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Darden Restaurants SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Darden Restaurants 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) Darden Restaurants is facing in its current business environment.
The Darden Restaurants is one of the leading companies in its industry. Darden Restaurants 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 firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework enables 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 Darden Restaurants 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 an organization can utilize to exploit external opportunities, counter threats, and build on & protect Darden Restaurants strengths, and eradicate its weaknesses.
Step by Step Guide to Darden Restaurants SWOT Analysis
Strengths of Darden Restaurants – Internal Strategic Factors
As one of the leading firms in its industry, Darden Restaurants 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 Darden Restaurants are –
- Highly successful at Go To Market strategies for its products.
- Superb Performance in New Markets – Darden Restaurants 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 Free Cash Flow – Darden Restaurants has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Highly skilled workforce through successful training and learning programs. Darden Restaurants 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.
- Good Returns on Capital Expenditure – Darden Restaurants is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- 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 Brand Portfolio – Over the years Darden Restaurants has invested in building a strong brand portfolio. The SWOT analysis of Darden Restaurants just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Strong distribution network – Over the years Darden Restaurants has built a reliable distribution network that can reach majority of its potential market.
Weakness of Darden Restaurants – Internal Strategic Factors
Weakness are the areas where Darden Restaurants 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.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- 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.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Darden Restaurants 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 Darden Restaurants 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.
- 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.
- Limited success outside core business – Even though Darden Restaurants is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Opportunities for Darden Restaurants – External Strategic Factors
- New trends in the consumer behavior can open up new market for the Darden Restaurants . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- 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.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Darden Restaurants an opportunity to enter a new emerging market.
- The new technology provides an opportunity to Darden Restaurants 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.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Darden Restaurants.
- The market development will lead to dilution of competitor’s advantage and enable Darden Restaurants to increase its competitiveness compare to the other competitors.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Darden Restaurants to capture new customers and increase its 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 Darden Restaurants. 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 Darden Restaurants Facing - External Strategic Factors
- 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.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- 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.
- Rising raw material can pose a threat to the Darden Restaurants profitability.
- 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.
- 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 Darden Restaurants may be exposed to various liability claims given change in policies in those markets.
Limitations of SWOT Analysis for Darden Restaurants
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 Darden Restaurants
- 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 Darden Restaurants
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 Darden Restaurants 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 Darden Restaurants
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
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)
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