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Falabella SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Falabella managers to do a situational analysis of the company . It is a handy technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Falabella is facing in its current business environment.
The Falabella is one of the leading companies in its industry. Falabella 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 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 Falabella 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 an organization can use to exploit external opportunities, counter threats, and build on & protect Falabella strengths, and eradicate its weaknesses.
Step by Step Guide to Falabella SWOT Analysis
Strengths of Falabella – Internal Strategic Factors
As one of the leading companies in its industry, Falabella 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 Falabella are –
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Successful track record of developing new products – product innovation.
- Automation of activities brought consistency of quality to Falabella 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 distribution network – Over the years Falabella has built a reliable distribution network that can reach majority of its potential market.
- Strong Brand Portfolio – Over the years Falabella has invested in building a strong brand portfolio. The SWOT analysis of Falabella just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Superb Performance in New Markets – Falabella 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.
- Strong Free Cash Flow – Falabella has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Weakness of Falabella – Internal Strategic Factors
Weakness are the areas where Falabella can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Limited success outside core business – Even though Falabella is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- 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 Falabella is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- 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. Falabella has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- 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.
- 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.
- 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 Falabella
- 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 Falabella – External Strategic Factors
- New trends in the consumer behavior can open up new market for the Falabella . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Falabella.
- The market development will lead to dilution of competitor’s advantage and enable Falabella to increase its competitiveness compare to the other competitors.
- 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 Falabella. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Falabella to increase its profitability.
- The new technology provides an opportunity to Falabella 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.
- Government green drive also opens an opportunity for procurement of Falabella products by the state as well as federal government contractors.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
Threats Falabella Facing - External Strategic Factors
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- 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.
- Rising raw material can pose a threat to the Falabella profitability.
- Liability laws in different countries are different and Falabella may be exposed to various liability claims given change in policies 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 Falabella
- 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.
Limitations of SWOT Analysis for Falabella
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 Falabella
- 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 Falabella
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 Falabella 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 Falabella
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
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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)
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