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Fastenal SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Fastenal managers to do a situational analysis of the firm . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Fastenal is facing in its current business environment.
The Fastenal is one of the leading firms in its industry. Fastenal 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 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 called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Fastenal 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 utilize to exploit external opportunities, counter threats, and build on & protect Fastenal strengths, and eradicate its weaknesses.
Step by Step Guide to Fastenal SWOT Analysis
Strengths of Fastenal – Internal Strategic Factors
As one of the leading organizations in its industry, Fastenal 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 Fastenal are –
- Good Returns on Capital Expenditure – Fastenal is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Highly successful at Go To Market strategies for its products.
- Highly skilled workforce through successful training and learning programs. Fastenal 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 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.
- 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.
- Strong distribution network – Over the years Fastenal has built a reliable distribution network that can reach majority of its potential market.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Weakness of Fastenal – Internal Strategic Factors
Weakness are the areas where Fastenal can improve upon. Strategy is about making choices and weakness are the areas where an organization 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.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Fastenal 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 Fastenal is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Fastenal 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.
- 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 Fastenal is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- The profitability ratio and Net Contribution % of Fastenal are below the industry average.
Opportunities for Fastenal – 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 Fastenal.
- 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 Fastenal 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 Fastenal to drive home its advantage in new technology and gain market share in the new product category.
- Government green drive also opens an opportunity for procurement of Fastenal products by the state as well as federal government contractors.
- 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 Fastenal. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Fastenal to capture new customers and increase its market share.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Fastenal an opportunity to enter a new emerging market.
- The market development will lead to dilution of competitor’s advantage and enable Fastenal to increase its competitiveness compare to the other competitors.
Threats Fastenal 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 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.
- 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.
- 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.
- Liability laws in different countries are different and Fastenal may be exposed to various liability claims given change in policies 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.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Fastenal
- Imitation of the counterfeit and low quality product is also a threat to Fastenal’s product especially in the emerging markets and low income markets.
Limitations of SWOT Analysis for Fastenal
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 Fastenal
- 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 Fastenal
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 Fastenal 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 Fastenal
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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