Farmer Bros. Co. SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

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

The Farmer Bros. Co. is one of the leading companies in its industry. Farmer Bros. Co. maintains its dominant 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 firm 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 Farmer Bros. Co. to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Farmer Bros. Co. swot analysis / matrix

SWOT Matrix Strategies Objective

The central purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Farmer Bros. Co. strengths, and eradicate its weaknesses.

Step by Step Guide to Farmer Bros. Co. SWOT Analysis

Strengths of Farmer Bros. Co. – Internal Strategic Factors

As one of the leading organizations in its industry, Farmer Bros. Co. 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 Farmer Bros. Co. are –

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  • Good Returns on Capital Expenditure – Farmer Bros. Co. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
  • 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 – Farmer Bros. Co. has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Highly successful at Go To Market strategies for its products.
  • Highly skilled workforce through successful training and learning programs. Farmer Bros. 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.
  • Automation of activities brought consistency of quality to Farmer Bros. Co. products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • Successful track record of developing new products – product innovation.
  • Strong Brand Portfolio – Over the years Farmer Bros. Co. has invested in building a strong brand portfolio. The SWOT analysis of Farmer Bros. Co. just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.

Weakness of Farmer Bros. Co. – Internal Strategic Factors

Weakness are the areas where Farmer Bros. Co. 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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  • 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 Farmer Bros. Co.
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though Farmer Bros. Co. 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, Farmer Bros. 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.
  • 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 Farmer Bros. Co. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
  • 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. Farmer Bros. 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.
  • Limited success outside core business – Even though Farmer Bros. Co. 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 Farmer Bros. Co. – External Strategic Factors

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  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Farmer Bros. Co. to increase its profitability.
  • 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 Farmer Bros. Co.. 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 Farmer Bros. Co. 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 Farmer Bros. Co. to capture new customers and increase its market share.
  • 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 Farmer Bros. Co. products by the state as well as federal government contractors.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Farmer Bros. 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 Farmer Bros. Co. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.

Threats Farmer Bros. Co. Facing - External Strategic Factors

  • The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those 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.
  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • Rising raw material can pose a threat to the Farmer Bros. Co. profitability.
  • Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Farmer Bros. Co.   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.
  • 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 pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Farmer Bros. Co.

Limitations of SWOT Analysis for Farmer Bros. 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 Farmer Bros. 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 Farmer Bros. 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 Farmer Bros. 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 Farmer Bros. 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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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)