A SWOT analysis is a framework that is used to analyze a company’s competitive positioning in its business environment. This can be used by Veem Ltd, and will involve the identification of its internal Strengths (S) and Weaknesses (W) followed by the identification of the Opportunities (O) and Threats (T) it faces in its extensivelyrnal business environment.
Veem Ltd is among the leading firms within its industry, and it needs to retain this position. is carefully reviewing its SWOT analysis and using it to make strategic decisions. For a SWOT analysis to be conducted of the firm, an interactive process needs to be undertaken by coordinating among all the departments of the firm such as finance, marketing, operations, human resource, logistics, strategic planning, management information systems etc.
A SWOT matrix is a 2x2 matrix that has the internal strategic factors listed in the first row; Strengths and Weaknesses. It has the external strategic factors listed in the second row; Opportunities and Threats. This SWOT strategic framework allows company managers to easily view all of the company’s strengths, weaknesses, opportunities and threats in one matrix.
The SWOT analysis matrix helps in the development of 4 types of strategies by managers. These are:
- Strengths-Opportunities Strategies (SO): This involves using internal strengths to take advantage of opportunities.
- Weaknesses-Opportunities Strategies (WO): This involves improving on the company’s weaknesses by making use of the opportunities.
- Strengths-Threats Strategies (ST): This involves the using of strengths to minimize the weaknesses.
- Weaknesses-Threats Strategies (WT): This involves the elimination of weaknesses to combat the threats.
The main objective of the SWOT analysis is to help in identifying the strategies that can be used by the company to build on its strengths, eliminate its weaknesses while making the most of opportunities and countering threats.
SWOT Analysis of Veem Ltd
Strengths of Veem Ltd
- Distribution and Reach: Veem Ltd has a large number of outlets in almost every state, supported by a strong distribution network that makes sure that its products are available easily to a large number of customers in a timely manner.
- Cost Structure: Veem Ltd’s low cost structure helps it produce at a low cost and sell its products at a low price, making it affordable for its customers.
- Dealer Community: Veem Ltd has a strong relationship with its dealers that not only provide them with supplies but also focus on promoting the company's products and training.
- Financial Position: Veem Ltd has a strong financial position with consecutive profits in the past 5 years, along with accumulated profit reserves that can be used to finance future capital expenditures.
- has a large asset base, which provides it with better solvency.
- Return on Capital Expenditure: Veem Ltd has been successfully able to generate positive returns on the capital expenditure it has incurred on various projects in the past.
- Automation: of various stages of production has allowed the more efficient use of resources and reducing costs. It also allows for consistency in quality of its products and provides the ability to scale up and scale down production as per the demand in the market.
- Skilled Labor force: Veem Ltd has invested extensively in the training of its employees that has resulted in it employing a large number of skilled and motivated employees.
- has a diversified workforce, with people of many geographical, racial, cultural and educational backgrounds that help the company by bringing in diverse ideas and methodologies of doing things.
- has qualified and accredited professionals working under in its team.
- Entering new markets: Veem Ltd’s innovative teams have allowed it to come up with new products and enter new markets. It has been successful in past, in most of the initiatives it has taken in new markets.
- Social Media: Veem Ltd has a strong presence on social media with more than millions of followers on the three most famous social media platforms: Facebook, Twitter and Instagram. It has high levels of customer engagement on these platforms with low customer response time.
- Website: Veem Ltd has a well-functioning and interactive website that draws a large number of internet traffic and sales.
- Product Portfolio: Veem Ltd has a large product portfolio where it provides products in a large range of categories. It has a number of unique product offerings that are not provided by competitors.
- The geography and location of Veem Ltd provide it with a cost advantage in serving its customers, when compared to that with the competition.
- Veem Ltd has a well-established IT system that ensures efficiency in its internal and external operations.
- Veem Ltd owns a number of intellectual property rights that include trademarks and patents. These allow it exclusivity over its products and competitors cannot copy or reverse engineer them.
- Veem Ltd is a brand that has been in the market for years, and people are aware of it. This makes its brand awareness high.
- Its products have maintained quality over the years and are still valued by customers, who find it as good value for the amount of money that they pay.
- Partnerships: Strategic partnerships are established by Veem Ltd with its suppliers, dealers, retailers and other stakeholders. This allows it to leverage them if need be in the future.
Weaknesses of Veem Ltd
- Research and Development: Even though Veem Ltd is spending more than the average research and development expenditure within the industry, it is spending way less than a few players within the industry that have had a significant advantage as a result of their innovative products.
- High Day Sales Inventory: The time it takes for products to be purchased and sold are higher than the industry average, meaning that builds up on inventory adding unnecessary costs to the business.
- Rented Property: A significant proportion of the property that Veem Ltd owns is rented rather than purchased. It has to pay large amounts of rent on these adding to its costs.
- Low current ratio: The current ratio that shows the company’s ability to meet its short term financial obligations, is lower than the industry average. This could mean that the company could have liquidity problems in the future.
- The company has low levels of current assets compared to current liabilities, and this can create liquidity problems for it in operations.
- Cash flow problems: There is a lack of proper financial planning at Veem Ltd regarding cash flows, leading to certain circumstances where there isn’t enough cash flow as required leading to unnecessary unplanned borrowing.
- Integration: Veem Ltd's current structure and culture have resulted in the failure of various mergers aimed at vertical integration.
- Diversification in the workforce: The workforce at Veem Ltd is concentrated with mostly local workers, and low amounts of workers from other racial backgrounds. Lack of diversification makes it difficult for employees from different racial background to adjust at the workplace, leading to loss of talent.
- Market Research: Veem Ltd has not conducted market research within the market that is serves since the past 2 years. As a result, it is making decisions based on 2 years old data, while customer needs may have evolved over time.
- High employee turnover rates: Veem Ltd has a higher employee turnover rate compared to competitors. This means that it has more people leaving the job, and as a result, it is spending more on training and development as employees keep leaving and joining.
- Quality Control: Veem Ltd has a lower budget for its quality control department than competitors. This leads to lack of consistency and the possibility of damage to quality across its various outlets.
- Lack of legal experience and legal department employees are not highly qualified.
- A few products have a high market share, while most of the products have a low market share. This reliance on a few products makes vulnerable to external threats if these few products suffer for any reason.
- The workload is a high per worker as there are fewer workers than the actual work required. This puts workers under psychological stress and is likely to be less productive.
- Worker morale is low due to company culture and politics that have grown in recent years.
- Competition and qualified employees have been leaving the organisation in recent years, which could mean a shortage of good talent for the company in the upcoming years.
- The decision making is highly centralized, and decisions by teams need to be approved by certain officials. This reduces efficiency in operations by making them more time consuming. It also leads to reduced innovation.
- The performance appraisal is not in a systematic manner. People are often not appraised for their performance. This leads to lower work morale and lack of promotion opportunities for employees.
Opportunities of Veem Ltd
- Internet: there has been an increase in the number of internet users all over the world. This means that there is an opportunity for to expand their presence online; by using the internet to interact with its customers.
- E-commerce: There has been a new trend and a growth in sales of the e-commerce industry. This means that a lot of people are now making purchases online. Veem Ltd can earn revenue by opening online stores and making sales through these.
- Social Media: there has been an increase in the number of social media users worldwide. The three social media platforms; Facebook, Twitter and Instagram, have shown the greatest number of increase in monthly active users. Veem Ltd can use social media to promote its products, interact with customers and collect feedback from them.
- Technological developments: technology comes with numerous benefits among many departments. Operations can be automated to reduce costs. Technology enables better data to be collected on customers and improves on marketing efforts.
- There has been an increase in average household income along with an increase in consumer spending following the recession. This will result in growth in Veem Ltd’s target market with new customers that can be attracted towards the business.
- Population: the population has been growing and is expected to grow at a positive rate for the upcoming years. This is beneficial for Veem Ltd as there will be an increase in the number of potential customers that it can target.
- Inflation: The inflation rate has been low and is expected to remain low in the next two years. This is an opportunity for as its cost of inputs would remain low for the next two years.
- Interest rate: Lower interest rates than compared to previous years provides an opportunity for Veem Ltd to undergo expansion projects that are financed with loans at a cheaper interest rate.
- Green government drive: this provides an opportunity for Veem Ltd for the sale of Veem Ltd's products to federal and state government contractors.
- Transport Industry: the transport industry has been flourishing in the past few years, and shows growth potential in the future. This has reduced the costs of transportation, which is beneficial for Veem Ltd as it will lower its overall costs.
- Tax policy: the governments’ reduction in tax rate is beneficial for Veem Ltd as a lower amount would be expensed out as a tax.
- The government has also announced a subsidy on the sale of environmentally friendly goods in this sector. Veem Ltd can focus on these environmentally friendly products and make use of this opportunity.
- Tourism: growth in tourism is beneficial for Veem Ltd as it will provide new potential customers that it can target in order to gain market share.
- Skilled workers: increase in education and training by numerous institutes has increased the amount of skilled labor available within the country. This means that if Veem Ltd is able to hire skilled labor, it would have to spend less on training and development, therefore, saving costs.
- The growth in consumer spending in the economy is likely to increase consumption for Veem Ltd's products.
- A number of new niche markets have opened up that are growing. Veem Ltd can sell products in these markets and take advantage.
- Globalisation: Increased globalisation does not restrict Veem Ltd to its own country. It can extend its operations to other countries, entering into these markets and making use of the opportunities that lie in these markets.
- Consumers within the industry are becoming more conscious of health, and this is a segment that is growing. Veem Ltd can take advantage by manufacturing products that are beneficial to customer's health.
- Trade barriers have been reduced on the import of goods. This will reduce the costs incurred on inputs for production.
- Regulations have loosened in recent years making it easier for businesses to carry out their operations.
Threats of Veem Ltd
- Technological developments by competitors; New technological developments by a few competitors within the industry pose a threat to as customer attracted to this new technology can be lost to competitors, decreasing Veem Ltd’s overall market share.
- Suppliers: The bargaining power of suppliers has increased over the years with the decrease in the number of suppliers. This means that the costs of inputs could increase for Veem Ltd.
- New entrants: there have been numerous players that have entered the market and are gaining market share by gaining existing companies’ market share. This is a threat to Veem Ltd as it can lose its customers to these new entrants.
- Increasing competition: there has been an increase in competition within the industry putting downward pressure on prices. This could lead to reduced revenue for Veem Ltd if it adjusts to the price changes, or loss of market share if it doesn’t.
- Exchange Rate: the exchange rate keeps fluctuating and this affects a company like Veem Ltd that has sales internationally, while its suppliers are local.
- Political uncertainties in the country prove to be a barrier in business, hindering performance at times and making the business incur unnecessary costs.
- The fluctuating interest rates in the country do not provide a stable financial and economic environment.
- Consumer tastes are changing, and this puts pressure on companies to constantly change their products to meet the needs of these customers.
- Regulations on international trade keep changing, and this requires compliance by companies if they are to operate globally.
- Substitute products available are also increasing, which is threat collectively for the whole industry as consumption of current products decrease.
- The rise in prices of fuel has increased in the input costs for Veem Ltd. These costs have also increased as other industries that provide inputs for this company also have suffered from increasing fuel prices, thereby charging more.
- Increased promotions by competitors have been a threat for Veem Ltd. On most media, there is more clutter than ever, and customers are bombarded with multiple messages. This reduces the effectiveness of promotional messages by Veem Ltd.
- Constant technological developments require the workforce to be trained accordingly as the inability to keep up with these changes can lead to loss of business for Veem Ltd.
Limitations of the SWOT Analysis of Veem Ltd
Even though the SWOT analysis is an effective tool, it has certain limitations as well.
- Its major limitation is the fact that there can be an overlap of strengths and weakness, with a single factor being both a strength and a weakness. For example, a large number of outlets can be a strength in a growing economy or a weakness if the economy is going through a recession.
- The matrix is not an end as it does not show how to achieve the objectives. It should be used as a starting point to make strategic decisions.
- The assessment done through a SWOT analysis is a static one and does not take into consideration the changes that take place in the competitive environment.
- The factors listed down in a SWOT analysis may be overemphasized by the company.
- There are certain interrelationships between the internal and external factors that the SWOT Matrix overlooks.
Weighted SWOT analysis of Veem Ltd
In response to the above mentioned limitations, a weighted SWOT analysis can be conducted for Veem Ltd that involves assigning weightage to each of the strengths and weaknesses mentioned in the SWOT analysis for Veem Ltd. It also involves estimating the probability of an event occurring in the external environment. This allows managers to focus on the important factors, and give less consideration to the less important ones.
The limitation of the weighted SWOT analysis is that it does not look at how holistically different factors affect the business when combined.
Example of weighted SWOT analysis
For Veem Ltd, the strength for strong distribution can be given a higher weight than the strength for the skilled labor force.
Advanced SWOT analysis/SWOT Matrix
Veem Ltd SWOT analysis lists down the strengths, weaknesses, opportunities and threats to any organisation, but does not tell management what can be done by these. To overcome this limitation and help develop strategies that are appropriate, an advanced SWOT analysis or TOWS matrix is used. This lists down the Strengths-Opportunities (SO) strategies that involve using strengths to take advantage of opportunities. It lists the Strengths-Threats (ST) strategies that involve using strengths to fight of threats. It involves the Weaknesses-Opportunities strategies that involve converting weaknesses to strengths by using opportunities. Lastly, Weakness-Threats (WT) strategies involve overcoming weaknesses to avoid threats.
- Veem Ltd has a Strong Distribution network with a large number of outlets.
- It has a low-cost structure, which provides it with an advantage over the competition.
- It has a strong financial position with positive profits reported in the past few years. It also has a strong asset base.
- It has a skilled labour force that is highly qualified, innovative and diversified.
- It has a strong presence on social media.
- A high proportion of property in use by is on rent, and rental charges need to be paid.
- Low amounts of spending on research and development as compared to the competition.
- It has a high employee turnover rate, with low employee motivation and working morale.
- It has liquidity problems with low quick ratio; the level of current assets is less than current liabilities. It also faces cash flow problems.
- Internet users are increasing around the world. E-commerce is also growing with the increase in internet usage.
- Social media users are increasing worldwide.
- Household income is increasing and so is the consumer spending. Inflation in the economy is expected to remain low.
- Growth in environmentally friendly products and services. Government is offering subsidies on these.
- Interest rates are low, which provides an investment opportunity for large projects.
- Increase marketing to attract consumers to spend (S1, S3, O3).
- Use its presence on social media for marketing and to attract customer towards its website (S5, O2, O3).
- Develop environmentally friendly products through innovation, at a low cost so that they could be sold at a low price (S2, S4, O4).
- Market products at low prices by offering discounts. This would help increase sales in volumes and is feasible due to low inflation and cost (S2, O3).
- Finance ownership of the property through low interest rate to increase the proportion of owned property to rented property (W1, O5).
- Increase payrolls, provide incentive packages and benefits to employees to reduce turnover and improve work morale. This could be possible as costs are low currently. (W3, O3)
- There is a threat of new entrants coming into the market.
- The exchange rate has been devalued.
- Fuel price has risen in recent years making inputs expensive.
- Competition within the industry is increasing.
- More substitute products are now available.
- Use a strong distribution network to reach out to customers and fight off new entrants into the market (S1, T1).
- Use its strong financial position to invest in intellectual property rights. This would help compete with increasing competition in the market (S3, T4).
- Use its innovative teams to find cheaper alternatives to fuel so that these could be used, thereby reducing costs (S4, O3).
- Increase spending on research and development to enable Veem Ltd to better compete with competition (W2, T4).
- Provide incentives, increase engagement, or provide a better work environment to retain talent. This will ensure that employees don’t leave and join competitors (W3, T4).
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