Sonic Corp. SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

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

The Sonic Corp. is one of the leading companies in its industry. Sonic Corp. 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.

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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 Sonic Corp. 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 use to exploit external opportunities, counter threats, and build on & protect Sonic Corp. strengths, and eradicate its weaknesses.

Step by Step Guide to Sonic Corp. SWOT Analysis

Strengths of Sonic Corp. – Internal Strategic Factors

As one of the leading firms in its industry, Sonic Corp. 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 Sonic Corp. are –

Read - Sonic Corp. Porter 5 Forces Analysis & Industry Analysis
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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 – Sonic Corp. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Highly skilled workforce through successful training and learning programs. Sonic Corp. 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.
Superb Performance in New Markets – Sonic Corp. 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.
Automation of activities brought consistency of quality to Sonic Corp. products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Strong Brand Portfolio – Over the years Sonic Corp. has invested in building a strong brand portfolio. The SWOT analysis of Sonic Corp. just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
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 Free Cash Flow – Sonic Corp. has strong free cash flows that provide resources in the hand of the company to expand into new projects.

Weakness of Sonic Corp. – Internal Strategic Factors

Weakness are the areas where Sonic Corp. 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 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.
The profitability ratio and Net Contribution % of Sonic Corp. are below the industry average.
Not highly successful at integrating firms with different work culture. As mentioned earlier even though Sonic Corp. 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. Sonic Corp. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
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 Sonic Corp. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
Investment in Research and Development is below the fastest growing players in the industry. Even though Sonic Corp. 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 Sonic Corp. – External Strategic Factors

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Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Sonic Corp.’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 Sonic Corp. to drive home its advantage in new technology and gain market share in the new product category.
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 Sonic Corp. products by the state as well as federal government contractors.
The new technology provides an opportunity to Sonic Corp. 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 Sonic Corp.. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
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 Sonic Corp. in other product categories.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Sonic Corp. to capture new customers and increase its market share.

Threats Sonic Corp. Facing - External Strategic Factors

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.
Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
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.
Liability laws in different countries are different and Sonic Corp. may be exposed to various liability claims given change in policies 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 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.
Rising raw material can pose a threat to the Sonic Corp. profitability.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Sonic Corp. in those markets.

Limitations of SWOT Analysis for Sonic Corp.

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 Sonic Corp.
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 Sonic Corp.

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 Sonic Corp. 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 Sonic Corp.

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)