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Level 3 Communications SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Level 3 Communications managers to do a situational analysis of the firm . It is a useful technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Level 3 Communications is facing in its current business environment.
The Level 3 Communications is one of the leading firms in its industry. Level 3 Communications 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 helps the managers of the Level 3 Communications 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 company can utilize to exploit external opportunities, counter threats, and build on & protect Level 3 Communications strengths, and eradicate its weaknesses.
Step by Step Guide to Level 3 Communications SWOT Analysis
Strengths of Level 3 Communications – Internal Strategic Factors
As one of the leading organizations in its industry, Level 3 Communications 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 Level 3 Communications are –
- Highly skilled workforce through successful training and learning programs. Level 3 Communications 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.
- 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.
- Successful track record of developing new products – product innovation.
- 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.
- 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.
- Strong distribution network – Over the years Level 3 Communications has built a reliable distribution network that can reach majority of its potential market.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Weakness of Level 3 Communications – Internal Strategic Factors
Weakness are the areas where Level 3 Communications 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.
- 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 Level 3 Communications is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- 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. Level 3 Communications has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- 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 profitability ratio and Net Contribution % of Level 3 Communications are below the industry average.
- 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 Level 3 Communications
- Limited success outside core business – Even though Level 3 Communications is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Level 3 Communications is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Opportunities for Level 3 Communications – 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 Level 3 Communications in other product categories.
- The market development will lead to dilution of competitor’s advantage and enable Level 3 Communications to increase its competitiveness compare to the other competitors.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Level 3 Communications.
- The new technology provides an opportunity to Level 3 Communications 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.
- Government green drive also opens an opportunity for procurement of Level 3 Communications products by the state as well as federal government contractors.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Level 3 Communications an opportunity to enter a new emerging market.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Level 3 Communications’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.
- 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 Level 3 Communications. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Threats Level 3 Communications Facing - External Strategic Factors
- Liability laws in different countries are different and Level 3 Communications may be exposed to various liability claims given change in policies in those markets.
- Rising raw material can pose a threat to the Level 3 Communications profitability.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Imitation of the counterfeit and low quality product is also a threat to Level 3 Communications’s product especially in the emerging markets and low income markets.
- 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.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Level 3 Communications in those markets.
Limitations of SWOT Analysis for Level 3 Communications
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 Level 3 Communications
- 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 Level 3 Communications
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 Level 3 Communications 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 Level 3 Communications
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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