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Reliance Steel & Aluminum SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Reliance Steel & Aluminum managers to do a situational analysis of the company . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Reliance Steel & Aluminum is facing in its current business environment.
The Reliance Steel & Aluminum is one of the leading companies in its industry. Reliance Steel & Aluminum 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 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 Reliance Steel & Aluminum 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 main purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Reliance Steel & Aluminum strengths, and eradicate its weaknesses.
Step by Step Guide to Reliance Steel & Aluminum SWOT Analysis
Strengths of Reliance Steel & Aluminum – Internal Strategic Factors
As one of the leading companies in its industry, Reliance Steel & Aluminum 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 Reliance Steel & Aluminum are –
- Automation of activities brought consistency of quality to Reliance Steel & Aluminum products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Superb Performance in New Markets – Reliance Steel & Aluminum 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 Reliance Steel & Aluminum has built a reliable distribution network that can reach majority of its potential market.
- Highly successful at Go To Market strategies for its products.
- Strong Brand Portfolio – Over the years Reliance Steel & Aluminum has invested in building a strong brand portfolio. The SWOT analysis of Reliance Steel & Aluminum just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Strong Free Cash Flow – Reliance Steel & Aluminum has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Successful track record of developing new products – product innovation.
Weakness of Reliance Steel & Aluminum – Internal Strategic Factors
Weakness are the areas where Reliance Steel & Aluminum 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.
- 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.
- High attrition rate in work force – compare to other organizations in the industry Reliance Steel & Aluminum has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- 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.
- 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. Reliance Steel & Aluminum 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 Reliance Steel & Aluminum is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Reliance Steel & Aluminum is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- 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.
Opportunities for Reliance Steel & Aluminum – External Strategic Factors
- 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 Reliance Steel & Aluminum in other product categories.
- 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 Reliance Steel & Aluminum 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 Reliance Steel & Aluminum’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.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Reliance Steel & Aluminum an opportunity to enter a new emerging market.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Reliance Steel & Aluminum.
- 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.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Reliance Steel & Aluminum 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 Reliance Steel & Aluminum to increase its profitability.
Threats Reliance Steel & Aluminum Facing - External Strategic Factors
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- 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.
- 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.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Liability laws in different countries are different and Reliance Steel & Aluminum may be exposed to various liability claims given change in policies in those markets.
Limitations of SWOT Analysis for Reliance Steel & Aluminum
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 Reliance Steel & Aluminum
- 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 Reliance Steel & Aluminum
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 Reliance Steel & Aluminum 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 Reliance Steel & Aluminum
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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