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Charles Schwab SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Charles Schwab managers to do a situational analysis of the organization . It is a handy technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Charles Schwab is facing in its current business environment.
The Charles Schwab is one of the leading organizatations in its industry. Charles Schwab maintains its prominent 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 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 known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Charles Schwab 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 an organization can utilize to exploit external opportunities, counter threats, and build on & protect Charles Schwab strengths, and eradicate its weaknesses.
Step by Step Guide to Charles Schwab SWOT Analysis
Strengths of Charles Schwab – Internal Strategic Factors
As one of the leading companies in its industry, Charles Schwab 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 Charles Schwab are –
- 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.
- Highly successful at Go To Market strategies for its products.
- Automation of activities brought consistency of quality to Charles Schwab products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Good Returns on Capital Expenditure – Charles Schwab is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Superb Performance in New Markets – Charles Schwab 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 Brand Portfolio – Over the years Charles Schwab has invested in building a strong brand portfolio. The SWOT analysis of Charles Schwab just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- 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.
- Successful track record of developing new products – product innovation.
Weakness of Charles Schwab – Internal Strategic Factors
Weakness are the areas where Charles Schwab 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.
- 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.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Charles Schwab 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.
- 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 Charles Schwab
- 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. Charles Schwab has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- High attrition rate in work force – compare to other organizations in the industry Charles Schwab has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Charles Schwab is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Opportunities for Charles Schwab – External Strategic Factors
- 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 Charles Schwab. 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 new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Charles Schwab to increase its profitability.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Charles Schwab.
- 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 Charles Schwab in other product categories.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Charles Schwab an opportunity to enter a new emerging market.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Charles Schwab’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.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Charles Schwab to capture new customers and increase its market share.
- New trends in the consumer behavior can open up new market for the Charles Schwab . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Threats Charles Schwab Facing - External Strategic Factors
- 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.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Charles Schwab in those markets.
- Rising raw material can pose a threat to the Charles Schwab profitability.
- 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.
- Liability laws in different countries are different and Charles Schwab may be exposed to various liability claims given change in policies in those markets.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- 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.
Limitations of SWOT Analysis for Charles Schwab
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 Charles Schwab
- 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 Charles Schwab
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 Charles Schwab 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 Charles Schwab
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)
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