AutoNation (AN) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for AutoNation (United States)

Based on various researches at Oak Spring University , AutoNation is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, there is backlash against globalization, geopolitical disruptions, increasing household debt because of falling income levels, wage bills are increasing, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, etc

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Introduction to SWOT Analysis of AutoNation

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AutoNation can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AutoNation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AutoNation 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of AutoNation can be done for the following purposes –
1. Strategic planning of AutoNation
2. Improving business portfolio management of AutoNation
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Specialty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AutoNation

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Strengths of AutoNation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of AutoNation are -

Low bargaining power of suppliers

– Suppliers of AutoNation in the Services sector have low bargaining power. AutoNation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AutoNation to manage not only supply disruptions but also source products at highly competitive prices.

Training and development

– AutoNation has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Learning organization

- AutoNation 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 AutoNation is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at AutoNation emphasize – knowledge, initiative, and innovation.

Operational resilience

– The operational resilience strategy of AutoNation comprises – understanding the underlying the factors in the Retail (Specialty) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Organizational Resilience of AutoNation

– The covid-19 pandemic has put organizational resilience at the centre of everthing AutoNation does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Innovation driven organization

– AutoNation is one of the most innovative firm in Retail (Specialty) sector.

Digital Transformation in Retail (Specialty) industry

- digital transformation varies from industry to industry. For AutoNation digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AutoNation has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

High brand equity

– AutoNation has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AutoNation to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

High switching costs

– The high switching costs that AutoNation 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.

Sustainable margins compare to other players in Retail (Specialty) industry

– AutoNation has clearly differentiated products in the market place. This has enabled AutoNation to fetch slight price premium compare to the competitors in the Retail (Specialty) industry. The sustainable margins have also helped AutoNation to invest into research and development (R&D) and innovation.

Cross disciplinary teams

– Horizontal connected teams at the AutoNation 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.

Highly skilled collaborators

– AutoNation has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Specialty) industry. Secondly the value chain collaborators of AutoNation have helped the firm to develop new products and bring them quickly to the marketplace.

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Weaknesses of AutoNation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of AutoNation are -

High operating costs

– Compare to the competitors, AutoNation has high operating costs in the Retail (Specialty) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract AutoNation lucrative customers.

High cash cycle compare to competitors

AutoNation has a high cash cycle compare to other players in the Retail (Specialty) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Lack of clear differentiation of AutoNation products

– To increase the profitability and margins on the products, AutoNation needs to provide more differentiated products than what it is currently offering in the marketplace.

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 AutoNation supply chain. Even after few cautionary changes, AutoNation is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left AutoNation vulnerable to further global disruptions in South East Asia.

Slow to strategic competitive environment developments

– As AutoNation is one of the leading players in the Retail (Specialty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Specialty) industry in last five years.

High dependence on AutoNation ‘s star products

– The top 2 products and services of AutoNation still accounts for major business revenue. This dependence on star products in Retail (Specialty) industry has resulted into insufficient focus on developing new products, even though AutoNation has relatively successful track record of launching new products.

Employees’ less understanding of AutoNation strategy

– From the outside it seems that the employees of AutoNation 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.

Slow decision making process

– As mentioned earlier in the report, AutoNation has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Specialty) industry over the last five years. AutoNation even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

Products dominated business model

– Even though AutoNation has some of the most successful models in the Retail (Specialty) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. AutoNation should strive to include more intangible value offerings along with its core products and services.

Low market penetration in new markets

– Outside its home market of United States, AutoNation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Ability to respond to the competition

– As the decision making is very deliberative at AutoNation, in the dynamic environment of Retail (Specialty) industry it has struggled to respond to the nimble upstart competition. AutoNation has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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AutoNation Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of AutoNation are -

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for AutoNation 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 AutoNation to hire the very best people irrespective of their geographical location.

Low interest rates

– Even though inflation is raising its head in most developed economies, AutoNation can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects AutoNation can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Using analytics as competitive advantage

– AutoNation has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Specialty) sector. This continuous investment in analytics has enabled AutoNation to build a competitive advantage using analytics. The analytics driven competitive advantage can help AutoNation to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Creating value in data economy

– The success of analytics program of AutoNation has opened avenues for new revenue streams for the organization in Retail (Specialty) industry. This can help AutoNation to build a more holistic ecosystem for AutoNation products in the Retail (Specialty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Manufacturing automation

– AutoNation can use the latest technology developments to improve its manufacturing and designing process in Retail (Specialty) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Learning at scale

– Online learning technologies has now opened space for AutoNation 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, AutoNation 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 AutoNation to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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 AutoNation 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AutoNation can use these opportunities to build new business models that can help the communities that AutoNation operates in. Secondly it can use opportunities from government spending in Retail (Specialty) sector.

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. AutoNation can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Building a culture of innovation

– managers at AutoNation can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Specialty) industry.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Retail (Specialty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. AutoNation 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. AutoNation 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.

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Threats AutoNation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of AutoNation are -

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. AutoNation needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for AutoNation in Retail (Specialty) industry. The Retail (Specialty) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for AutoNation in the Retail (Specialty) sector and impact the bottomline of the organization.

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. AutoNation 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 AutoNation 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 Retail (Specialty) industry and other sectors.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Retail (Specialty) industry are lowering. It can presents AutoNation with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Specialty) sector.

Stagnating economy with rate increase

– AutoNation 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 Retail (Specialty) industry.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, AutoNation may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Specialty) sector.

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 AutoNation business can come under increasing regulations regarding data privacy, data security, etc.

Regulatory challenges

– AutoNation 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 Retail (Specialty) industry regulations.

Technology acceleration in Forth Industrial Revolution

– AutoNation has witnessed rapid integration of technology during Covid-19 in the Retail (Specialty) industry. As one of the leading players in the industry, AutoNation needs to keep up with the evolution of technology in the Retail (Specialty) 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.

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of AutoNation.

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Weighted SWOT Analysis of AutoNation Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AutoNation 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 AutoNation 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 AutoNation 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 AutoNation 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 AutoNation needs to make to build a sustainable competitive advantage.

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