Big Lots, Inc. SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

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

The Big Lots, Inc. is one of the leading organizatations in its industry. Big Lots, Inc. maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the firm 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 called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Big Lots, 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 a company can utilize to exploit external opportunities, counter threats, and build on & protect Big Lots, Inc. strengths, and eradicate its weaknesses.

Step by Step Guide to Big Lots, Inc. SWOT Analysis

Strengths of Big Lots, Inc. – Internal Strategic Factors

As one of the leading organizations in its industry, Big Lots, 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 Big Lots, Inc. are –

Read - Big Lots, Inc. Porter 5 Forces Analysis & Industry Analysis
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Automation of activities brought consistency of quality to Big Lots, Inc. products and has enabled the company to scale up and scale down based on the demand conditions in the market.
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.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Strong Brand Portfolio – Over the years Big Lots, Inc. has invested in building a strong brand portfolio. The SWOT analysis of Big Lots, 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.
Strong distribution network – Over the years Big Lots, Inc. has built a reliable distribution network that can reach majority of its potential market.
Strong Free Cash Flow – Big Lots, Inc. has strong free cash flows that provide resources in the hand of the company to expand into new projects.
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.

Weakness of Big Lots, Inc. – Internal Strategic Factors

Weakness are the areas where Big Lots, 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 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. Big Lots, Inc. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Big Lots, 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.
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
High attrition rate in work force – compare to other organizations in the industry Big Lots, Inc. 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 Big Lots, Inc. 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 Big Lots, Inc. are below the industry average.
Not highly successful at integrating firms with different work culture. As mentioned earlier even though Big Lots, Inc. is successful at integrating small companies it has its share of failure to merge firms that have different work culture.

Opportunities for Big Lots, Inc. – External Strategic Factors

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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 Big Lots, 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.
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.
Government green drive also opens an opportunity for procurement of Big Lots, Inc. 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 Big Lots, Inc. an opportunity to enter a new emerging market.
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 Big Lots, Inc. 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 Big Lots, 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.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Big Lots, Inc. to capture new customers and increase its market share.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Big Lots, Inc. to increase its profitability.

Threats Big Lots, Inc. Facing - External Strategic Factors

Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Big Lots, Inc.
Liability laws in different countries are different and Big Lots, Inc. may be exposed to various liability claims given change in policies in those markets.
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.
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
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 Big Lots, Inc. profitability.
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 Big Lots, 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 Big Lots, 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 Big Lots, 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 Big Lots, 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 Big Lots, 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)