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Tractor Supply SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Tractor Supply 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) Tractor Supply is facing in its current business environment.
The Tractor Supply is one of the leading firms in its industry. Tractor Supply maintains its prominent position in market by critically 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 facilitates 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 Tractor Supply 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 firm can use to exploit external opportunities, counter threats, and build on & protect Tractor Supply strengths, and eradicate its weaknesses.
Step by Step Guide to Tractor Supply SWOT Analysis
Strengths of Tractor Supply – Internal Strategic Factors
As one of the leading organizations in its industry, Tractor Supply 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 Tractor Supply are –
- 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 skilled workforce through successful training and learning programs. Tractor Supply 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 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.
- 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 – Tractor Supply has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Highly successful at Go To Market strategies for its products.
- Automation of activities brought consistency of quality to Tractor Supply products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Weakness of Tractor Supply – Internal Strategic Factors
Weakness are the areas where Tractor Supply 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.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Tractor Supply 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.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Tractor Supply 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.
- Limited success outside core business – Even though Tractor Supply is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- High attrition rate in work force – compare to other organizations in the industry Tractor Supply has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- 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 profitability ratio and Net Contribution % of Tractor Supply are below the industry average.
- 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.
Opportunities for Tractor Supply – External Strategic Factors
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Tractor Supply an opportunity to enter a new emerging market.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Tractor Supply to capture new customers and increase its market share.
- Government green drive also opens an opportunity for procurement of Tractor Supply products by the state as well as federal government contractors.
- The new technology provides an opportunity to Tractor Supply 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.
- 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 Tractor Supply to drive home its advantage in new technology and gain market share in the new product category.
- 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 Tractor Supply. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Tractor Supply.
- New trends in the consumer behavior can open up new market for the Tractor Supply . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Threats Tractor Supply Facing - External Strategic Factors
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- 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.
- 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.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Tractor Supply in those 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.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- 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.
Limitations of SWOT Analysis for Tractor Supply
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 Tractor Supply
- 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 Tractor Supply
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 Tractor Supply 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 Tractor Supply
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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