KAR Auction Services (KAR) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Specialty)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for KAR Auction Services (United States)
Based on various researches at Oak Spring University , KAR Auction Services is operating in a macro-environment that has been destablized by – wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, there is backlash against globalization, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels,
supply chains are disrupted by pandemic , there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of KAR Auction Services
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that KAR Auction Services can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the KAR Auction Services, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which KAR Auction Services 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 KAR Auction Services can be done for the following purposes –
1. Strategic planning of KAR Auction Services
2. Improving business portfolio management of KAR Auction Services
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 KAR Auction Services
Strengths of KAR Auction Services | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of KAR Auction Services are -
Successful track record of launching new products
– KAR Auction Services has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. KAR Auction Services has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Retail (Specialty) industry
– KAR Auction Services has clearly differentiated products in the market place. This has enabled KAR Auction Services to fetch slight price premium compare to the competitors in the Retail (Specialty) industry. The sustainable margins have also helped KAR Auction Services to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of KAR Auction Services in Retail (Specialty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of KAR Auction Services in the Services sector have low bargaining power. KAR Auction Services has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps KAR Auction Services to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the KAR Auction Services 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.
Ability to recruit top talent
– KAR Auction Services is one of the leading players in the Retail (Specialty) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- KAR Auction Services 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 KAR Auction Services is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at KAR Auction Services emphasize – knowledge, initiative, and innovation.
Training and development
– KAR Auction Services 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.
Operational resilience
– The operational resilience strategy of KAR Auction Services 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.
Effective Research and Development (R&D)
– KAR Auction Services has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – KAR Auction Services staying ahead in the Retail (Specialty) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– KAR Auction Services has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled KAR Auction Services to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Retail (Specialty) industry
- digital transformation varies from industry to industry. For KAR Auction Services digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. KAR Auction Services 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.
Weaknesses of KAR Auction Services | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of KAR Auction Services are -
Workers concerns about automation
– As automation is fast increasing in the Retail (Specialty) industry, KAR Auction Services needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Lack of clear differentiation of KAR Auction Services products
– To increase the profitability and margins on the products, KAR Auction Services 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 KAR Auction Services supply chain. Even after few cautionary changes, KAR Auction Services is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left KAR Auction Services vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of KAR Auction Services strategy
– From the outside it seems that the employees of KAR Auction Services 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.
Capital Spending Reduction
– Even during the low interest decade, KAR Auction Services has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Retail (Specialty) industry using digital technology.
Slow to strategic competitive environment developments
– As KAR Auction Services 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.
Products dominated business model
– Even though KAR Auction Services 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. KAR Auction Services should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, KAR Auction Services 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 dependence on KAR Auction Services ‘s star products
– The top 2 products and services of KAR Auction Services 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 KAR Auction Services has relatively successful track record of launching new products.
Skills based hiring in Retail (Specialty) industry
– The stress on hiring functional specialists at KAR Auction Services 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.
Increasing silos among functional specialists
– The organizational structure of KAR Auction Services is dominated by functional specialists. It is not different from other players in the Retail (Specialty) industry, but KAR Auction Services needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help KAR Auction Services to focus more on services in the Retail (Specialty) industry rather than just following the product oriented approach.
KAR Auction Services Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of KAR Auction Services are -
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. KAR Auction Services can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– KAR Auction Services 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, KAR Auction Services is facing challenges because of the dominance of functional experts in the organization. KAR Auction Services can utilize new technology in the field of Retail (Specialty) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at KAR Auction Services 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, KAR Auction Services can use these opportunities to build new business models that can help the communities that KAR Auction Services operates in. Secondly it can use opportunities from government spending in Retail (Specialty) sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for KAR Auction Services 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 KAR Auction Services to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help KAR Auction Services to increase its market reach. KAR Auction Services will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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. KAR Auction Services 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. KAR Auction Services 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.
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 KAR Auction Services 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for KAR Auction Services in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Specialty) industry, and it will provide faster access to the consumers.
Manufacturing automation
– KAR Auction Services 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.
Developing new processes and practices
– KAR Auction Services can develop new processes and procedures in Retail (Specialty) industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Leveraging digital technologies
– KAR Auction Services 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.
Threats KAR Auction Services External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of KAR Auction Services are -
Environmental challenges
– KAR Auction Services 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. KAR Auction Services can take advantage of this fund but it will also bring new competitors in the Retail (Specialty) industry.
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 KAR Auction Services in the Retail (Specialty) sector and impact the bottomline of the organization.
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 KAR Auction Services.
Technology acceleration in Forth Industrial Revolution
– KAR Auction Services has witnessed rapid integration of technology during Covid-19 in the Retail (Specialty) industry. As one of the leading players in the industry, KAR Auction Services 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.
Stagnating economy with rate increase
– KAR Auction Services 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.
High dependence on third party suppliers
– KAR Auction Services 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.
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 KAR Auction Services business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, KAR Auction Services 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 KAR Auction Services prominent markets.
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.
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. KAR Auction Services needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.
Consumer confidence and its impact on KAR Auction Services 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.
Shortening product life cycle
– it is one of the major threat that KAR Auction Services is facing in Retail (Specialty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for KAR Auction Services 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.
Weighted SWOT Analysis of KAR Auction Services Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at KAR Auction Services 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 KAR Auction Services 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 KAR Auction Services 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 KAR Auction Services 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 KAR Auction Services needs to make to build a sustainable competitive advantage.