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Outerwall SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Outerwall managers to do a situational analysis of the organization . It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Outerwall is facing in its current business environment.
The Outerwall is one of the leading firms in its industry. Outerwall maintains its dominant 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 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 Outerwall 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 firm can use to exploit external opportunities, counter threats, and build on & protect Outerwall strengths, and eradicate its weaknesses.
Step by Step Guide to Outerwall SWOT Analysis
Strengths of Outerwall – Internal Strategic Factors
As one of the leading firms in its industry, Outerwall 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 Outerwall are –
- 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 Outerwall has invested in building a strong brand portfolio. The SWOT analysis of Outerwall 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 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.
- Strong Free Cash Flow – Outerwall has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong distribution network – Over the years Outerwall has built a reliable distribution network that can reach majority of its potential market.
- Highly skilled workforce through successful training and learning programs. Outerwall 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.
- 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.
Weakness of Outerwall – Internal Strategic Factors
Weakness are the areas where Outerwall 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.
- 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 Outerwall
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Outerwall 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.
- 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 Outerwall is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- 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.
- High attrition rate in work force – compare to other organizations in the industry Outerwall has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Outerwall is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Opportunities for Outerwall – 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 Outerwall to drive home its advantage in new technology and gain market share in the new product category.
- 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 Outerwall in other product categories.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Outerwall’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.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Outerwall.
- New trends in the consumer behavior can open up new market for the Outerwall . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Outerwall an opportunity to enter a new emerging market.
- Government green drive also opens an opportunity for procurement of Outerwall products by the state as well as federal government contractors.
- The new technology provides an opportunity to Outerwall 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.
Threats Outerwall Facing - External Strategic Factors
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Outerwall
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Liability laws in different countries are different and Outerwall may be exposed to various liability claims given change in policies 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.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- 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.
Limitations of SWOT Analysis for Outerwall
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 Outerwall
- 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 Outerwall
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 Outerwall 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 Outerwall
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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