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CF Industries Holdings SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by CF Industries Holdings managers to do a situational analysis of the company . It is a useful technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) CF Industries Holdings is facing in its current business environment.
The CF Industries Holdings is one of the leading organizatations in its industry. CF Industries Holdings maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly 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 called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the CF Industries Holdings 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 an organization can use to exploit external opportunities, counter threats, and build on & protect CF Industries Holdings strengths, and eradicate its weaknesses.
Step by Step Guide to CF Industries Holdings SWOT Analysis
Strengths of CF Industries Holdings – Internal Strategic Factors
As one of the leading organizations in its industry, CF Industries Holdings has numerous strengths that help 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 CF Industries Holdings are –
- 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 – CF Industries Holdings is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- 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.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Automation of activities brought consistency of quality to CF Industries Holdings products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Highly skilled workforce through successful training and learning programs. CF Industries Holdings 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 Free Cash Flow – CF Industries Holdings has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Superb Performance in New Markets – CF Industries Holdings 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.
Weakness of CF Industries Holdings – Internal Strategic Factors
Weakness are the areas where CF Industries Holdings 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.
- Investment in Research and Development is below the fastest growing players in the industry. Even though CF Industries Holdings 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.
- High attrition rate in work force – compare to other organizations in the industry CF Industries Holdings has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though CF Industries Holdings is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- 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. CF Industries Holdings has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- 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, CF Industries Holdings 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 CF Industries Holdings are below the industry average.
Opportunities for CF Industries Holdings – 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 CF Industries Holdings to increase its profitability.
- The new technology provides an opportunity to CF Industries Holdings 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 trends in the consumer behavior can open up new market for the CF Industries Holdings . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Government green drive also opens an opportunity for procurement of CF Industries Holdings products by the state as well as federal government contractors.
- The market development will lead to dilution of competitor’s advantage and enable CF Industries Holdings to increase its competitiveness compare to the other competitors.
- 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 CF Industries Holdings. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- 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 CF Industries Holdings in other product categories.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided CF Industries Holdings an opportunity to enter a new emerging market.
Threats CF Industries Holdings Facing - External Strategic Factors
- Rising raw material can pose a threat to the CF Industries Holdings profitability.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Liability laws in different countries are different and CF Industries Holdings may be exposed to various liability claims given change in policies in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- 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.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- 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.
Limitations of SWOT Analysis for CF Industries Holdings
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 CF Industries Holdings
- 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 CF Industries Holdings
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 CF Industries Holdings 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 CF Industries Holdings
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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