Northern Tier Energy SWOT Analysis / Matrix

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

The Northern Tier Energy is one of the leading companies in its industry. Northern Tier Energy maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis.  SWOT analysis an immensenly 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 enables the managers of the Northern Tier 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 primary purpose of SWOT matrix is to identify the strategies that a company can utilize to exploit external opportunities, counter threats, and build on & protect Northern Tier Energy strengths, and eradicate its weaknesses.

Step by Step Guide to Northern Tier Energy SWOT Analysis

Strengths of Northern Tier Energy – Internal Strategic Factors

As one of the leading firms in its industry, Northern Tier 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 Northern Tier Energy are –

• Superb Performance in New Markets – Northern Tier Energy 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.
• Automation of activities brought consistency of quality to Northern Tier Energy products and has enabled the company to scale up and scale down based on the demand conditions in the market.
• Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
• Strong Free Cash Flow – Northern Tier Energy 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. Northern Tier 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.
• Successful track record of developing new products – product innovation.
• 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.
• Good Returns on Capital Expenditure – Northern Tier Energy is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.

Weakness of Northern Tier Energy – Internal Strategic Factors

Weakness are the areas where Northern Tier 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 Northern Tier Energy is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
• Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Northern Tier 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.
• 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.
• Limited success outside core business – Even though Northern Tier Energy is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
• 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.
• The profitability ratio and Net Contribution % of Northern Tier Energy are below the industry average.
• 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 Northern Tier Energy is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.

Opportunities for Northern Tier Energy – External Strategic Factors

• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Northern Tier Energy an opportunity to enter a new emerging market.
• The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Northern Tier Energy to increase its profitability.
• Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Northern Tier Energy to capture new customers and increase its market share.
• Government green drive also opens an opportunity for procurement of Northern Tier Energy products by the state as well as federal government contractors.
• 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.
• Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Northern Tier Energy.
• 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 Northern Tier Energy to drive home its advantage in new technology and gain market share in the new product category.
• 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 Northern Tier Energy in other product categories.

Threats Northern Tier Energy Facing - External Strategic Factors

• The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
• 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.
• 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.
• Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
• Liability laws in different countries are different and Northern Tier Energy may be exposed to various liability claims given change in policies in those markets.
• Rising raw material can pose a threat to the Northern Tier Energy profitability.
• New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.

Limitations of SWOT Analysis for Northern Tier 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 Northern Tier 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 Northern Tier 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 Northern Tier 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 Northern Tier 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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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)