Abercrombie & Fitch SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by Abercrombie & Fitch managers to do a situational analysis of the company . It is a handy technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Abercrombie & Fitch is facing in its current business environment.

The Abercrombie & Fitch is one of the leading organizatations in its industry. Abercrombie & Fitch 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 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 enables the managers of the Abercrombie & Fitch to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Abercrombie & Fitch swot analysis / matrix

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 Abercrombie & Fitch strengths, and eradicate its weaknesses.

Step by Step Guide to Abercrombie & Fitch SWOT Analysis

Strengths of Abercrombie & Fitch – Internal Strategic Factors

As one of the leading companies in its industry, Abercrombie & Fitch 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 Abercrombie & Fitch are –

  • Automation of activities brought consistency of quality to Abercrombie & Fitch products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • Superb Performance in New Markets – Abercrombie & Fitch 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.
  • 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.
  • Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
  • Strong distribution network – Over the years Abercrombie & Fitch has built a reliable distribution network that can reach majority of its potential market.
  • Strong Free Cash Flow – Abercrombie & Fitch has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Highly skilled workforce through successful training and learning programs. Abercrombie & Fitch 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.
  • Successful track record of developing new products – product innovation.

Weakness of Abercrombie & Fitch – Internal Strategic Factors

Weakness are the areas where Abercrombie & Fitch 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.

  • High attrition rate in work force – compare to other organizations in the industry Abercrombie & Fitch has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
  • The profitability ratio and Net Contribution % of Abercrombie & Fitch are below the industry average.
  • Limited success outside core business – Even though Abercrombie & Fitch is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Abercrombie & Fitch 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.
  • Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Abercrombie & Fitch
  • 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.
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though Abercrombie & Fitch is successful at integrating small companies it has its share of failure to merge firms that have different work culture.

Opportunities for Abercrombie & Fitch – External Strategic Factors

  • The market development will lead to dilution of competitor’s advantage and enable Abercrombie & Fitch to increase its competitiveness compare to the other competitors.
  • New trends in the consumer behavior can open up new market for the Abercrombie & Fitch . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Abercrombie & Fitch’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
  • 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 Abercrombie & Fitch. 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 Abercrombie & Fitch in other product categories.
  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Abercrombie & Fitch to capture new customers and increase its market share.
  • 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 Abercrombie & Fitch to drive home its advantage in new technology and gain market share in the new product category.
  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Abercrombie & Fitch to increase its profitability.

Threats Abercrombie & Fitch 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.
  • Rising raw material can pose a threat to the Abercrombie & Fitch profitability.
  • 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.
  • Liability laws in different countries are different and Abercrombie & Fitch 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 Abercrombie & Fitch
  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .

Limitations of SWOT Analysis for Abercrombie & Fitch

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 Abercrombie & Fitch
  • 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 Abercrombie & Fitch

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 Abercrombie & Fitch 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 Abercrombie & Fitch

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)