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Sally Beauty Holdings SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Sally Beauty Holdings managers to do a situational analysis of the organization . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Sally Beauty Holdings is facing in its current business environment.
The Sally Beauty Holdings is one of the leading companies in its industry. Sally Beauty Holdings maintains its prominent 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 firm 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 called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Sally Beauty 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 main purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Sally Beauty Holdings strengths, and eradicate its weaknesses.
Step by Step Guide to Sally Beauty Holdings SWOT Analysis
Strengths of Sally Beauty Holdings – Internal Strategic Factors
As one of the leading firms in its industry, Sally Beauty Holdings 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 Sally Beauty Holdings are –
- Strong distribution network – Over the years Sally Beauty Holdings has built a reliable distribution network that can reach majority of its potential market.
- 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.
- Highly successful at Go To Market strategies for its products.
- Strong Free Cash Flow – Sally Beauty Holdings 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 Sally Beauty Holdings has invested in building a strong brand portfolio. The SWOT analysis of Sally Beauty Holdings just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Automation of activities brought consistency of quality to Sally Beauty 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. Sally Beauty 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.
- Good Returns on Capital Expenditure – Sally Beauty Holdings is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Weakness of Sally Beauty Holdings – Internal Strategic Factors
Weakness are the areas where Sally Beauty Holdings 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.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Sally Beauty 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 Sally Beauty Holdings are below the industry average.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Limited success outside core business – Even though Sally Beauty Holdings is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- 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.
- High attrition rate in work force – compare to other organizations in the industry Sally Beauty Holdings has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- 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.
Opportunities for Sally Beauty Holdings – 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 Sally Beauty Holdings.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Sally Beauty Holdings to increase its profitability.
- 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 Sally Beauty 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.
- The market development will lead to dilution of competitor’s advantage and enable Sally Beauty Holdings to increase its competitiveness compare to the other competitors.
- Government green drive also opens an opportunity for procurement of Sally Beauty Holdings products by the state as well as federal government contractors.
- 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 Sally Beauty Holdings 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.
- The new technology provides an opportunity to Sally Beauty 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.
Threats Sally Beauty Holdings Facing - External Strategic Factors
- 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.
- Liability laws in different countries are different and Sally Beauty Holdings may be exposed to various liability claims given change in policies in those markets.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Sally Beauty Holdings 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.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Rising raw material can pose a threat to the Sally Beauty Holdings profitability.
Limitations of SWOT Analysis for Sally Beauty 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 Sally Beauty 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 Sally Beauty 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 Sally Beauty 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 Sally Beauty 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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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)
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