Case Study: SWOT Analysis

What is SWOT Analysis?

            “The SWOT analysis is a valuable step in your situational analysis. Assessing your firm’s strengths, weaknesses, market opportunities, and threats through a SWOT analysis is a very simple process that can offer powerful insight into the potential and critical issues affecting a venture. It begins by conducting an inventory of internal strengths and weaknesses in your organization. You will then note the external opportunities and threats that may affect the organization, based on your market and the overall environment. Don’t be concerned about elaborating on these topics at this stage; bullet points may be the best way to begin. Capture the factors you believe are relevant in each of the four areas. You will want to review what you have noted here as you work through your marketing plan. The primary purpose of the SWOT analysis is to identify and assign each significant factor, positive and negative, to one of the four categories, allowing you to take an objective look at your business. The SWOT analysis will be a useful tool in developing and confirming your goals and your marketing strategy”, stated by TIM BERRY on his article “How to Perform SWOT Analysis”.

           

            Truly, SWOT analysis is a great help for businesses in determining some good points to empower its foundation in a competitive world of business. Lots of businesses were big time nowadays through consistent analysis of the strengths, weaknesses, opportunities and threats that may come along throughout the business. It will serve a good guideline for business minded people on putting up a good business that will last for years. And to understand more about SWOT analysis, let’s take the case study done in Hal’s Hardware, Inc.

Hal’s Hardware, Inc.

            Hal Dovan is the president of Hal’s Hardware, Inc (HHI), a regional chain of 14 hardware stores located in Michigan, Ohio, and western Pennsylvania. HHI currently has a website that includes information about the company and some store information, such as locations and hours. Hal is thinking about expanding the HHI Web site to include online shopping. He believes that HHI customers might find the Web site to be useful way to order items, see whether items are in stock at the nearest store, and comparison shop among different brands of a particular item. Hal is also hopeful that the Web site can reach customers that are not located near an HHI store. Many of the items sold at HHI are small and have value-to-weight ratios, so they have a good delivery service shipping profiles. Hal has decided that not all of HHI’s inventory items should be available for sale on the Web site. Item such as wheelbarrows and live plants would probably be among the types of products that should be excluded. Hal does not want customers to be able to order these items on the Web and pick them in the store, however.

            HHI enjoys an excellent reputation as a chain of friendly neighborhood stores. The store managers are all active in their communities and the stores regularly sponsor youth sports teams and support local charities. When hired, salespeople go through a comprehensive training program that includes skill training in the areas of the store in which they will work (plumbing, electrical, power tools, flooring, garden, and so on), and they are trained in customer service skills. As a result of HHI’s focus on service, most of the stores have become community gathering places.

          On Saturday afternoons, the stores are full of woodworking hobbyist, gardeners, and customers planning weekend projects of various kinds. On weekday mornings, electricians, plumbers, remodelers and construction constructors stop for the free coffee that the HHI offer when they open at 6:00 a.m. Each HHI store maintains a bulletin board next to the coffee urn in the constructors’ area. Constructors can place help wanted or job wanted notices on the bulletin board. They can also place ads to buy and sell used equipment there. Many of HHI’s regular customers obtained their current jobs through those bulletin boards.

            HHI store offers classes and workshops for the homeowner and hobbyist three evenings each month and regularly schedule seminars are underwritten and taught by manufacturers to promote their products, but an increasing number are being created by HHI staff members.

          HHI’s stores all face serious competition from national hardware chains such a Home Depot and Lowe’s. These national chains have opened many new stores during the past few years, and they are larger, carry more items, and offer lower prices on some items. The competition is fierce; for example, all HHI stores have closed their lumber departments because of this competition. The national chains buy lumber in such large quantities that they can offer far lower prices. HHI was unable to earn profit when matching the large competitor’s prices and the lumber operations consumed a large amount of store space. Hal is worried that this sort of problem could develop on other departments, so he is always looking for ways to add value to the HHI customer experience, especially ways that the national chains are not willing or able to do. For example, Hal believes that most people want to try out a new power tool in person before they spend hundreds of dollars on a purchase. Thus, every HHI store has a tool demonstration area that is always staffed with salespeople who are experts in power tool operation. For each major type of power tool (drills, power saws, joiners, grinding tools, and so on), HHI has created a small booklet of hints for using that type of tool. HHI gives these booklets to customers as free handouts. HHI also sells its own low-cost instructional videotapes and DVDs.

            Hal is also concerned about competition from other sources as well. Some of the tool manufacturing companies are talking about selling directly to customers on their Web sites. None of HHI’s major suppliers has done this yet, but Hal is worried that it could occur in the future.  HHI also faces competitions from companies such as Outlet Tool Supply, Tool Crib, Southern Tool, and Tool Crib of the North, which has formed an alliance with Amazon.com to appear on its Web site.

            HHI buys most of its inventory directly from the manufacturers, but it does buy some items from distributors. Most items are shipped to one of HHI’s three warehouses, but some items are shipped directly to the store locations. HHI has a new companywide inventory control system that was just installed last year at a cost of about $200,000. This information system monitors inventory in real time. When a new shipment arrives at an HHI store, it is entered into the system on the receiving dock. Each item is bar coded so it can be tracked as it moves from the receiving dock to the warehouse to the store shelf and, finally, out the door past a point-of-sale terminal (which Hal still calls a cash register). This inventory-tracking system is accessible through a Web browser and can be connected to a Web site, so HHI could sell inventory from its existing warehouses and stores through the Web. The cost for the software is $42,000, including installation and configuration.

SWOT Analysis

Strength

ü  Expanding the Web site

• Hal’s plan of expanding official Web site for their business is such a good idea. This certain strategy will definitely allow of reaching the customers who are even far from their stores. It will showcase most of the inventory items that their company offers and will allow an online shopping. Good thing with it is that through this, customers will find it easy to know their available products even before going to their stores. That is indeed no hassle for most of their valued customers.

ü  Delivery Shipping Profile

•  Hal’s Hardware Inc. (HHI) has a good profile on delivery shipping performances. This has become one of their edges to promote a good quality service. With this alone, it will put up a good relationship to customers in terms of trust. Upon providing best performance on deliveries will generate a continuous profit for them.

ü  Reputation as a Chain of Friendly Neighborhood stores

•  Another advantage of HHI is that they have already an excellent reputation as a chain of friendly neighborhood stores. For instance, in recent years, their managers usually sponsor youth sports teams and support local charities. Their salespeople  go through a comprehensive training program that includes skill training in the areas of the store in which they will work (plumbing, electrical, power tools, flooring, garden, and so on), and they are trained in customer service skills. And as a result of HHI’s focus on service, most of the stores have become community gathering places.

ü   Inventory Control System

• HHI has a new companywide inventory control system that will monitor inventories at real time. When a new shipment arrives at an HHI store, it is entered automatically into the system on the receiving dock. It is good investment because it is accessible through a Web browser and can be connected to a Web site, so that HHI could sell inventory from its existing warehouses and stores through the Web.

Weakness

ü  Limited Inventory Items on Web site

• Since HHI showcases their products online, it would be a problem for them to allow showcasing some of their inventories like live plants. Though they provide a good service on delivery and shipping, it would be hard for them to include this product. It is because it may not be as good as the customers expected it when it arrives. Limitations to some of inventories may cause a decline on the profit of the company.

ü  Matching the Large Competitors’ Prices

• There is a serious competition that HHI may face from national hardware chains. The national chains buy lumber in such large quantities that they can offer far lower prices. With this, HHI was unable to earn a profit when matching the large competitors’ prices and the lumber operations consumed a large amount of store space. And this sort of problem could be developed on other departments.

Opportunity

ü  Offers Classes and Workshops

• HHI store offers classes and workshops for the homeowner and hobbyist three evenings each month and regularly schedule seminars are underwritten and taught by manufacturers. Through this, it will generate a good companionship among the manufacturers and consumers. In addition, this would also promote the manufacturers’ products. So eventually, it will lead to increase their revenue.

ü  Try out a New Power Tool

• Aside of providing a good workshop, HHI plans to generate a good profit out from their new strategies like allowing the customers to try out a new power tool in person before they spend hundreds of dollars on a purchase. With this, HHI must have a tool demonstration area that is always staffed with salespeople who are experts in power tool operation.

Threats

ü  Competition from National hardware chains

• Since HHI is planning to expand of reaching their valued customers, it will be a threat for them to compete with big time manufacturers. Because, nowadays, these big manufacturing companies have already put up an alliance to some of the well-known Web sites to promote its products.

ü  Direct selling through Web sites of Tool Manufacturing companies

• From the time when the HHI will sell some of its product through online, they cannot compete with some other manufacturers who actually do the “direct selling” through Web sites. And again, this would be risky for the HHI to gain a big profit.

Recommendations:

Expanding Partnership

            There is a need for expanding partnership with other manufacturers. This is to be able to bid for lower prices of products from business partners, and eventually sell these products to consumers at a lower cost.

Online Membership

            There is a necessity for regular customers to sign up for membership on the HHI official Web site that will allow online shopping, consultations, and feedbacks. Through this, the company will be able to monitor the trend of business to meet the needs of their valued customers.

Promos, Freebies, and Discounts

            To gain more customers is through giving promos, freebies or discounts for regular costumers. This is just to catch number of customers to consume lots of products at a very low price.

CONCLUSION

            Base on the given case of Hal’s Hardware, Inc., they were strong on putting up a good relationship with their valued customers which is a good foundation. But the problem is that they cannot provide a cheaper price for some products because of the competition between manufacturers. Therefore they must take the given SWOT analysis and do some research so that they will come up into a better guideline solution and have an idea on what to do to make the company last for years.

REFERENCE

Berry, T., n. d., ’How to Perform SWOT Analysis’, viewed 6 July 2010,

Available at: < http://articles.bplans.com/business/how-to-perform-swot-analysis/116>