Allison Transmission Holdings SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

SWOT analysis is a vital strategic planning tool that can be used by Allison Transmission Holdings 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) Allison Transmission Holdings is facing in its current business environment.

The Allison Transmission Holdings is one of the leading firms in its industry. Allison Transmission Holdings maintains its prominent position in market by critically 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 called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Allison Transmission Holdings 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 Allison Transmission Holdings strengths, and eradicate its weaknesses.

Step by Step Guide to Allison Transmission Holdings SWOT Analysis

Strengths of Allison Transmission Holdings – Internal Strategic Factors

As one of the leading firms in its industry, Allison Transmission Holdings 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 Allison Transmission Holdings are –

• Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
• Strong Brand Portfolio – Over the years Allison Transmission Holdings has invested in building a strong brand portfolio. The SWOT analysis of Allison Transmission Holdings just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
• 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.
• Highly successful at Go To Market strategies for its products.
• Strong Free Cash Flow – Allison Transmission Holdings has strong free cash flows that provide resources in the hand of the company to expand into new projects.
• Highly skilled workforce through successful training and learning programs. Allison Transmission Holdings 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.
• Superb Performance in New Markets – Allison Transmission Holdings 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.
• Automation of activities brought consistency of quality to Allison Transmission Holdings products and has enabled the company to scale up and scale down based on the demand conditions in the market.

Weakness of Allison Transmission Holdings – Internal Strategic Factors

Weakness are the areas where Allison Transmission Holdings 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.

• 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.
• 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.
• The profitability ratio and Net Contribution % of Allison Transmission Holdings are below the industry average.
• 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 Allison Transmission Holdings is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
• 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 Allison Transmission Holdings
• 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. Allison Transmission Holdings has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
• Limited success outside core business – Even though Allison Transmission Holdings is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.

Opportunities for Allison Transmission Holdings – External Strategic Factors

• New trends in the consumer behavior can open up new market for the Allison Transmission Holdings . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• The market development will lead to dilution of competitor’s advantage and enable Allison Transmission Holdings to increase its competitiveness compare to the other competitors.
• 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 Allison Transmission Holdings. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
• The new technology provides an opportunity to Allison Transmission Holdings 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.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Allison Transmission Holdings an opportunity to enter a new emerging market.
• Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Allison Transmission Holdings to capture new customers and increase its 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 Allison Transmission Holdings.
• 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 Allison Transmission Holdings to drive home its advantage in new technology and gain market share in the new product category.

Threats Allison Transmission Holdings Facing - External Strategic Factors

• New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
• Liability laws in different countries are different and Allison Transmission Holdings may be exposed to various liability claims given change in policies 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 Allison Transmission Holdings
• Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
• 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 Allison Transmission Holdings   in those markets.
• The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards 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.

Limitations of SWOT Analysis for Allison Transmission Holdings

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 Allison Transmission Holdings
• 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 Allison Transmission Holdings

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 Allison Transmission Holdings 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 Allison Transmission Holdings

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

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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)