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MSC Industrial Direct SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by MSC Industrial Direct managers to do a situational analysis of the firm . It is an important technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) MSC Industrial Direct is facing in its current business environment.
The MSC Industrial Direct is one of the leading organizatations in its industry. MSC Industrial Direct maintains its prominent position in market by carefully 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 MSC Industrial Direct 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 core purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect MSC Industrial Direct strengths, and eradicate its weaknesses.
Step by Step Guide to MSC Industrial Direct SWOT Analysis
Strengths of MSC Industrial Direct – Internal Strategic Factors
As one of the leading companies in its industry, MSC Industrial Direct 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 MSC Industrial Direct are –
- Successful track record of developing new products – product innovation.
- Strong distribution network – Over the years MSC Industrial Direct has built a reliable distribution network that can reach majority of its potential market.
- Automation of activities brought consistency of quality to MSC Industrial Direct products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Strong Brand Portfolio – Over the years MSC Industrial Direct has invested in building a strong brand portfolio. The SWOT analysis of MSC Industrial Direct just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Highly successful at Go To Market strategies for its 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.
- Good Returns on Capital Expenditure – MSC Industrial Direct is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- 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 MSC Industrial Direct – Internal Strategic Factors
Weakness are the areas where MSC Industrial Direct 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.
- Limited success outside core business – Even though MSC Industrial Direct is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- The profitability ratio and Net Contribution % of MSC Industrial Direct are below the industry average.
- High attrition rate in work force – compare to other organizations in the industry MSC Industrial Direct has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- 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 MSC Industrial Direct is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Investment in Research and Development is below the fastest growing players in the industry. Even though MSC Industrial Direct 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.
- 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 MSC Industrial Direct – External Strategic Factors
- 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 MSC Industrial Direct 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 MSC Industrial Direct products by the state as well as federal government contractors.
- New trends in the consumer behavior can open up new market for the MSC Industrial Direct . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of MSC Industrial Direct.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided MSC Industrial Direct an opportunity to enter a new emerging market.
- 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 MSC Industrial Direct. 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 MSC Industrial Direct to capture new customers and increase its market share.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as MSC Industrial Direct to increase its profitability.
Threats MSC Industrial Direct 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.
- Imitation of the counterfeit and low quality product is also a threat to MSC Industrial Direct’s product especially in the emerging markets and low income markets.
- Liability laws in different countries are different and MSC Industrial Direct may be exposed to various liability claims given change in policies in those markets.
- 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.
- 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 MSC Industrial Direct
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- 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 MSC Industrial Direct
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 MSC Industrial Direct
- 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 MSC Industrial Direct
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 MSC Industrial Direct 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 MSC Industrial Direct
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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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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