Big Lots SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Big Lots managers to do a situational analysis of the organization . It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Big Lots is facing in its current business environment.

The Big Lots is one of the leading companies in its industry. Big Lots 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 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 Big Lots to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Big Lots swot analysis / matrix

SWOT Matrix Strategies Objective

The core purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Big Lots strengths, and eradicate its weaknesses.

Step by Step Guide to Big Lots SWOT Analysis

Strengths of Big Lots – Internal Strategic Factors

As one of the leading companies in its industry, Big Lots 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 Big Lots 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.
  • Good Returns on Capital Expenditure – Big Lots 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 Big Lots products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • 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.
  • Highly successful at Go To Market strategies for its products.
  • Highly skilled workforce through successful training and learning programs. Big Lots 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.

Weakness of Big Lots – Internal Strategic Factors

Weakness are the areas where Big Lots can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

  • 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 Big Lots is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
  • 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 Big Lots
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though Big Lots is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Big Lots 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 Big Lots 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 Big Lots has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.

Opportunities for Big Lots – External Strategic Factors

  • The market development will lead to dilution of competitor’s advantage and enable Big Lots to increase its competitiveness compare to the other competitors.
  • 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.
  • The new technology provides an opportunity to Big Lots 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.
  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Big Lots to increase its profitability.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Big Lots’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 Big Lots 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 Big Lots 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 Big Lots . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.

Threats Big Lots 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.
  • Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Big Lots   in those markets.
  • Rising raw material can pose a threat to the Big Lots profitability.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • 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.
  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.

Limitations of SWOT Analysis for Big Lots

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 Big Lots
  • 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 Big Lots

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 Big Lots 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 Big Lots

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)