Alon USA Energy, Inc. SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Alon USA Energy, Inc. managers to do a situational analysis of the organization . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Alon USA Energy, Inc. is facing in its current business environment.

The Alon USA Energy, Inc. is one of the leading firms in its industry. Alon USA Energy, Inc. 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 company such as – marketing, finance, operations, management information systems and strategic planning.

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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 Alon USA Energy, Inc. to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Alon USA Energy, Inc. swot analysis / matrix

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 Alon USA Energy, Inc. strengths, and eradicate its weaknesses.

Step by Step Guide to Alon USA Energy, Inc. SWOT Analysis

Strengths of Alon USA Energy, Inc. – Internal Strategic Factors

As one of the leading firms in its industry, Alon USA Energy, Inc. 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 Alon USA Energy, Inc. are –

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  • Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
  • 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 – Alon USA Energy, Inc. 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 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.
  • Successful track record of developing new products – product innovation.
  • Good Returns on Capital Expenditure – Alon USA Energy, Inc. 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 – Alon USA Energy, Inc. 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.

Weakness of Alon USA Energy, Inc. – Internal Strategic Factors

Weakness are the areas where Alon USA Energy, Inc. can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

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  • The profitability ratio and Net Contribution % of Alon USA Energy, Inc. are below the industry average.
  • 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 Alon USA Energy, Inc.
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though Alon USA Energy, Inc. is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
  • 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 Alon USA Energy, Inc. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
  • 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, Alon USA Energy, Inc. 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 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. Alon USA Energy, Inc. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.

Opportunities for Alon USA Energy, Inc. – External Strategic Factors

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  • Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Alon USA Energy, Inc..
  • 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 Alon USA Energy, Inc. in other product categories.
  • New trends in the consumer behavior can open up new market for the Alon USA Energy, Inc. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
  • 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 Alon USA Energy, Inc.. 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 taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Alon USA Energy, Inc. to increase its profitability.
  • The new technology provides an opportunity to Alon USA Energy, Inc. 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.
  • 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 Alon USA Energy, Inc. to drive home its advantage in new technology and gain market share in the new product category.

Threats Alon USA Energy, Inc. 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.
  • 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.
  • 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.
  • Imitation of the counterfeit and low quality product is also a threat to Alon USA Energy, Inc.’s product especially in the emerging markets and low income 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.
  • Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Alon USA Energy, Inc.
  • 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 Alon USA Energy, Inc. may be exposed to various liability claims given change in policies in those markets.

Limitations of SWOT Analysis for Alon USA Energy, Inc.

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 Alon USA Energy, Inc.
  • 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.

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Weighted SWOT Analysis of Alon USA Energy, Inc.

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 Alon USA Energy, Inc. 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 Alon USA Energy, Inc.

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)