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Arch Coal SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Arch Coal managers to do a situational analysis of the firm . It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Arch Coal is facing in its current business environment.
The Arch Coal is one of the leading companies in its industry. Arch Coal maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly 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 Arch Coal 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 a firm can use to exploit external opportunities, counter threats, and build on & protect Arch Coal strengths, and eradicate its weaknesses.
Step by Step Guide to Arch Coal SWOT Analysis
Strengths of Arch Coal – Internal Strategic Factors
As one of the leading organizations in its industry, Arch Coal 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 Arch Coal are –
- Superb Performance in New Markets – Arch Coal 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 Brand Portfolio – Over the years Arch Coal has invested in building a strong brand portfolio. The SWOT analysis of Arch Coal just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Highly skilled workforce through successful training and learning programs. Arch Coal 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.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Good Returns on Capital Expenditure – Arch Coal 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 Arch Coal products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- 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.
- 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.
Weakness of Arch Coal – Internal Strategic Factors
Weakness are the areas where Arch Coal 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.
- 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 Arch Coal
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Arch Coal 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 Arch Coal are below the industry average.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Arch Coal is successful at integrating small companies it has its share of failure to merge firms that have different work 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.
- 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.
Opportunities for Arch Coal – External Strategic Factors
- 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 Arch Coal 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.
- 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 Arch Coal 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 Arch Coal 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 Arch Coal to capture new customers and increase its market share.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Arch Coal an opportunity to enter a new emerging market.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Arch Coal.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Arch Coal’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.
Threats Arch Coal Facing - External Strategic Factors
- 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 .
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Arch Coal in those markets.
- 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.
- 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 pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Arch Coal
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Imitation of the counterfeit and low quality product is also a threat to Arch Coal’s product especially in the emerging markets and low income markets.
Limitations of SWOT Analysis for Arch Coal
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 Arch Coal
- 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 Arch Coal
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 Arch Coal 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 Arch Coal
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.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
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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