Lipton SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Lipton 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) Lipton is facing in its current business environment.

The Lipton is one of the leading companies in its industry. Lipton maintains its dominant 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 called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Lipton 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 an organization can utilize to exploit external opportunities, counter threats, and build on & protect Lipton strengths, and eradicate its weaknesses.

Step by Step Guide to Lipton SWOT Analysis

Strengths of Lipton – Internal Strategic Factors

As one of the leading firms in its industry, Lipton 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 Lipton are –

Automation of activities brought consistency of quality to Lipton products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Strong distribution network – Over the years Lipton has built a reliable distribution network that can reach majority of its potential market.
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.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Good Returns on Capital Expenditure – Lipton is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Strong Free Cash Flow – Lipton has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Highly successful at Go To Market strategies for its products.
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 Lipton – Internal Strategic Factors

Weakness are the areas where Lipton 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.

High attrition rate in work force – compare to other organizations in the industry Lipton has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
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 Lipton
Investment in Research and Development is below the fastest growing players in the industry. Even though Lipton 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. Lipton 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 Lipton is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
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 Lipton – External Strategic Factors

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 Lipton in other product categories.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Lipton to capture new customers and increase its market share.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Lipton an opportunity to enter a new emerging market.
The market development will lead to dilution of competitor’s advantage and enable Lipton to increase its competitiveness compare to the other competitors.
The new technology provides an opportunity to Lipton 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.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Lipton’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 trends in the consumer behavior can open up new market for the Lipton . 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 Lipton to increase its profitability.

Threats Lipton Facing - External Strategic Factors

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.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Lipton in those markets.
Imitation of the counterfeit and low quality product is also a threat to Lipton’s product especially in the emerging markets and low income markets.
Liability laws in different countries are different and Lipton may be exposed to various liability claims given change in policies in those markets.
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
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.
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 pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Lipton

Limitations of SWOT Analysis for Lipton

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 Lipton
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 Lipton

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 Lipton 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 Lipton

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)