SWOT Analysis for S&W and Makatume - Essay Example

Running Head: STRATEGIC MANAGEMENT Strategic Management Univesity Part I: SWOT Analysis for S&W and Makatume Themission is the organization's reason for being. It defines what the company has set out to do. It is broken down into objectives or concrete goals that the company has to reach in order to accomplish its mission. Each goal needs a strategy and a strategic plan for implementing and evaluating the level of accomplishment of the plan. In order to make the strategic plan, a study of both internal and external environments need to be conducted to define the company's strengths which can be used to achieve the objectives, take advantage of opportunities, minimize weaknesses and threats; the company's weaknesses which must be addressed or minimized in order not to detract from achieving the objectives; the opportunities in the external environment which can be taken advantage of; and the threats in the external environment which should be addressed so as not to affect achievement of the objectives. This paper conducts a SWOT analysis of Able Corporation's major competitors - Smith & White Corporation and Matakume. It attempts to anticipate these competitor's strategic responses to specific weaknesses by recommending strategies. The SWOT analysis and the anticipated recommended strategies should be helpful to Able Corporation in charting its strategic course of action with regards its major competitors. Part I: SWOT Analysis for S&W and Makatume Introduction Strategic management at the business unit level involves defining the mission and objectives, conducting a situation analysis, formulating strategies, implementing them, and controlling the process through measurement and evaluation. Once objectives are specified, the company has to analyze its current to be able to devise a strategic plan to reach the objectives. An environmental scan has to be performed for both internal and external environments. SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. SWOT stands for strengths, weaknesses, opportunities and threats. The SWOT framework was introduced in the 1960's by Learned, Christiansen, Andrews, and Guth in their book, Business Policy, Text and Cases. SWOT classifies the internal aspects of the company as strengths or weaknesses, and the external factors as opportunities or threats. Internal analysis for evaluating the company's strengths and weaknesses revolve around factors such as company culture, company image, organizational structure, key staff, access to natural resources, position on the experience curve, operational efficiency, operational capacity, brand awareness, market share, financial resources, exclusive contracts, patents and trade secrets. Opportunities and threats may arise due to changes in the external environments. External analysis, therefore, may involve factors such as customers, competitors, market trends, suppliers, partners, social changes, new technology, economic environment, political and regulatory environment (NetMBA 2007). Using SWOT analysis, two companies, Smith and White Corporation and Makatume Corporation, will be analyzed to address specific strategic management concerns. For Smith and White Corporation, a strategy shall be recommended to address one specific weakness, with brief recommendations for implementation and evaluation, as well as notes on ramifications. For Makatume Corporation, a strategy shall be recommended to address the higher voltage issue without proposing a shift to higher voltages production. S&W SWOT Analysis Smith & White Corporation (S&W) is a very large and aggressive domestic manufacturer of a full line of moderate quality professional and consumer tools. It is a multi-national conglomerate that has dominant shares in all the markets in which it operates. S&W's strengths include: (1) Its aggressive company culture. It uses massive amounts of national advertising to maintain and build brand equity which has made the company a multinational conglomerate with dominant market shares in the markets it operates in. (2) Its operational capacity. S&W has the capacity to manufacturer a full line of power tool products for both professional and consumer markets, at levels which are sufficient to fill high end-consumer demand. (3) Its dominant market share. S&W has achieved dominance in all the markets it operates in because it is able to sustain high consumer demand through massive advertising. (4) Its huge financial resources. S&W is a multinational conglomerate, enjoying dominant shares in all markets it operates in, able to command higher prices due to high consumer demand. (5) Its operational efficiency. Because of the current dominance it enjoys due to high consumer demand, retailers are compelled to stock S&W products. S&W is able to forecast production requirements better with advanced order placements. Due to the support of retailers, it is able to take advantage of co-op advertising and cross promotion. (6) Its brand equity. S&W's brand awareness is high because of its massive advertising which has resulted in high consumer demand. Moreover, it uses the same brand for all its products, resulting in high brand equity in both professional and consumer markets. S&W's weaknesses include: (1) Its company image among distributors. Due to its dominant position, there is a perceived abuse of the company's dominant market position. (2) Its company organization. Due to its huge size, S&W is unwieldy and is not able to readily react to changes in the market environment. (3) Its brand awareness. Although S&W, on the whole, enjoys high brand equity, there is confusion within the market between its professional and consumer tools. (4) Its operational efficiency and finances, with regard to the high costs of production because its old manufacturing plants are located in high labor cost urban areas. (5) Its moderate quality products. Although this is also a strength, because moderate quality would tend to mean moderate price, thereby appealing to a larger market segment, it is also a weakness, in that it doesn't address the needs of high-end product consumers. Opportunities in the external environment which S&W may be able to take advantage of include: (1) New and more customers. With S&W's experience and the dominance it has achieved in its existing markets, there would be opportunities in opening up new markets. (2) Market trends. There is opportunity in going into the market for cordless tools which means an entirely new product line variation for S&W's existing line. This new products can even increase market size because they would serve a different need. (3) Competition. Due to its size, dominance and brand equity, there is opportunity for S&W to enter a new product market such as cordless tools and grab market share from current players in the cordless tool market. (4) Partners. With its success in its relationships with retailers, there is opportunity for S&W to expand its retailer network. (5) New technology. Aside from cordless technology, S&W, with its size and financial resources can easily look into new products for the power tool market through research and development. They would be able to easily identify new market requirements and develop appropriate products for those. Threats which S&W may have to address include: (1) Customers and their confusion between professional and consumer tools. Such confusion as it grows would need to be checked as S&W may lose out on its market share. (2) Competitors. With S&W's success, there would be more competitors wanting to replicate their business practices as well as new entrants both domestically and internationally who would want to enter S&W's existing markets. S&W must implement strategies to help ensure its continued market dominance. (3) Market trend for demand of cordless tools. S&W must formulate its strategy to address the growing demand for cordless tools. Failure to do this not only results in S&W's inability to take advantage of this opportunity, there is also the threat that existing consumer's may shift to cordless tools and take away market share from S&W. (4) Partners. The negative feelings of distributors due to perceived abuse of dominant market position of S&W need to be resolved to prevent partners from withdrawing their support for S&W's products. (5) New technology. S&W must resolve its problems of being unwieldy due to size. The issue of cordless tools, wherein S&W has no presence or capacity to produce should be addressed. Other new technology ramifications must be looked into. New technology may make current production facilities obsolete which would be a great loss for S&W, considering its huge operations. One of S&W's weaknesses stems from market confusion between its professional and consumer tools. The recommended strategy to address this weakness is a re-branding strategy. The objective of the strategy is to eliminate the confusion between professional and consumer tools. Implementation. While maintaining the S&W brand, sub-brands will be introduced for the professional and consumer product lines, such as S&W/Industrial and S&W/Personal Power. This will make the particular product line brand easily recognizable when encountered in advertising. It will differentiate power tools as being for professional or consumer use and justify pricing. It will also facilitate customer referrals according to the type of customer and the need that has to be served. The re-branding strategy shall be implemented using new logos and advertising messages. The new re-branded name shall be depicted in a logo with a look that will appeal to the market segment being targeted. Appropriate slogans will also be developed along with the logo. Marketing and advertising messages and collaterals shall be produced which appeal to the specific segment. The important objective is to create an S&W image that is relevant to the particular market segment, whether professional or consumer. It should be clear in what it stands for, such as reliability and durability for professionals; and ease of use for consumers. It should also offer points of differentiation from competition. With separate brands, for professionals and customers, competitors in each area would also be more specifically addressed (Pullig, 2008). Ramification. One ramification of the re-branding strategy may be some taking away from the brand equity of the S&W brand as a whole. But this may be addressed by keeping the S&W brand present in the re-branded names so that the new logos can also take advantage of S&W's current brand equity. Another ramification may be closer evaluation of customers of S&W's products against competing ones. Since marketing and advertising messages will be more focused to target customers, more direct comparison can be done by customers. S&W must ensure that its products continue to perform in terms of customer satisfaction, even with the re-branding. Evaluation. The weakness identified was done so presumably from existing data and information. Effectiveness of the re-branding strategy should be measured against data after its implementation. These data should include product sales and the number of customer queries related to the confusion. These data items should be monitored during the launch of the re-branded names and the period after that. Increased sales and decreased queries would signify that the strategy and the implementation plan have worked. Decrease in sales or lack of movement may mean that the strategy is not working or that changes need to be incorporated in the implementation plan. Makatume SWOT Analysis Makatume is a Japanese powerhouse manufacturer of professional tools, which are highly regarded by tradesmen for their quality, robustness, and durability. It controls over 50% of the Japanese market and has become the second biggest player in the U.S. market. Makatume's strengths include: (1) Its company image with respect to tradesmen. The professional tools it manufactures and markets are highly regarded by professionals for their quality, robustness and durability. (2) Its position in the experience curve in so far as cordless professional tools are concerned. This is a result of Makatume's early entry into this sector of the professional tool industry. (3) Its operational efficiency with its strong cost position because of relatively new manufacturing plants. (4) Its operational capacity which is able to serve 50% of the Japanese market, 70% of the cordless tool market and the U.S. market wherein Makatume is the 2nd biggest supplier. (5) Its brand awareness especially for its cordless professional tools. (6) Its market share of 50% of the Japanese market, 70% of the cordless tool market and its being the 2nd largest supplier to the US market. Makatume's weaknesses include: (1) Its company image which is limited to the professional market. It is not known as a producer of power tools for consumers. (2) Its manufacturing facilities are locked into low voltage tools. Currently, Makatume cannot address requirements for high voltages. (3) Its manufacturing capacity is limited by the plants in Japan. To sell internationally, they would have to export products and deal with foreign currency exchange rates. (4) Its brand awareness is limited only to professionals. The brand is not known to general consumers. (5) Its financial resources are affected by foreign currency rates when it exports its products outside Japan. Opportunities for Makatume, which are present in the external environment include: (1) New customers and new markets. With its success in Japan in the United States, it can look into expanding its Japanese and international market. (2) Competing domestic and foreign niche markets hold less than 5% share each. Makatume, with its current dominance can easily appropriate these small markets. (3) The fast growing demand trend for cordless tools is an opportunity that Makatume should not let pass. It has the competitive advantage of even monopolizing this market because of its current dominance from market experience brought about by its early entry into this sector. (4) Developments in battery efficiencies should be an opportunity for new products and new markets. Makatume already has experience in low voltage batteries which have been widely accepted and this experience should be useful in developing higher voltage tools. (5) The benefits from currently favorable exchange rates should be maximized. Makatume should maximize exportation while exchange rates are favorable. Threats to Makatume include: (1) Domestic and foreign niche competitors. Although they currently hold less than 5% market share, these competitors should be watched lest they grab share away from Makatume. (2) Growing strength of consumer tools from China due to low price and good value should be watched. China may also start producing professional tools with low price and good value. (3) Customers may switch to Makatume's competitors. If and when China produces professional tools at lower prices than Makatume's, this would be a threat to the company. If Makatume does not produce high voltage tools which may be more salable to Makatume's current customers, they would switch to another brand which does. (4) The advances in battery efficiencies is a threat to Makatume because it is not ready to take advantage of this new technology and may lose out on its market share. (5) The threat of unfavorable exchange rates in the next two years, forecasted by economists, will affect Makatume's exports to the United States. One of Makatume's weaknesses is that it is locked into production of low voltage cordless tools. This is a weakness because it prevents the company from taking advantage of new technologies in battery efficiencies which allow for higher voltages. This weakness might be exploited by competitors with the introduction of higher voltage products which may take away market share from Makatume. Makatume cannot readily go into high voltage tool production because this would entail costs for setting production facilities for such products. The recommended strategies are the following: (1) Temporarily disregard the opportunity/threat of new technology in battery efficiencies. (2) Counteract possible adverse effects of (1) by strengthening strategies exploiting strengths in low voltages, cordless technology, brand awareness and exports. (3) Monitor the progress of high voltages with the performance of competitors and if lucrative, then go into high voltages. Implementation. Using Makatume's current strengths of market share, it should increase its share of the professional market in Japan to more than 50%. This can be done through increased advertising and finding more distribution channels for its products. It can also increase its export market by finding new markets other than the United States, especially those where currency exchange rates would be favorable to Makatume. It can also increase its overall market share with the production of tools that can be marketed to non-professionals, yet using operational efficiencies and capacities already existing for the professional tools. Consumer tools can be marketed both in Japan and in other countries. Low voltage cordless tools should also be marketed to consumers, which can start competing with the consumer tools being sold from China. Targeting a new segment such as consumers would require Makatume to implement appropriate marketing, advertising and distribution plans. Ramification. The negative ramification of the wait and see attitude toward high voltages is that Makatume would not have pioneer advantage. However, the positive ramification is that it can first assess market acceptance of the new technology before deciding to invest huge finances into the change. With its current market leadership in the professional market, the cordless tool market and the low voltage market, it would have sufficient brand equity to be able to grab a significant market share in the high voltage market when it decides to do so. This being the case, industry trends should be monitored so that strategies and plans to go into high voltage tools production can be implemented when the timing is right. Evaluation. With the situation being that there is impending threat from high voltage products, data should be gathered on the current industry and Makatume's situation. Sales data should increase with the increase in advertising and distribution efforts as far as professional tools and the introduction of consumer tools are concerned. Competitor sales analysis should be conducted to determine if Makatume's sales increase offsets the gains of competitors from high voltage products. Appropriate adjustments to the implementation plans should be done if such is not the case. If and when competitor sales of high voltage products become increasingly significant, then the Makatume's plan to get into the market should be put into motion. Conclusion The SWOT analysis conducted for S&W Corporation and Matakume should be helpful to Able Corporation in formulating its own strategies and strategic plans to more successfully address the threats presented by these competitors. From limited information available, Able Corporation can deduce that both S&W and Makatume, although threats because of their market dominance have problems of their own. Competitors' weaknesses would be another companies opportunities. Having identifies these in its competitors, Able Corporation should be able to formulate strategies to take advantage of the situations presented. Reference List NetMBA. (2007). The strategic planning process. NetMBA Business Knowledge Center. Retrieved August 23, 2008, from http://www.netmba.com/strategy/process/ Pullig, C. (June 2008). What is brand equity and what does the branding concept mean to you Keller Center Research Report. Retrieved August 23, 2008, from http://www.baylor.edu/business/kellercenter/index.phpid=55735 Part II: Philip Morris' Environmental Strategic Initiative (5-7 paragraphs) Introduction The Altria Group is the parent company of Philip Morris USA, John Middleton and Philip Morris Capital Corporation. Philip Morris USA is the largest tobacco company in the United States, with 50% share of the U.S. cigarette market. John Middleton is a leading manufacturer of machine-made cigars. Philip Morris Capital Corporation' deals with direct finance lease investments. Additionally, the Altria Group partly owns SABMiller plc., a large brewer. According to the Altria website, "Altria Group is committed to reducing the environmental impact of its businesses and promoting the sustainability of the natural resources upon which they depend. Philip Morris USA has established policies and procedures to manage the environmental impact of its business activities in order to meet its compliance obligations. PM USA has also worked to benchmark and improve its environmental performance, set priorities for the future, and identify opportunities to collaborate more effectively with key environmental and agricultural stakeholders." In order to make good on this commitment, Philip Morris USA proclaims that one important measure of its business is its impact on the environment. PM USA says that it actively seeks ways in minimizing its impact on air emissions, specifically carbon dioxide; energy usage; water, including consumption and nutrient discharge in wastewater; and solid waste generation. In its website, PM USA publishes site assessments of its facilities in terms of goals and progress using 2004 data as baseline. It keeps these assessments up to date even to the current year, 2008 (PM USA, 2008). On the surface, the commitment of Altria and Philip Morris to the environment is very commendable because not many companies exhibit the same level of commitment to the environment. If more companies would take their example, the world would be a better place to live in and would be better preserved and conserved for future generations. However, coming from a company whose business is made from providing products which have already been proven harmful to human beings, the commitment, albeit commendable, is suspect as being merely a strategy to counteract weaknesses and threats. According to Madeley (1999), tobacco production damages the environment. The land used for growing tobacco gets destroyed or degraded which also affects nearby farms. When forests are cleared in favor of tobacco production, the benefits of forests to prevent soil erosion and floods are lost. Since tobacco leaves are cured using wood, the process also contributes to depletion of this resource. The tobacco plant needs lots of water which wastes this important resource. The plant also requires use of harmful pesticides to ensure well developed leaves. Taking a look at the environmental commitment of Altria and the above effects of tobacco production to the environment, there seems to be a mismatch of environmental impact and the proclaimed commitment. All that PM USA has published are environmental measures for its processing facilities. They do not address the environmental impact on the tobacco fields, nor the use of wood in the curing process. Therefore, the commitments will in no way offset the environmental issues with the tobacco company. Moreover, according to the World Health Organization (2008), tobacco smoking has been the cause of actual damage to the environment. Fires caused by smoking have caused 10% of all fire deaths, killing 300,000 people, costing $27 billion. In 1987, the worst forest fire in the world happened in China, killing 300 people, making 5,000 homeless, and destroying 1.3 million hectares of land. The fire was caused by smoking. Such forest fires result in more carbon dioxide released into the atmosphere exacerbating the problem of climate change. The resources required to make cigarette lighters and package them, to box and package tobacco use non-biodegradable material such as plastics which destroy the environment or organic material such as wood and paper which can be put to better use, considering the vast quantities required in the tobacco industry. It is therefore, almost certain that Altria's strategic reasons for its environmental initiatives are to draw attention away from the environmental issues against tobacco companies, to help repair the damage done to the company image because of environment issues, and to justify their continued existence and maintain consumer patronage of their products despite environmental issues. On the overall, as long as Altria's companies continue to generate good business from its operations, the environmental impact of these companies will continue to persist. So, it is also good that Altria has defined its environmental commitment and adheres to it, rather than no commitment at all. Reference List Altria. (2008). Environment and agriculture. Retrieved August 23, 2008, from http://www.altria.com/responsibility/4_6_environmentagriculture.asp Philip Morris USA. (2008). Reducin our environmental impact. Retrieved August 23, 2008, from http://www.philipmorrisusa.com/en/cms/Responsibility/Reducing_Our_Environmental_Impact/default.aspx Madeley, J. (1999). Big business poor peoples; the impact of transnational corporations on the world's poor. Zed Books. In Global Issues. Tobacco by Anup Shah, July 2, 2008. Retrieved August 23, 2008, from http://www.globalissues.org/article/533/tobacco WHO. (2008) The Tobacco Atlas. Retrieved August 23, 2008, from http://www.who.int/tobacco/resources/publications/tobacco_atlas/en/ Read More