American Express SWOT Analysis / Matrix

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

The American Express is one of the leading companies in its industry. American Express maintains its dominant 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 helps the managers of the American Express to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
American Express swot analysis / matrix

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 American Express strengths, and eradicate its weaknesses.

Step by Step Guide to American Express SWOT Analysis

Strengths of American Express – Internal Strategic Factors

As one of the leading companies in its industry, American Express 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 American Express are –

  • Highly successful at Go To Market strategies for its products.
  • Strong Free Cash Flow – American Express has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Strong Brand Portfolio – Over the years American Express has invested in building a strong brand portfolio. The SWOT analysis of American Express just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
  • Successful track record of developing new products – product innovation.
  • 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.
  • Automation of activities brought consistency of quality to American Express products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • 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.
  • Good Returns on Capital Expenditure – American Express is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.

Weakness of American Express – Internal Strategic Factors

Weakness are the areas where American Express 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.

  • Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
  • High attrition rate in work force – compare to other organizations in the industry American Express has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
  • Investment in Research and Development is below the fastest growing players in the industry. Even though American Express 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. American Express has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
  • 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.
  • 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.
  • 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 American Express is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.

Opportunities for American Express – External Strategic Factors

  • The market development will lead to dilution of competitor’s advantage and enable American Express to increase its competitiveness compare to the other competitors.
  • 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 American Express in other product categories.
  • 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.
  • Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided American Express 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 American Express to increase its profitability.
  • 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 American Express 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 American Express. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
  • New trends in the consumer behavior can open up new market for the American Express . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.

Threats American Express Facing - External Strategic Factors

  • Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of American Express
  • New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
  • Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
  • Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for American Express   in those markets.
  • Imitation of the counterfeit and low quality product is also a threat to American Express’s product especially in the emerging markets and low income markets.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • Liability laws in different countries are different and American Express may be exposed to various liability claims given change in policies in those markets.
  • The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.

Limitations of SWOT Analysis for American Express

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 American Express
  • 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 American Express

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 American Express 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 American Express

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)