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Abercrombie & Fitch Co. SWOT Analysis / Matrix
Business Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Abercrombie & Fitch Co. managers to do a situational analysis of the company . It is an important technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Abercrombie & Fitch Co. is facing in its current business environment.
The Abercrombie & Fitch Co. is one of the leading firms in its industry. Abercrombie & Fitch Co. 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 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 helps the managers of the Abercrombie & Fitch Co. 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 primary purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Abercrombie & Fitch Co. strengths, and eradicate its weaknesses.
Step by Step Guide to Abercrombie & Fitch Co. SWOT Analysis
Strengths of Abercrombie & Fitch Co. – Internal Strategic Factors
As one of the leading firms in its industry, Abercrombie & Fitch Co. 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 Abercrombie & Fitch Co. are –
Read - Abercrombie & Fitch Co. Porter 5 Forces Analysis & Industry Analysis
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- Highly skilled workforce through successful training and learning programs. Abercrombie & Fitch Co. 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.
- Strong Brand Portfolio – Over the years Abercrombie & Fitch Co. has invested in building a strong brand portfolio. The SWOT analysis of Abercrombie & Fitch Co. just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Strong Free Cash Flow – Abercrombie & Fitch Co. 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 Abercrombie & Fitch Co. products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Good Returns on Capital Expenditure – Abercrombie & Fitch Co. 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 – Abercrombie & Fitch Co. 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.
- Highly successful at Go To Market strategies for its products.
Weakness of Abercrombie & Fitch Co. – Internal Strategic Factors
Weakness are the areas where Abercrombie & Fitch Co. 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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- Limited success outside core business – Even though Abercrombie & Fitch Co. 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.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Abercrombie & Fitch Co. is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- 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. Abercrombie & Fitch Co. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- 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.
- 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 Abercrombie & Fitch Co. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Abercrombie & Fitch Co. 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.
Opportunities for Abercrombie & Fitch Co. – External Strategic Factors
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- 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 Abercrombie & Fitch Co. to drive home its advantage in new technology and gain market share in the new product category.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Abercrombie & Fitch Co. to increase its profitability.
- 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 Abercrombie & Fitch Co. in other product categories.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Abercrombie & Fitch Co.’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.
- New trends in the consumer behavior can open up new market for the Abercrombie & Fitch Co. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Government green drive also opens an opportunity for procurement of Abercrombie & Fitch Co. products by the state as well as federal government contractors.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Abercrombie & Fitch Co. an opportunity to enter a new emerging market.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Abercrombie & Fitch Co..
Threats Abercrombie & Fitch Co. Facing - External Strategic Factors
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- 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.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Abercrombie & Fitch Co. in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Abercrombie & Fitch Co.
- Imitation of the counterfeit and low quality product is also a threat to Abercrombie & Fitch Co.’s product especially in the emerging markets and low income markets.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those 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.
Limitations of SWOT Analysis for Abercrombie & Fitch Co.
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 Abercrombie & Fitch Co.
- 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 Abercrombie & Fitch Co.
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 Abercrombie & Fitch Co. 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 Abercrombie & Fitch Co.
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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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)
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