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MGP Ingredients, Inc. SWOT Analysis / Matrix
Business Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by MGP Ingredients, Inc. managers to do a situational analysis of the firm . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) MGP Ingredients, Inc. is facing in its current business environment.
The MGP Ingredients, Inc. is one of the leading organizatations in its industry. MGP Ingredients, Inc. 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 MGP Ingredients, 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 use to exploit external opportunities, counter threats, and build on & protect MGP Ingredients, Inc. strengths, and eradicate its weaknesses.
Step by Step Guide to MGP Ingredients, Inc. SWOT Analysis
Strengths of MGP Ingredients, Inc. – Internal Strategic Factors
As one of the leading organizations in its industry, MGP Ingredients, 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 MGP Ingredients, Inc. are –
Read - MGP Ingredients, Inc. Porter 5 Forces Analysis & Industry Analysis
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- Successful track record of developing new products – product innovation.
- Good Returns on Capital Expenditure – MGP Ingredients, Inc. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Strong Free Cash Flow – MGP Ingredients, Inc. has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- 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 MGP Ingredients, Inc. products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Highly skilled workforce through successful training and learning programs. MGP Ingredients, 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.
- 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.
Weakness of MGP Ingredients, Inc. – Internal Strategic Factors
Weakness are the areas where MGP Ingredients, 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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- 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 MGP Ingredients, Inc. has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- 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 MGP Ingredients, 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 MGP Ingredients, 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. MGP Ingredients, 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 MGP Ingredients, Inc. is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Opportunities for MGP Ingredients, Inc. – External Strategic Factors
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- 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.
- The market development will lead to dilution of competitor’s advantage and enable MGP Ingredients, Inc. 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 MGP Ingredients, Inc. in other product categories.
- 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 MGP Ingredients, Inc. to drive home its advantage in new technology and gain market share in the new product category.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided MGP Ingredients, Inc. an opportunity to enter a new emerging market.
- The new technology provides an opportunity to MGP Ingredients, 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 trends in the consumer behavior can open up new market for the MGP Ingredients, Inc. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Government green drive also opens an opportunity for procurement of MGP Ingredients, Inc. products by the state as well as federal government contractors.
Threats MGP Ingredients, Inc. Facing - External Strategic Factors
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for MGP Ingredients, Inc. in those markets.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of MGP Ingredients, Inc.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards 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.
- Imitation of the counterfeit and low quality product is also a threat to MGP Ingredients, Inc.’s product especially in the emerging markets and low income markets.
- Liability laws in different countries are different and MGP Ingredients, Inc. may be exposed to various liability claims given change in policies in those markets.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Limitations of SWOT Analysis for MGP Ingredients, 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 MGP Ingredients, 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 MGP Ingredients, 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 MGP Ingredients, 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 MGP Ingredients, 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
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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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