Royal Mail SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

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

The Royal Mail is one of the leading organizatations in its industry. Royal Mail maintains its dominant 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 enables the managers of the Royal Mail 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 Royal Mail strengths, and eradicate its weaknesses.

Step by Step Guide to Royal Mail SWOT Analysis

Strengths of Royal Mail – Internal Strategic Factors

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

Superb Performance in New Markets – Royal Mail 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 – Royal Mail is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
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 successful at Go To Market strategies for its products.
Strong distribution network – Over the years Royal Mail has built a reliable distribution network that can reach majority of its potential market.
Strong Free Cash Flow – Royal Mail has strong free cash flows that provide resources in the hand of the company to expand into new projects.
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.
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 Royal Mail – Internal Strategic Factors

Weakness are the areas where Royal Mail 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.

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. Royal Mail has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
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 Royal Mail is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
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 Royal Mail
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Royal Mail 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.
Not highly successful at integrating firms with different work culture. As mentioned earlier even though Royal Mail is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Investment in Research and Development is below the fastest growing players in the industry. Even though Royal Mail 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.

Opportunities for Royal Mail – External Strategic Factors

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 Royal Mail.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Royal Mail to capture new customers and increase its market share.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Royal Mail to increase its profitability.
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 Royal Mail to drive home its advantage in new technology and gain market share in the new product category.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Royal Mail’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 market development will lead to dilution of competitor’s advantage and enable Royal Mail to increase its competitiveness compare to the other competitors.
The new technology provides an opportunity to Royal Mail 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.

Threats Royal Mail Facing - External Strategic Factors

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.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
Liability laws in different countries are different and Royal Mail 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.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Royal Mail in those 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.
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.
Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Royal Mail

Limitations of SWOT Analysis for Royal Mail

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 Royal Mail
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 Royal Mail

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 Royal Mail 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 Royal Mail

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)