Alliance Data Systems Corporation SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Alliance Data Systems Corporation managers to do a situational analysis of the organization . It is a handy technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Alliance Data Systems Corporation is facing in its current business environment.

The Alliance Data Systems Corporation is one of the leading firms in its industry. Alliance Data Systems Corporation 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 organization 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 helps the managers of the Alliance Data Systems Corporation 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 a company can use to exploit external opportunities, counter threats, and build on & protect Alliance Data Systems Corporation strengths, and eradicate its weaknesses.

Step by Step Guide to Alliance Data Systems Corporation SWOT Analysis

Strengths of Alliance Data Systems Corporation – Internal Strategic Factors

As one of the leading companies in its industry, Alliance Data Systems Corporation 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 Alliance Data Systems Corporation are –

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• Highly skilled workforce through successful training and learning programs. Alliance Data Systems Corporation 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.
• Successful track record of developing new products – product innovation.
• 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.
• 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.
• 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.
• Good Returns on Capital Expenditure – Alliance Data Systems Corporation is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
• Automation of activities brought consistency of quality to Alliance Data Systems Corporation products and has enabled the company to scale up and scale down based on the demand conditions in the market.

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Weakness of Alliance Data Systems Corporation – Internal Strategic Factors

Weakness are the areas where Alliance Data Systems Corporation 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.

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• 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 Alliance Data Systems Corporation
• Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
• Limited success outside core business – Even though Alliance Data Systems Corporation is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
• 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 Alliance Data Systems Corporation has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
• 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 Alliance Data Systems Corporation is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
• The profitability ratio and Net Contribution % of Alliance Data Systems Corporation are below the industry average.

Opportunities for Alliance Data Systems Corporation – External Strategic Factors

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• Government green drive also opens an opportunity for procurement of Alliance Data Systems Corporation products by the state as well as federal government contractors.
• 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 Alliance Data Systems Corporation. 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 environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Alliance Data Systems Corporation 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 Alliance Data Systems Corporation’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.
• 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 Alliance Data Systems Corporation in other product categories.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Alliance Data Systems Corporation an opportunity to enter a new emerging market.
• The market development will lead to dilution of competitor’s advantage and enable Alliance Data Systems Corporation to increase its competitiveness compare to the other competitors.
• Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Alliance Data Systems Corporation to capture new customers and increase its market share.

Threats Alliance Data Systems Corporation Facing - External Strategic Factors

• Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
• Imitation of the counterfeit and low quality product is also a threat to Alliance Data Systems Corporation’s product especially in the emerging markets and low income 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.
• Rising raw material can pose a threat to the Alliance Data Systems Corporation profitability.
• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Alliance Data Systems Corporation   in those markets.
• New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
• The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
• Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.

Limitations of SWOT Analysis for Alliance Data Systems Corporation

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 Alliance Data Systems Corporation
• 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 Alliance Data Systems Corporation

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 Alliance Data Systems Corporation 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 Alliance Data Systems Corporation

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)