Arla SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by Arla managers to do a situational analysis of the organization . It is a handy technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Arla is facing in its current business environment.

The Arla is one of the leading organizatations in its industry. Arla 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 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 called SWOT Matrix.

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

Step by Step Guide to Arla SWOT Analysis

Strengths of Arla – Internal Strategic Factors

As one of the leading companies in its industry, Arla 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 Arla are –

Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Superb Performance in New Markets – Arla 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 – Arla is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
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.
Highly successful at Go To Market strategies for its products.
Automation of activities brought consistency of quality to Arla products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Highly skilled workforce through successful training and learning programs. Arla 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 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 Arla – Internal Strategic Factors

Weakness are the areas where Arla 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.

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.
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 Arla is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Arla needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
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 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. Arla has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
Investment in Research and Development is below the fastest growing players in the industry. Even though Arla 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 profitability ratio and Net Contribution % of Arla are below the industry average.

Opportunities for Arla – External Strategic Factors

New trends in the consumer behavior can open up new market for the Arla . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
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 Arla to drive home its advantage in new technology and gain market share in the new product category.
The new technology provides an opportunity to Arla 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.
The market development will lead to dilution of competitor’s advantage and enable Arla 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 Arla. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Arla’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.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Arla to increase its profitability.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Arla to capture new customers and increase its market share.

Threats Arla Facing - External Strategic Factors

Liability laws in different countries are different and Arla 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.
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.
Rising raw material can pose a threat to the Arla profitability.
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.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Arla in those markets.
Imitation of the counterfeit and low quality product is also a threat to Arla’s product especially in the emerging markets and low income markets.
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.

Limitations of SWOT Analysis for Arla

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 Arla
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 Arla

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 Arla 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 Arla

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)