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Nortek SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Nortek 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) Nortek is facing in its current business environment.
The Nortek is one of the leading firms in its industry. Nortek 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 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 Nortek 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 central purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Nortek strengths, and eradicate its weaknesses.
Step by Step Guide to Nortek SWOT Analysis
Strengths of Nortek – Internal Strategic Factors
As one of the leading companies in its industry, Nortek 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 Nortek are –
- Good Returns on Capital Expenditure – Nortek is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Superb Performance in New Markets – Nortek 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 distribution network – Over the years Nortek has built a reliable distribution network that can reach majority of its potential 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 – Nortek has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Highly successful at Go To Market strategies for its products.
- Successful track record of developing new products – product innovation.
- Strong Brand Portfolio – Over the years Nortek has invested in building a strong brand portfolio. The SWOT analysis of Nortek just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Weakness of Nortek – Internal Strategic Factors
Weakness are the areas where Nortek 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 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 Nortek 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 Nortek 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.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Nortek is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- High attrition rate in work force – compare to other organizations in the industry Nortek has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Limited success outside core business – Even though Nortek is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- 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. Nortek has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- The profitability ratio and Net Contribution % of Nortek are below the industry average.
Opportunities for Nortek – External Strategic Factors
- 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 Nortek in other product categories.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Nortek to increase its profitability.
- 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 environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Nortek to drive home its advantage in new technology and gain market share in the new product category.
- 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 Nortek. 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 Nortek 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 Nortek 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 Nortek.
Threats Nortek 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.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Nortek in those markets.
- Rising raw material can pose a threat to the Nortek profitability.
- Imitation of the counterfeit and low quality product is also a threat to Nortek’s product especially in the emerging markets and low income markets.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- 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.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Limitations of SWOT Analysis for Nortek
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 Nortek
- 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 Nortek
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 Nortek 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 Nortek
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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