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Arrow Electronics, Inc. SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Arrow Electronics, Inc. managers to do a situational analysis of the company . It is an important technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Arrow Electronics, Inc. is facing in its current business environment.
The Arrow Electronics, Inc. is one of the leading companies in its industry. Arrow Electronics, 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 Arrow Electronics, 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 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 Arrow Electronics, Inc. strengths, and eradicate its weaknesses.
Step by Step Guide to Arrow Electronics, Inc. SWOT Analysis
Strengths of Arrow Electronics, Inc. – Internal Strategic Factors
As one of the leading companies in its industry, Arrow Electronics, 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 Arrow Electronics, Inc. are –
Read - Arrow Electronics, Inc. Porter 5 Forces Analysis & Industry Analysis
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- Strong distribution network – Over the years Arrow Electronics, Inc. has built a reliable distribution network that can reach majority of its potential market.
- Highly successful at Go To Market strategies for its products.
- Strong Brand Portfolio – Over the years Arrow Electronics, Inc. has invested in building a strong brand portfolio. The SWOT analysis of Arrow Electronics, Inc. just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Successful track record of developing new products – product innovation.
- 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.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Highly skilled workforce through successful training and learning programs. Arrow Electronics, Inc. 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.
Weakness of Arrow Electronics, Inc. – Internal Strategic Factors
Weakness are the areas where Arrow Electronics, Inc. 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.
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- The profitability ratio and Net Contribution % of Arrow Electronics, Inc. are below the industry average.
- 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. Arrow Electronics, Inc. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Arrow Electronics, Inc. is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Arrow Electronics, 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.
- 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 Arrow Electronics, Inc.
- High attrition rate in work force – compare to other organizations in the industry Arrow Electronics, Inc. has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Arrow Electronics, 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 Arrow Electronics, 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 Arrow Electronics, Inc..
- New trends in the consumer behavior can open up new market for the Arrow Electronics, Inc. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- 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.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Arrow Electronics, 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.
- 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 Arrow Electronics, Inc. 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 Arrow Electronics, Inc. to increase its profitability.
- The new technology provides an opportunity to Arrow Electronics, 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.
- 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 Arrow Electronics, 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.
Threats Arrow Electronics, Inc. Facing - External Strategic Factors
- Imitation of the counterfeit and low quality product is also a threat to Arrow Electronics, 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.
- 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.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Arrow Electronics, Inc. in those markets.
- Liability laws in different countries are different and Arrow Electronics, Inc. may be exposed to various liability claims given change in policies in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- 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 Arrow Electronics, 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 Arrow Electronics, 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 Arrow Electronics, 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 Arrow Electronics, 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 Arrow Electronics, 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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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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