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Hexion SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Hexion managers to do a situational analysis of the company . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Hexion is facing in its current business environment.
The Hexion is one of the leading organizatations in its industry. Hexion 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 company such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps 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 Hexion 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 central purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Hexion strengths, and eradicate its weaknesses.
Step by Step Guide to Hexion SWOT Analysis
Strengths of Hexion – Internal Strategic Factors
As one of the leading companies in its industry, Hexion 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 Hexion are –
- Strong distribution network – Over the years Hexion has built a reliable distribution network that can reach majority of its potential market.
- Strong Free Cash Flow – Hexion has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Highly successful at Go To Market strategies for its products.
- Highly skilled workforce through successful training and learning programs. Hexion 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.
- Good Returns on Capital Expenditure – Hexion is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Superb Performance in New Markets – Hexion 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.
- 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 Brand Portfolio – Over the years Hexion has invested in building a strong brand portfolio. The SWOT analysis of Hexion just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Weakness of Hexion – Internal Strategic Factors
Weakness are the areas where Hexion 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.
- The profitability ratio and Net Contribution % of Hexion are below the industry average.
- 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.
- 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. Hexion has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Hexion 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.
- Limited success outside core business – Even though Hexion is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- 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.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Opportunities for Hexion – External Strategic Factors
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Hexion to capture new customers and increase its market share.
- 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 Hexion in other product categories.
- 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 Hexion to drive home its advantage in new technology and gain market share in the new product category.
- 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.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Hexion an opportunity to enter a new emerging market.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Hexion.
- New trends in the consumer behavior can open up new market for the Hexion . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- 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 Hexion. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Threats Hexion 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.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Rising raw material can pose a threat to the Hexion profitability.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Liability laws in different countries are different and Hexion may be exposed to various liability claims given change in policies in those markets.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Hexion
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Hexion in those markets.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
Limitations of SWOT Analysis for Hexion
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 Hexion
- 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 Hexion
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 Hexion 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 Hexion
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.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
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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