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Alon USA Energy SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by Alon USA Energy managers to do a situational analysis of the firm . It is a handy technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Alon USA Energy is facing in its current business environment.
The Alon USA Energy is one of the leading companies in its industry. Alon USA Energy 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 organization 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 known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Alon USA Energy 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 a company can use to exploit external opportunities, counter threats, and build on & protect Alon USA Energy strengths, and eradicate its weaknesses.
Step by Step Guide to Alon USA Energy SWOT Analysis
Strengths of Alon USA Energy – Internal Strategic Factors
As one of the leading companies in its industry, Alon USA Energy 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 Alon USA Energy are –
- 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.
- Highly successful at Go To Market strategies for its products.
- Automation of activities brought consistency of quality to Alon USA Energy products and has enabled the company to scale up and scale down based on the demand conditions in the 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.
- Strong Free Cash Flow – Alon USA Energy has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Good Returns on Capital Expenditure – Alon USA Energy is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Highly skilled workforce through successful training and learning programs. Alon USA Energy 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 Alon USA Energy – Internal Strategic Factors
Weakness are the areas where Alon USA Energy 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.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Alon USA Energy is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- The profitability ratio and Net Contribution % of Alon USA Energy are below the industry average.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Alon USA Energy 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.
- 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, Alon USA Energy 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.
- 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.
Opportunities for Alon USA Energy – External Strategic Factors
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Alon USA Energy.
- 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 Alon USA Energy in other product categories.
- Government green drive also opens an opportunity for procurement of Alon USA Energy products by the state as well as federal government contractors.
- The new technology provides an opportunity to Alon USA Energy 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 environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Alon USA Energy to drive home its advantage in new technology and gain market share in the new product category.
- 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 Alon USA Energy. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- The market development will lead to dilution of competitor’s advantage and enable Alon USA Energy 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.
Threats Alon USA Energy 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.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- 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.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Alon USA Energy in those markets.
- 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 environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
Limitations of SWOT Analysis for Alon USA Energy
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 Alon USA Energy
- 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 Alon USA Energy
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 Alon USA Energy 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 Alon USA Energy
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
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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