Foot Locker SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

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

The Foot Locker is one of the leading companies in its industry. Foot Locker maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis.  SWOT analysis an immensenly 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 Foot Locker to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Foot Locker swot analysis / matrix

SWOT Matrix Strategies Objective

The central purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect Foot Locker strengths, and eradicate its weaknesses.

Step by Step Guide to Foot Locker SWOT Analysis

Strengths of Foot Locker – Internal Strategic Factors

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

  • 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.
  • Good Returns on Capital Expenditure – Foot Locker is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
  • Highly skilled workforce through successful training and learning programs. Foot Locker 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.
  • Strong Free Cash Flow – Foot Locker 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.
  • Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
  • Automation of activities brought consistency of quality to Foot Locker 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 – Foot Locker 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.

Weakness of Foot Locker – Internal Strategic Factors

Weakness are the areas where Foot Locker 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 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.
  • 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 Foot Locker is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
  • High attrition rate in work force – compare to other organizations in the industry Foot Locker has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
  • Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
  • Investment in Research and Development is below the fastest growing players in the industry. Even though Foot Locker 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.
  • 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 Foot Locker

Opportunities for Foot Locker – External Strategic Factors

  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Foot Locker 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 Foot Locker to drive home its advantage in new technology and gain market share in the new product category.
  • 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 Foot Locker in other product categories.
  • 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 Foot Locker. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
  • The market development will lead to dilution of competitor’s advantage and enable Foot Locker to increase its competitiveness compare to the other competitors.
  • Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Foot Locker an opportunity to enter a new emerging market.
  • 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.
  • The new technology provides an opportunity to Foot Locker 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 Foot Locker Facing - External Strategic Factors

  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • 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.
  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • 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.
  • Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
  • The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
  • Liability laws in different countries are different and Foot Locker may be exposed to various liability claims given change in policies in those markets.

Limitations of SWOT Analysis for Foot Locker

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 Foot Locker
  • 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 Foot Locker

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 Foot Locker 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 Foot Locker

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)