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Luna Innovations Incorporated SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by Luna Innovations Incorporated managers to do a situational analysis of the firm . It is a handy technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Luna Innovations Incorporated is facing in its current business environment.
The Luna Innovations Incorporated is one of the leading firms in its industry. Luna Innovations Incorporated 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 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 called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Luna Innovations Incorporated 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 core purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Luna Innovations Incorporated strengths, and eradicate its weaknesses.
Step by Step Guide to Luna Innovations Incorporated SWOT Analysis
Strengths of Luna Innovations Incorporated – Internal Strategic Factors
As one of the leading companies in its industry, Luna Innovations Incorporated 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 Luna Innovations Incorporated are –
Read - Luna Innovations Incorporated Porter 5 Forces Analysis & Industry Analysis
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- Highly successful at Go To Market strategies for its products.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Strong Free Cash Flow – Luna Innovations Incorporated has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Highly skilled workforce through successful training and learning programs. Luna Innovations Incorporated 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.
- 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.
- Automation of activities brought consistency of quality to Luna Innovations Incorporated 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 Luna Innovations Incorporated has invested in building a strong brand portfolio. The SWOT analysis of Luna Innovations Incorporated just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Superb Performance in New Markets – Luna Innovations Incorporated 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.
Weakness of Luna Innovations Incorporated – Internal Strategic Factors
Weakness are the areas where Luna Innovations Incorporated 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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- The profitability ratio and Net Contribution % of Luna Innovations Incorporated are below the industry average.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Luna Innovations Incorporated 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, Luna Innovations Incorporated 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.
- 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.
- High attrition rate in work force – compare to other organizations in the industry Luna Innovations Incorporated has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- 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 Luna Innovations Incorporated
- Limited success outside core business – Even though Luna Innovations Incorporated is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Opportunities for Luna Innovations Incorporated – External Strategic Factors
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- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Luna Innovations Incorporated’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.
- The market development will lead to dilution of competitor’s advantage and enable Luna Innovations Incorporated to increase its competitiveness compare to the other competitors.
- 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 Luna Innovations Incorporated in other product categories.
- Government green drive also opens an opportunity for procurement of Luna Innovations Incorporated products by the state as well as federal government contractors.
- New trends in the consumer behavior can open up new market for the Luna Innovations Incorporated . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Luna Innovations Incorporated.
- 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.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Luna Innovations Incorporated to capture new customers and increase its market share.
Threats Luna Innovations Incorporated Facing - External Strategic Factors
- Rising raw material can pose a threat to the Luna Innovations Incorporated profitability.
- 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.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Liability laws in different countries are different and Luna Innovations Incorporated may be exposed to various liability claims given change in policies 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.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Luna Innovations Incorporated
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
Limitations of SWOT Analysis for Luna Innovations Incorporated
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 Luna Innovations Incorporated
- 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 Luna Innovations Incorporated
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 Luna Innovations Incorporated 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 Luna Innovations Incorporated
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)
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