where Northrop Grumman 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.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold 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.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Northrop Grumman 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 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. Northrop Grumman has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Northrop Grumman is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- 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 Northrop Grumman
- 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.
Opportunities for Northrop Grumman – External Strategic Factors
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Northrop Grumman’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.
- 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 Northrop Grumman. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Northrop Grumman an opportunity to enter a new emerging market.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Northrop Grumman.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Northrop Grumman to increase its profitability.
- Government green drive also opens an opportunity for procurement of Northrop Grumman products by the state as well as federal government contractors.
- The new technology provides an opportunity to Northrop Grumman 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 Northrop Grumman to capture new customers and increase its market share.
Threats Northrop Grumman Facing - External Strategic Factors
- Rising raw material can pose a threat to the Northrop Grumman profitability.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Northrop Grumman
- Imitation of the counterfeit and low quality product is also a threat to Northrop Grumman’s product especially in the emerging markets and low income markets.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- 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.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Northrop Grumman in those markets.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Liability laws in different countries are different and Northrop Grumman may be exposed to various liability claims given change in policies in those markets.
Limitations of SWOT Analysis for Northrop Grumman
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 Northrop Grumman
- 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 Northrop Grumman
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 Northrop Grumman 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 Northrop Grumman
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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Example of Weighted SWOT Analysis
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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)
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