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Tim Hortons SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Tim Hortons managers to do a situational analysis of the company . It is an important technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Tim Hortons is facing in its current business environment.
The Tim Hortons is one of the leading companies in its industry. Tim Hortons maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly 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 helps the managers of the Tim Hortons 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 central purpose of SWOT matrix is to identify the strategies that a company can utilize to exploit external opportunities, counter threats, and build on & protect Tim Hortons strengths, and eradicate its weaknesses.
Step by Step Guide to Tim Hortons SWOT Analysis
Strengths of Tim Hortons – Internal Strategic Factors
As one of the leading firms in its industry, Tim Hortons 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 Tim Hortons are –
- Highly successful at Go To Market strategies for its products.
- Good Returns on Capital Expenditure – Tim Hortons is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Superb Performance in New Markets – Tim Hortons 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 distribution network – Over the years Tim Hortons has built a reliable distribution network that can reach majority of its potential market.
- Strong Brand Portfolio – Over the years Tim Hortons has invested in building a strong brand portfolio. The SWOT analysis of Tim Hortons just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Successful track record of developing new products – product innovation.
- 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.
- Highly skilled workforce through successful training and learning programs. Tim Hortons 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.
Weakness of Tim Hortons – Internal Strategic Factors
Weakness are the areas where Tim Hortons 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.
- 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 Tim Hortons is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- High attrition rate in work force – compare to other organizations in the industry Tim Hortons has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Tim Hortons 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.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- 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 profitability ratio and Net Contribution % of Tim Hortons are below the industry average.
Opportunities for Tim Hortons – External Strategic Factors
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Tim Hortons to capture new customers and increase its market share.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Tim Hortons’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.
- 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.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Tim Hortons.
- The market development will lead to dilution of competitor’s advantage and enable Tim Hortons 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 Tim Hortons to drive home its advantage in new technology and gain market share in the new product category.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Tim Hortons to increase its profitability.
- 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 Tim Hortons. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Threats Tim Hortons Facing - External Strategic Factors
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Liability laws in different countries are different and Tim Hortons may be exposed to various liability claims given change in policies 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.
- 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.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- Imitation of the counterfeit and low quality product is also a threat to Tim Hortons’s product especially in the emerging markets and low income 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 Tim Hortons
Limitations of SWOT Analysis for Tim Hortons
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 Tim Hortons
- 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 Tim Hortons
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 Tim Hortons 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 Tim Hortons
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)
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