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ABM Industries SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by ABM Industries managers to do a situational analysis of the firm . It is a useful technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) ABM Industries is facing in its current business environment.
The ABM Industries is one of the leading firms in its industry. ABM Industries 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 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 ABM Industries 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 a company can use to exploit external opportunities, counter threats, and build on & protect ABM Industries strengths, and eradicate its weaknesses.
Step by Step Guide to ABM Industries SWOT Analysis
Strengths of ABM Industries – Internal Strategic Factors
As one of the leading organizations in its industry, ABM Industries 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 ABM Industries are –
- Strong Free Cash Flow – ABM Industries has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- 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.
- Good Returns on Capital Expenditure – ABM Industries is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Automation of activities brought consistency of quality to ABM Industries products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Strong Brand Portfolio – Over the years ABM Industries has invested in building a strong brand portfolio. The SWOT analysis of ABM Industries just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Superb Performance in New Markets – ABM Industries 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 distribution network – Over the years ABM Industries has built a reliable distribution network that can reach majority of its potential market.
- 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.
Weakness of ABM Industries – Internal Strategic Factors
Weakness are the areas where ABM Industries 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.
- Limited success outside core business – Even though ABM Industries is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, ABM Industries 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.
- The profitability ratio and Net Contribution % of ABM Industries are below the industry average.
- 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. ABM Industries has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- 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.
- 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 ABM Industries is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- 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.
Opportunities for ABM Industries – 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 ABM Industries an opportunity to enter a new emerging market.
- Government green drive also opens an opportunity for procurement of ABM Industries products by the state as well as federal government contractors.
- New trends in the consumer behavior can open up new market for the ABM Industries . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- The new technology provides an opportunity to ABM Industries 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.
- 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 ABM Industries in other product categories.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of ABM Industries.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for ABM Industries 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 ABM Industries’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.
Threats ABM Industries Facing - External Strategic Factors
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Imitation of the counterfeit and low quality product is also a threat to ABM Industries’s product especially in the emerging markets and low income markets.
- 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.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of ABM Industries
- 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.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Limitations of SWOT Analysis for ABM Industries
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 ABM Industries
- 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 ABM Industries
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 ABM Industries 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 ABM Industries
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
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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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