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Freddie Mac SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Freddie Mac managers to do a situational analysis of the firm . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Freddie Mac is facing in its current business environment.
The Freddie Mac is one of the leading firms in its industry. Freddie Mac maintains its dominant 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 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 called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Freddie Mac 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 an organization can utilize to exploit external opportunities, counter threats, and build on & protect Freddie Mac strengths, and eradicate its weaknesses.
Step by Step Guide to Freddie Mac SWOT Analysis
Strengths of Freddie Mac – Internal Strategic Factors
As one of the leading organizations in its industry, Freddie Mac 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 Freddie Mac are –
- Highly successful at Go To Market strategies for its products.
- Strong Free Cash Flow – Freddie Mac has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- 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.
- 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 Freddie Mac has built a reliable distribution network that can reach majority of its potential market.
- Automation of activities brought consistency of quality to Freddie Mac products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Weakness of Freddie Mac – Internal Strategic Factors
Weakness are the areas where Freddie Mac can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Freddie Mac is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- The profitability ratio and Net Contribution % of Freddie Mac 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 Freddie Mac
- 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.
- High attrition rate in work force – compare to other organizations in the industry Freddie Mac has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- 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 Freddie Mac is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- 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.
Opportunities for Freddie Mac – External Strategic Factors
- Government green drive also opens an opportunity for procurement of Freddie Mac products by the state as well as federal government contractors.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Freddie Mac to capture new customers and increase its market share.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Freddie Mac’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.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Freddie Mac an opportunity to enter a new emerging market.
- 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 Freddie Mac to drive home its advantage in new technology and gain market share in the new product category.
- New trends in the consumer behavior can open up new market for the Freddie Mac . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Freddie Mac.
- 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 Freddie Mac. 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 Freddie Mac Facing - External Strategic Factors
- Rising raw material can pose a threat to the Freddie Mac profitability.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Freddie Mac
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- 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.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- 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.
- 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.
Limitations of SWOT Analysis for Freddie Mac
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 Freddie Mac
- 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 Freddie Mac
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 Freddie Mac 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 Freddie Mac
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.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
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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