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Michael Kors SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Michael Kors managers to do a situational analysis of the organization . It is a useful technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Michael Kors is facing in its current business environment.
The Michael Kors is one of the leading firms in its industry. Michael Kors maintains its prominent 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 firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps 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 known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Michael Kors 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 firm can utilize to exploit external opportunities, counter threats, and build on & protect Michael Kors strengths, and eradicate its weaknesses.
Step by Step Guide to Michael Kors SWOT Analysis
Strengths of Michael Kors – Internal Strategic Factors
As one of the leading companies in its industry, Michael Kors 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 Michael Kors 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.
- Strong Free Cash Flow – Michael Kors 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.
- Good Returns on Capital Expenditure – Michael Kors is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Highly skilled workforce through successful training and learning programs. Michael Kors 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.
- Successful track record of developing new products – product innovation.
Weakness of Michael Kors – Internal Strategic Factors
Weakness are the areas where Michael Kors 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 Michael Kors 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 Michael Kors is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- The profitability ratio and Net Contribution % of Michael Kors are below the industry average.
- 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.
- 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 Michael Kors
- Investment in Research and Development is below the fastest growing players in the industry. Even though Michael Kors 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.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Michael Kors is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Opportunities for Michael Kors – External Strategic Factors
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Michael Kors an opportunity to enter a new emerging market.
- 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 Michael Kors in other product categories.
- 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 Michael Kors.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Michael Kors to increase its profitability.
- The market development will lead to dilution of competitor’s advantage and enable Michael Kors to increase its competitiveness compare to the other competitors.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Michael Kors to capture new customers and increase its market share.
- Government green drive also opens an opportunity for procurement of Michael Kors products by the state as well as federal government contractors.
Threats Michael Kors Facing - External Strategic Factors
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Michael Kors
- 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.
- Liability laws in different countries are different and Michael Kors may be exposed to various liability claims given change in policies in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Michael Kors in those markets.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
Limitations of SWOT Analysis for Michael Kors
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 Michael Kors
- 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 Michael Kors
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 Michael Kors 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 Michael Kors
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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