Sears Hometown & Outlet Stores SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

SWOT analysis is a vital strategic planning tool that can be used by Sears Hometown & Outlet Stores managers to do a situational analysis of the organization . It is a handy technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Sears Hometown & Outlet Stores is facing in its current business environment.

The Sears Hometown & Outlet Stores is one of the leading organizatations in its industry. Sears Hometown & Outlet Stores 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 firm such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates 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 Sears Hometown & Outlet Stores 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 an organization can utilize to exploit external opportunities, counter threats, and build on & protect Sears Hometown & Outlet Stores strengths, and eradicate its weaknesses.

Step by Step Guide to Sears Hometown & Outlet Stores SWOT Analysis

Strengths of Sears Hometown & Outlet Stores – Internal Strategic Factors

As one of the leading organizations in its industry, Sears Hometown & Outlet Stores 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 Sears Hometown & Outlet Stores are –

• Highly successful at Go To Market strategies for its products.
• Strong distribution network – Over the years Sears Hometown & Outlet Stores has built a reliable distribution network that can reach majority of its potential 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.
• Strong Free Cash Flow – Sears Hometown & Outlet Stores has strong free cash flows that provide resources in the hand of the company to expand into new projects.
• 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.
• Highly skilled workforce through successful training and learning programs. Sears Hometown & Outlet Stores 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 – Sears Hometown & Outlet Stores is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.

Weakness of Sears Hometown & Outlet Stores – Internal Strategic Factors

Weakness are the areas where Sears Hometown & Outlet Stores 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.

• Limited success outside core business – Even though Sears Hometown & Outlet Stores 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 Sears Hometown & Outlet Stores are below the industry average.
• Not highly successful at integrating firms with different work culture. As mentioned earlier even though Sears Hometown & Outlet Stores 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.
• Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Sears Hometown & Outlet Stores 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 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.
• High attrition rate in work force – compare to other organizations in the industry Sears Hometown & Outlet Stores has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.

Opportunities for Sears Hometown & Outlet Stores – 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 Sears Hometown & Outlet Stores to drive home its advantage in new technology and gain market share in the new product category.
• Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Sears Hometown & Outlet Stores’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 Sears Hometown & Outlet Stores 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 Sears Hometown & Outlet Stores. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
• 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 Sears Hometown & Outlet Stores 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.
• Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Sears Hometown & Outlet Stores.
• Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Sears Hometown & Outlet Stores to capture new customers and increase its market share.

Threats Sears Hometown & Outlet Stores Facing - External Strategic Factors

• Rising raw material can pose a threat to the Sears Hometown & Outlet Stores profitability.
• Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
• Liability laws in different countries are different and Sears Hometown & Outlet Stores may be exposed to various liability claims given change in policies in those markets.
• Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
• New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
• Imitation of the counterfeit and low quality product is also a threat to Sears Hometown & Outlet Stores’s product especially in the emerging markets and low income markets.
• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Sears Hometown & Outlet Stores   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 Sears Hometown & Outlet Stores

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 Sears Hometown & Outlet Stores
• 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 Sears Hometown & Outlet Stores

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 Sears Hometown & Outlet Stores 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 Sears Hometown & Outlet Stores

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

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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)