Cummins Inc. SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

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

The Cummins Inc. is one of the leading organizatations in its industry. Cummins Inc. maintains its prominent 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 organization such as – marketing, finance, operations, management information systems and strategic planning.

Order Now - Cummins Inc. SWOT Analysis
Check out- Cummins Inc. PESTEL / PEST & Environment Analysis
Article continues after advertisement

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 enables the managers of the Cummins Inc. 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 main purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Cummins Inc. strengths, and eradicate its weaknesses.

Step by Step Guide to Cummins Inc. SWOT Analysis

Strengths of Cummins Inc. – Internal Strategic Factors

As one of the leading companies in its industry, Cummins Inc. 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 Cummins Inc. are –

Read - Cummins Inc. Porter 5 Forces Analysis & Industry Analysis
Article continues after advertisement

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.
Successful track record of developing new products – product innovation.
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 distribution network – Over the years Cummins Inc. has built a reliable distribution network that can reach majority of its potential market.
Good Returns on Capital Expenditure – Cummins Inc. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Strong Free Cash Flow – Cummins Inc. has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Automation of activities brought consistency of quality to Cummins Inc. products and has enabled the company to scale up and scale down based on the demand conditions in the market.

Weakness of Cummins Inc. – Internal Strategic Factors

Weakness are the areas where Cummins 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.

Article continues after advertisement

High attrition rate in work force – compare to other organizations in the industry Cummins Inc. has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
The profitability ratio and Net Contribution % of Cummins Inc. are below the industry average.
Not highly successful at integrating firms with different work culture. As mentioned earlier even though Cummins Inc. is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Limited success outside core business – Even though Cummins Inc. is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Cummins 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.
Investment in Research and Development is below the fastest growing players in the industry. Even though Cummins Inc. 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.

Opportunities for Cummins Inc. – External Strategic Factors

Article continues after advertisement

The market development will lead to dilution of competitor’s advantage and enable Cummins Inc. to increase its competitiveness compare to the other competitors.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Cummins Inc. to increase its profitability.
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 Cummins 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.
New trends in the consumer behavior can open up new market for the Cummins Inc. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Cummins Inc..
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Cummins Inc.’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 Cummins Inc. an opportunity to enter a new emerging market.
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.

Threats Cummins Inc. Facing - External Strategic Factors

Imitation of the counterfeit and low quality product is also a threat to Cummins Inc.’s product especially in the emerging markets and low income markets.
The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
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.
Rising raw material can pose a threat to the Cummins Inc. profitability.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Cummins Inc. 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.

Limitations of SWOT Analysis for Cummins 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 Cummins 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.

Article continues after advertisement

Weighted SWOT Analysis of Cummins 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 Cummins 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 Cummins 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.

Buy Custom Essay and Term Paper on SWOT Analysis / Matrix , Weighted SWOT Analysis of Cummins Inc.

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)