Williams-Sonoma SWOT Analysis / Matrix

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

The Williams-Sonoma is one of the leading companies in its industry. Williams-Sonoma maintains its dominant position in market by carefully 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 helps the managers of the Williams-Sonoma 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 Williams-Sonoma strengths, and eradicate its weaknesses.

Step by Step Guide to Williams-Sonoma SWOT Analysis

Strengths of Williams-Sonoma – Internal Strategic Factors

As one of the leading firms in its industry, Williams-Sonoma 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 Williams-Sonoma are –

Good Returns on Capital Expenditure – Williams-Sonoma is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Strong Free Cash Flow – Williams-Sonoma has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Strong Brand Portfolio – Over the years Williams-Sonoma has invested in building a strong brand portfolio. The SWOT analysis of Williams-Sonoma just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Highly successful at Go To Market strategies for its products.
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 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.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Successful track record of developing new products – product innovation.

Weakness of Williams-Sonoma – Internal Strategic Factors

Weakness are the areas where Williams-Sonoma 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.

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.
High attrition rate in work force – compare to other organizations in the industry Williams-Sonoma has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
The profitability ratio and Net Contribution % of Williams-Sonoma 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 Williams-Sonoma
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, Williams-Sonoma 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.

Opportunities for Williams-Sonoma – External Strategic Factors

The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Williams-Sonoma 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 Williams-Sonoma.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Williams-Sonoma an opportunity to enter a new emerging market.
The market development will lead to dilution of competitor’s advantage and enable Williams-Sonoma to increase its competitiveness compare to the other competitors.
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 Williams-Sonoma 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 Williams-Sonoma . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
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.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Williams-Sonoma to capture new customers and increase its market share.

Threats Williams-Sonoma Facing - External Strategic Factors

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.
The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
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.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Williams-Sonoma in those markets.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
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.

Limitations of SWOT Analysis for Williams-Sonoma

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 Williams-Sonoma
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 Williams-Sonoma

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 Williams-Sonoma 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 Williams-Sonoma

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)