SWOT Analysis: Toyota, Starbucks,

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SWOT Analysis of Toyota

Strengths

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• New investment by Toyota in factories in the US and China saw 2005 profits rise, against the worldwide motor industry trend. Net profits rose 0.8% to 1.17 trillion yen ($11bn; .85bn), while sales were 7.3% higher at 18.55 trillion yen. Commentators argue that this is because the company has the right mix of products for the markets that it serves. This is an example of very focused segmentation, targeting and positioning in a number of countries.
• In 2003 Toyota knocked its rivals Ford into third spot, to become the World's second largest carmaker with 6.78 million units. The company is still behind rivals General Motors with 8.59 million units in the same period. Its strong industry position is based upon a number of factors including a diversified product range, highly targeted marketing and a commitment to lean manufacturing and quality.
• The company makes a large range of vehicles for both private customers and commercial organisations, from the small Yaris to large trucks. The company uses marketing techniques to identify and satisfy customer needs. Its brand is a household name. The company also maximizes profit through efficient manufacturing approaches (e.g. Total Quality Management).

Weaknesses

• Being big has its own problems. The World market for cars is in a condition of over supply and so car manufacturers need to make sure that it is their models that consumers want. Toyota markets most of its products in the US and in Japan. Therefore it is exposed to fluctuating economic and political conditions those markets. Perhaps that is why the company is beginning to shift its attentions to the emerging Chinese market. Movements in exchange rates could see the already narrow margins in the car market being reduced.
• The company needs to keep producing cars in order to retain its operational efficiency. Car plants represent a huge investment in expensive fixed costs, as well as the high costs of training and retaining labour. So if the car market experiences a down turn, the company could see over capapacity. If on the other hand the car market experiences an upturn, then the company may miss out on potential sales due to under capacity i.e. it takes time to accommodate. This is a typical problem with high volume car manufacturing.

Opportunities

• Lexus and Toyota now have a reputation for manufacturing environmentally friendly vehicles. Lexus has RX 400h hybrid, and Toyota has it Prius. Both are based upon advance technologies developed by the organisation. Rocketing oil prices have seen sales of the new hybrid vehicles increase. Toyota has also sold on its technology to other motor manufacturers, for example Ford has bought into the technology for its new Explorer SUV Hybrid. Such moves can only firm up Toyota's interest and investment in hybrid R&D.
• Toyota is to target the 'urban youth' market. The company has launched its new Aygo, which is targeted at the streetwise youth market and captures (or attempts to the nature of dance and DJ culture in a very competitive segment. The vehicle itself is a unique convertible, with models extending at their rear! The narrow segment is notorious for it narrow margins and difficulties for branding.

Threats

• Product recalls are always a problem for vehicle manufacturers. In 2005 the company had to recall 880,00 sports utility vehicles and pick up trucks due to faulty front suspension systems. Toyota did not give details of how much the recall would cost. The majority of affected vehicles were sold in the US, while the rest were sold in Japan, Europe and Australia.
• As with any car manufacturer, Toyota faces tremendous competitive rivalry in the car market. Competition is increasing almost daily, with new entrants coming into the market from China, South Korea and new plants in Eastern Europe. The company is also exposed to any movement in the price of raw materials such as rubber, steel and fuel. The key economies in the Pacific, the US and Europe also experience slow downs. These economic factors are potential threats for Toyota.

SWOT Analysis Starbucks

Strengths

• Starbucks Corporation is a very profitable organisation, earning in excess of $600 million in 2004. The company generated revenue of more than $5000 million in the same year.
• It is a global coffee brand built upon a reputation for fine products and services. It has almost 9000 cafes in almost 40 countries.
• Starbucks was one of the Fortune Top 100 Companies to Work For in 2005. The company is a respected employer that values its workforce.
• The organisation has strong ethical values and an ethical mission statement as follows, 'Starbucks is committed to a role of environmental leadership in all facets of our business.

Weaknesses

• Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.
• The organisation has a strong presence in the United States of America with more than three quarters of their cafes located in the home market. It is often argued that they need to look for a portfolio of countries, in order to spread business risk.
• The organisation is dependant on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise.

Opportunities

• Starbucks are very good at taking advantage of opportunties.
• In 2004 the company created a CD-burning service in their Santa Monica (California USA) cafe with Hewlett Packard, where customers create their own music CD.
• New products and services that can be retailed in their cafes, such as Fair Trade products.
• The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge.
• Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.

Threats

• Who knows if the market for coffee will grow and stay in favour with customers, or whether another type of beverage or leisure activity will replace coffee in the future?
• Starbucks are exposed to rises in the cost of coffee and dairy products.
• Since its conception in Pike Place Market, Seattle in 1971, Starbucks' success has lead to the market entry of many competitors and copy cat brands that pose potential threats.

'Starbucks' mission statement is 'Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.' The following six guiding principles will help us measure the appropriateness of our decisions' more? Then go to Starbucks.

SWOT Analysis Dell

Strengths

• Dell is the World's largest PC maker. Profits for the 3 months to July 2005 were in excess of $1 billion US, representing a growth of around 28%. For the last couple of years it has held its position as market leader (it took it from rivals Hewlett-Packard). The Dell brand is one of the best known and renowned computer brands in the World.
• Dell cuts out the retailer and supplies directly to the customers. It uses information technology, and Customer Relationship Management (CRM) approaches to capture data on its loyal consumers. So a customer selects a generic PC model, and then adds items and upgrades until the PC is kitted out to the customer's own specification. Components are made by suppliers, never by Dell. PC's are assembled using relatively cheap labour. You can even keep track of your delivery by contacting customer services, based in India. The finished goods are then dropped off with the customer by courier. Dell has total command of the supply chain.

Weaknesses

• The company has such a huge range of products and components from many suppliers from a plethora of countries, that there is the occasional product recall that can cause Dell some embarrassment. In 2004 Dell had to recall 4.4 million laptop adapters because of a fear that they could overheat, causing electric shocks or fires.
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• Whilst this is a tremendous advantage in terms of business operations, allowing Dell to focus on marketing and logistics, the company is reliant on a few large suppliers, and to an extent is locked in for periods of time (i.e. unable to switch supply dues to the lack of large suppliers in the World).

Opportunities

• Kevin Rollins replaced Michael Dell in 2004 as Dell's Chief Executive Officer. Dell remained the company's Chairman. Despite founder Dell's massive success, new blood and a change in management thinking could lead the company into a new, even more profitable period. Dell was born in 1965, and founded Dell in 1984 with $1000 whilst studying at the University of Texas. He became the youngest Fortune 500 CEO in 1992, and will be a tough act to follow.
• Dell is pursuing a diversification strategy by introducing many new products to its range. This initially has meant good such as peripherals including printers and toners, but now also included LCD televisions and other non-computing goods. So Dell compete against iPod and other consumer electronics brands.
• Dell is making and selling low-cost, low-price computers to PC retailers in the United States. The PC's are unbranded and should not be recognised as being Dell when the consumer makes a purchase. Rebranding and rebadging for retailers, although a departure for Dell, gives the company new market segments to attack with the associated marketing costs.

Threats

• The single biggest problem for Dell is the competitive rivalry that exists in the PC market globally. As with all profitable brands, retaliation from competitors and new entrants to the market pose potential threats. Dell sources from Far Eastern nations where labour costs remain low, but there is nothing stopping competitors doing the same - even sourcing the same or similar components from the same or similar suppliers. Remember, Dell is a PC maker, not a PC manufacturer.
• Dell, being global in its marketing and operations, is exposed to fluctuations in the World currency markets. Although it is a very lean organisation, orders do have to be placed some time ahead due to their size or value. Changes in exchange rates could leave the company exposed to potential loses in parts of its supply chain.
• Dell's commitment to customer value, to our team, to being direct, to operating responsibly and, ultimately, to winning continues to differentiate us from other companies. The Background section provides critical information and history about Dell's business world.
• SWOT Analysis Nike, Inc.

Strengths

• Nike is a very competitive organisation. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.' Nike has a healthy dislike of is competitors. At the Atlanta Olympics, Reebok went to the expense of sponsoring the games. Nike did not. However Nike sponsored the top athletes and gained valuable coverage.
• Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This makes a very lean organisation. Nike is strong at research and development, as is evidenced by its evolving and innovative product range. They then manufacture wherever they can produce high quality product at the lowest possible price. If prices rise, and products can be made more cheaply elsewhere (to the same or better specification), Nike will move production.
• Nike is a global brand. It is the number one sports brand in the World. Its famous 'Swoosh' is instantly recognisable, and Phil Knight even has it tattooed on his ankle.

Weaknesses

• The organisation does have a diversified range of sports products. However, the income of the business is still heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share erodes.
• The retail sector is very price sensitive. Nike does have its own retailer in Nike Town. However, most of its income is derived from selling into retailers. Retailers tend to offer a very similar experience to the consumer. Can you tell one sports retailer from another? So margins tend to get squeezed as retailers try to pass some of the low price competition pressure onto Nike.

Opportunities

• Product development offers Nike many opportunities. The brand is fiercely defended by its owners whom truly believe that Nike is not a fashion brand. However, like it or not, consumers that wear Nike product do not always buy it to participate in sport. Some would argue that in youth culture especially, Nike is a fashion brand. This creates its own opportunities, since product could become unfashionable before it wears out i.e. consumers need to replace shoes.
• There is also the opportunity to develop products such as sport wear, sunglasses and jewellery. Such high value items do tend to have associated with them, high profits.
•  The business could also be developed internationally, building upon its strong global brand recognition. There are many markets that have the disposable income to spend on high value sports goods. For example, emerging markets such as China and India have a new richer generation of consumers. There are also global marketing events that can be utilised to support the brand such as the World Cup (soccer) and The Olympics.

Threats

• Nike is exposed to the international nature of trade. It buys and sells in different currencies and so costs and margins are not stable over long periods of time. Such an exposure could mean that Nike may be manufacturing and/or selling at a loss. This is an issue that faces all global brands.
• The market for sports shoes and garments is very competitive. The model developed by Phil Knight in his Stamford Business School days (high value branded product manufactured at a low cost) is now commonly used and to an extent is no longer a basis for sustainable competitive advantage. Competitors are developing alternative brands to take away Nike's market share.
• As discussed above in weaknesses, the retail sector is becoming price competitive. This ultimately means that consumers are shopping around for a better deal. So if one store charges a price for a pair of sports shoes, the consumer could go to the store along the street to compare prices for the exactly the same item, and buy the cheaper of the two. Such consumer price sensitivity is a potential external threat to Nike.

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