Question
ToolsCorp Corporation is a fictitious company that does not exist anywhere. For the purpose of this course, it is located it in Tennessee. It builds power tools, lawn mowers, lawn furniture, microwaves, and ranges. All products are manufactured locally and sold through large retailers that place sales papers inserted in every Wednesday and Sunday paper. Although they have a thriving business in the United States and Canada, ToolsCorp is trying to break into the global marketplace.
- A complete strengths, weaknesses, opportunities, and threats (SWOT) analysis (including at least 5 factors from each category and full explanations of why each factor is important and why it was placed in the category) of the environment that exists within ToolsCorp and the environment that ToolsCorp is proposing
Answer
ToolsCorp Corporation SWOT Analysis
Strengths
Strong position in the U.S. and Canadian markets
This is one of the key strengths for ToolsCorp Company. ToolsCorp has established a strong presence in the U.S. and Canadian markets, which means the company has a strong footing in the local region. Having a strong position in the local region is important because it indicates the company’s potential to succeed even outside the local market. This factor was placed in this category because it relates to the company’s internal characteristics that promote its product marketability.
Strong brand portfolio
ToolsCorp has five different brands in the market. Products include lawn mowers, microwaves, power tools, lawn furniture, and ranges. Having such a diversified brand portfolio helps in satisfaction of consumers’ diverse needs. In addition, having such a brand portfolio attracts more customers to purchase the company’s products compared to when a company is offering a single product. Strong brand portfolio is an internal organizational characteristic, and thus falls under the strengths category.
Ease of expansion due to established business
It is easier for ToolsCorp to expand into the international market since the company has already established a local presence successfully. For instance, it will be easier for the company to project each product category demand in the international market by relying on sales figures from the local market. This factor was placed in this category since it is an internal strength of the organization.
Larger market for the products
Expanding into the international market will enable the company to expand operations by tapping into new and potential markets. By entering the global marketplace, ToolsCorp will have an unlimited market for its products. This factor was placed in this category because having access to international market will give the company an internal advantage to produce more products.
Human resource expertise
Since ToolsCorp has been in operation for some time, it has an experienced human resource team involved in the manufacture and marketing of various products. This team will be critical while expanding in the international market. This factor was placed in this category since it is a factor within the company’s internal environment.
Weaknesses
Increasing bureaucracy in the company structure
Operating in a global environment will lead to increased bureaucracy in the management structure of the company. This could lead to high operational costs and inefficiencies. This factor is within the internal environment of the company, thus the reason it was categorized as a weakness.
Lack of business diversification
ToolsCorp operates in only one business segment, which is manufacturing. Failure to diversify operations into other business segments such as financial services means the company could be affected adversely if the manufacturing segment performs poorly. Failure to diversify is an internal factor that leads to certain disadvantages.
Limited presence in overseas market
Currently, ToolsCorp has limited presence in the international market, operating only in the Canadian market. This means that the company does not have the necessary experience for operating in various overseas markets such as China, Europe, Australia, and Africa. This factor is an internal factor limiting the company and thus categorized as a weakness.
Brand dilution
Since the company has a variety of brands, this contributes to brand dilution. Brand dilution is the weakening of a particular brand and may result when there is high brand extension such that consumers lose faith in some products. This can also result since the company will have to use different names for each brand of the product. Brand dilution is an internal factor, which the company has total control.
Weak distribution channel
Expanding into the international market may require the company to establish a new distribution channel for its products. Currently, the company relies on large retailers who may not have the capacity to distribute products to foreign markets. This is an internal disadvantage thus the reason it was categorized as a weakness.
Opportunities
Expansion into the international market
ToolsCorp can take advantage of an expanded market by targeting the international market. Focusing on the international market will present unlimited opportunities to increase production by targeting the new markets. This factor is an opportunity since it exists in the external environment of the company.
Stamp its presence in emerging economies
ToolsCorp can be able to take advantage of strong market growth in various emerging economies such as Brazil, Malaysia, China, Turkey, Kenya, and Nigeria. Targeting such markets can lead to a high demand of the company’s products and thus faster returns. This factor is within the external environment of the company and can facilitate its growth.
Use of e-commerce to reach the international segment
ToolsCorp can utilize e-commerce to reach the international segment at a cheaper cost. E-commerce in this case would involve the selling of various products through the internet. This platform can allow the company to reach a wider international audience using the least time and money resources. The factor is within the external environment of the company and provides a chance for growth, thus an opportunity.
Ease in penetrating international markets through joint ventures
Since the company has a large market share in the local market, it is easier to acquire other businesses in overseas countries and expand operations there. The company has adequate resources to engage in joint ventures or acquisitions. This factor is within the external environment of the company, thus a business opportunity.
Protection from trade cycles
Expanding into the international market will help protect ToolsCorp from trade fluctuations in the local market. When there is recession in the local U.S. market, the company can be able to offset the impacts by selling more of the products in other markets not affected by the local economic conditions. This factor is within the external environment of the company. Since the company can take advantage of the factor, it represents an opportunity.
Threats
Fluctuation in currency exchange rates
Targeting the international market will expose the business to certain risks such as currency exchange rate fluctuations, which could significantly affect the financial position of the business (Sweidan, 2013). For instance, a strengthening dollar against another currency could hamper exports to the country. This factor is a threat since it is within the external environment and presents a risk to the business.
Increased competition
One of the challenges that ToolsCorp might face is increased competition from other firms producing similar products in the international market. In overseas markets where another firm dominates the market, it could be difficult for ToolsCorp to gain a sizable share of the market. This factor is outside the control of ToolsCorp and creates a disadvantage, thus a threat.
Legal and political challenges
It could be difficult for the company to establish its presence in the international market especially where there is need to open operations in overseas countries. Legal and political factors may act as barriers to operating in international markets. These are factors that the company cannot be able to control and thus a threat.
Tough operating environment
The U.S. manufacturing industry has been on a decline owing to the high costs of doing business. This is partly due to new regulations such as imposing taxes on steel imports used in manufacturing (BBC News, 2018). Companies increasingly prefer moving operations to other areas such as Mexico where production costs are lower. This external factor has certain negative implications to the business, and thus a threat to the company.
Cultural barriers
ToolsCorp could face significant cultural barriers in international markets. For instance, certain cultures have unique ways of doing things and the people there may not necessarily prefer purchasing the company’s products. It could take long for the company to change the people’s culture. This is an external factor since the company has little or no control.
References
BBC News. (2018, May 31). US tariffs: steel and aluminum levies slapped on key allies. BBC. Retrieved from https://www.bbc.com/news/world-us-canada-44320221
Sweidan, O. (2013). The Effect of Exchange Rate on Exports and Imports: The Case of Jordan. The International Trade Journal, 27(2): 156-172.
Related: SWOT Analysis
