Aj Rent A Car (68400) SWOT Analysis / TOWS Matrix / MBA Resources
Rental & Leasing
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Aj Rent A Car (South Korea)
Based on various researches at Oak Spring University , Aj Rent A Car is operating in a macro-environment that has been destablized by – technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, central banks are concerned over increasing inflation, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models,
there is increasing trade war between United States & China, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Aj Rent A Car can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aj Rent A Car, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aj Rent A Car operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Aj Rent A Car can be done for the following purposes –
1. Strategic planning of Aj Rent A Car
2. Improving business portfolio management of Aj Rent A Car
3. Assessing feasibility of the new initiative in South Korea
4. Making a Rental & Leasing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aj Rent A Car
Strengths of Aj Rent A Car | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aj Rent A Car are -
Organizational Resilience of Aj Rent A Car
– The covid-19 pandemic has put organizational resilience at the centre of everthing Aj Rent A Car does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Aj Rent A Car has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aj Rent A Car to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Aj Rent A Car has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Aj Rent A Car staying ahead in the Rental & Leasing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Aj Rent A Car has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Aj Rent A Car has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Rental & Leasing industry. Secondly the value chain collaborators of Aj Rent A Car have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Aj Rent A Car in the Services sector have low bargaining power. Aj Rent A Car has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aj Rent A Car to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Aj Rent A Car are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management in the Rental & Leasing industry
– Aj Rent A Car is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Aj Rent A Car is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Aj Rent A Car is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Aj Rent A Car emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Aj Rent A Car in Rental & Leasing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Rental & Leasing
– Aj Rent A Car is one of the leading players in the Rental & Leasing industry in South Korea. Over the years it has not only transformed the business landscape in the Rental & Leasing industry in South Korea but also across the existing markets. The ability to lead change has enabled Aj Rent A Car in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Rental & Leasing industry
– Aj Rent A Car has clearly differentiated products in the market place. This has enabled Aj Rent A Car to fetch slight price premium compare to the competitors in the Rental & Leasing industry. The sustainable margins have also helped Aj Rent A Car to invest into research and development (R&D) and innovation.
Weaknesses of Aj Rent A Car | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Aj Rent A Car are -
Compensation and incentives
– The revenue per employee of Aj Rent A Car is just above the Rental & Leasing industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to strategic competitive environment developments
– As Aj Rent A Car is one of the leading players in the Rental & Leasing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Rental & Leasing industry in last five years.
Interest costs
– Compare to the competition, Aj Rent A Car has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Aj Rent A Car has a high cash cycle compare to other players in the Rental & Leasing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, Aj Rent A Car has high operating costs in the Rental & Leasing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Aj Rent A Car lucrative customers.
Aligning sales with marketing
– From the outside it seems that Aj Rent A Car needs to have more collaboration between its sales team and marketing team. Sales professionals in the Rental & Leasing industry have deep experience in developing customer relationships. Marketing department at Aj Rent A Car can leverage the sales team experience to cultivate customer relationships as Aj Rent A Car is planning to shift buying processes online.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Aj Rent A Car supply chain. Even after few cautionary changes, Aj Rent A Car is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aj Rent A Car vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of Aj Rent A Car strategy
– From the outside it seems that the employees of Aj Rent A Car don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Low market penetration in new markets
– Outside its home market of South Korea, Aj Rent A Car needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Aj Rent A Car is dominated by functional specialists. It is not different from other players in the Rental & Leasing industry, but Aj Rent A Car needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aj Rent A Car to focus more on services in the Rental & Leasing industry rather than just following the product oriented approach.
Skills based hiring in Rental & Leasing industry
– The stress on hiring functional specialists at Aj Rent A Car has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Aj Rent A Car Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Aj Rent A Car are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aj Rent A Car can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Aj Rent A Car to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Aj Rent A Car to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aj Rent A Car to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Aj Rent A Car to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Aj Rent A Car can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aj Rent A Car can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Aj Rent A Car to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aj Rent A Car can use these opportunities to build new business models that can help the communities that Aj Rent A Car operates in. Secondly it can use opportunities from government spending in Rental & Leasing sector.
Loyalty marketing
– Aj Rent A Car has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aj Rent A Car in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Rental & Leasing industry, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions in Rental & Leasing industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Aj Rent A Car in the Rental & Leasing industry. Now Aj Rent A Car can target international markets with far fewer capital restrictions requirements than the existing system.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Aj Rent A Car can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Aj Rent A Car has opened avenues for new revenue streams for the organization in Rental & Leasing industry. This can help Aj Rent A Car to build a more holistic ecosystem for Aj Rent A Car products in the Rental & Leasing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Rental & Leasing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Aj Rent A Car can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Aj Rent A Car can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Aj Rent A Car External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Aj Rent A Car are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Aj Rent A Car business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Aj Rent A Car can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Rental & Leasing industry.
Shortening product life cycle
– it is one of the major threat that Aj Rent A Car is facing in Rental & Leasing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Aj Rent A Car needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Rental & Leasing industry regulations.
Technology acceleration in Forth Industrial Revolution
– Aj Rent A Car has witnessed rapid integration of technology during Covid-19 in the Rental & Leasing industry. As one of the leading players in the industry, Aj Rent A Car needs to keep up with the evolution of technology in the Rental & Leasing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aj Rent A Car can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Aj Rent A Car prominent markets.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Aj Rent A Car will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Consumer confidence and its impact on Aj Rent A Car demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Rental & Leasing industry and other sectors.
Increasing wage structure of Aj Rent A Car
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Aj Rent A Car.
Environmental challenges
– Aj Rent A Car needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Aj Rent A Car can take advantage of this fund but it will also bring new competitors in the Rental & Leasing industry.
High dependence on third party suppliers
– Aj Rent A Car high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Rental & Leasing industry are lowering. It can presents Aj Rent A Car with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Rental & Leasing sector.
Weighted SWOT Analysis of Aj Rent A Car Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Aj Rent A Car needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Aj Rent A Car is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Aj Rent A Car is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Aj Rent A Car to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Aj Rent A Car needs to make to build a sustainable competitive advantage.