Kar Auction Services SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

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

The Kar Auction Services is one of the leading organizatations in its industry. Kar Auction Services 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 called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Kar Auction Services 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 company can use to exploit external opportunities, counter threats, and build on & protect Kar Auction Services strengths, and eradicate its weaknesses.

Step by Step Guide to Kar Auction Services SWOT Analysis

Strengths of Kar Auction Services – Internal Strategic Factors

As one of the leading companies in its industry, Kar Auction Services 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 Kar Auction Services are –

• 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 Free Cash Flow – Kar Auction Services has strong free cash flows that provide resources in the hand of the company to expand into new projects.
• 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 developing new products – product innovation.
• Strong distribution network – Over the years Kar Auction Services has built a reliable distribution network that can reach majority of its potential market.
• Good Returns on Capital Expenditure – Kar Auction Services is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
• Automation of activities brought consistency of quality to Kar Auction Services 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 – Kar Auction Services 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.

Weakness of Kar Auction Services – Internal Strategic Factors

Weakness are the areas where Kar Auction Services 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.

• Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Kar Auction Services 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.
• Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
• 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 Kar Auction Services
• 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 Kar Auction Services is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
• Limited success outside core business – Even though Kar Auction Services is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
• Investment in Research and Development is below the fastest growing players in the industry. Even though Kar Auction Services 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 company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Kar Auction Services has to build internal feedback mechanism directly from sales team on ground to counter these challenges.

Opportunities for Kar Auction Services – External Strategic Factors

• Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Kar Auction Services to capture new customers and increase its market share.
• 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.
• New trends in the consumer behavior can open up new market for the Kar Auction Services . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Kar Auction Services to increase its profitability.
• The new technology provides an opportunity to Kar Auction Services 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.
• Government green drive also opens an opportunity for procurement of Kar Auction Services products by the state as well as federal government contractors.
• Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Kar Auction Services’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.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Kar Auction Services an opportunity to enter a new emerging market.

Threats Kar Auction Services Facing - External Strategic Factors

• 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.
• 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.
• Rising raw material can pose a threat to the Kar Auction Services profitability.
• Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
• New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
• 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.
• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Kar Auction Services   in those markets.

Limitations of SWOT Analysis for Kar Auction Services

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 Kar Auction Services
• 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 Kar Auction Services

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 Kar Auction Services 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 Kar Auction Services

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)