Praxair SWOT Analysis / Matrix

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

The Praxair is one of the leading companies in its industry. Praxair maintains its prominent 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 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 Praxair 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 primary purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Praxair strengths, and eradicate its weaknesses.

Step by Step Guide to Praxair SWOT Analysis

Strengths of Praxair – Internal Strategic Factors

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

Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
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.
Strong Free Cash Flow – Praxair 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.
Successful track record of developing new products – product innovation.
Superb Performance in New Markets – Praxair 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 Praxair has built a reliable distribution network that can reach majority of its potential market.
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 Praxair – Internal Strategic Factors

Weakness are the areas where Praxair 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.

Investment in Research and Development is below the fastest growing players in the industry. Even though Praxair 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.
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.
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 Praxair
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Praxair 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.
Limited success outside core business – Even though Praxair 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 Praxair has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
The profitability ratio and Net Contribution % of Praxair are below the industry average.

Opportunities for Praxair – External Strategic Factors

Government green drive also opens an opportunity for procurement of Praxair products by the state as well as federal government contractors.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Praxair.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Praxair’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 Praxair 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 Praxair. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
New trends in the consumer behavior can open up new market for the Praxair . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Praxair an opportunity to enter a new emerging market.
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 Praxair to drive home its advantage in new technology and gain market share in the new product category.

Threats Praxair Facing - External Strategic Factors

Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Imitation of the counterfeit and low quality product is also a threat to Praxair’s product especially in the emerging markets and low income markets.
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
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 Praxair
Liability laws in different countries are different and Praxair may be exposed to various liability claims given change in policies in those markets.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.

Limitations of SWOT Analysis for Praxair

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 Praxair
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 Praxair

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 Praxair 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 Praxair

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)