SWOT Analysis / TOWS Matrix for Lithia Motors (United States)
Based on various researches at Oak Spring University , Lithia Motors is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, there is backlash against globalization,
competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lithia Motors can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lithia Motors, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lithia Motors 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 Lithia Motors can be done for the following purposes –
1. Strategic planning of Lithia Motors
2. Improving business portfolio management of Lithia Motors
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 Lithia Motors
Strengths of Lithia Motors | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lithia Motors are -
Diverse revenue streams
– Lithia Motors is present in almost all the verticals within the Retail (Specialty) industry. This has provided Lithia Motors a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Low bargaining power of suppliers
– Suppliers of Lithia Motors in the Services sector have low bargaining power. Lithia Motors has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lithia Motors to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Lithia Motors 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.
Highly skilled collaborators
– Lithia Motors 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 Lithia Motors have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Lithia Motors in Retail (Specialty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Lithia Motors is one of the most innovative firm in Retail (Specialty) sector.
Sustainable margins compare to other players in Retail (Specialty) industry
– Lithia Motors has clearly differentiated products in the market place. This has enabled Lithia Motors to fetch slight price premium compare to the competitors in the Retail (Specialty) industry. The sustainable margins have also helped Lithia Motors to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Lithia Motors has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lithia Motors 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.
Successful track record of launching new products
– Lithia Motors has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lithia Motors 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.
Learning organization
- Lithia Motors 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 Lithia Motors is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lithia Motors emphasize – knowledge, initiative, and innovation.
Training and development
– Lithia Motors 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.
Ability to lead change in Retail (Specialty)
– Lithia Motors is one of the leading players in the Retail (Specialty) industry in United States. Over the years it has not only transformed the business landscape in the Retail (Specialty) industry in United States but also across the existing markets. The ability to lead change has enabled Lithia Motors in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Lithia Motors | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lithia Motors are -
Capital Spending Reduction
– Even during the low interest decade, Lithia Motors 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.
High dependence on Lithia Motors ‘s star products
– The top 2 products and services of Lithia Motors 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 Lithia Motors has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Retail (Specialty) industry, Lithia Motors 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 Lithia Motors products
– To increase the profitability and margins on the products, Lithia Motors needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– From the 10K / annual statement of Lithia Motors, it seems that company is thinking out the frontier risks that can impact Retail (Specialty) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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 Lithia Motors supply chain. Even after few cautionary changes, Lithia Motors is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lithia Motors vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Lithia Motors needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Specialty) industry have deep experience in developing customer relationships. Marketing department at Lithia Motors can leverage the sales team experience to cultivate customer relationships as Lithia Motors is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Lithia Motors 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.
Interest costs
– Compare to the competition, Lithia Motors 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.
Products dominated business model
– Even though Lithia Motors 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. Lithia Motors should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in Retail (Specialty) industry
– because of the regulatory requirements in United States, Lithia Motors is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Retail (Specialty) industry.
Lithia Motors Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lithia Motors are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lithia Motors can use these opportunities to build new business models that can help the communities that Lithia Motors operates in. Secondly it can use opportunities from government spending in Retail (Specialty) sector.
Learning at scale
– Online learning technologies has now opened space for Lithia Motors 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.
Building a culture of innovation
– managers at Lithia Motors 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lithia Motors can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lithia Motors 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 Lithia Motors to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Lithia Motors has opened avenues for new revenue streams for the organization in Retail (Specialty) industry. This can help Lithia Motors to build a more holistic ecosystem for Lithia Motors products in the Retail (Specialty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions in Retail (Specialty) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lithia Motors in the Retail (Specialty) industry. Now Lithia Motors 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. Lithia Motors can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lithia Motors is facing challenges because of the dominance of functional experts in the organization. Lithia Motors 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.
Using analytics as competitive advantage
– Lithia Motors 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 Lithia Motors to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lithia Motors to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lithia Motors 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.
Leveraging digital technologies
– Lithia Motors 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Specialty) industry, but it has also influenced the consumer preferences. Lithia Motors can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Lithia Motors External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lithia Motors are -
Easy access to finance
– Easy access to finance in Retail (Specialty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lithia Motors can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lithia Motors 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lithia Motors 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.
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. Lithia Motors needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.
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 Lithia Motors.
Regulatory challenges
– Lithia Motors 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.
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. Lithia Motors 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.
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 Lithia Motors business can come under increasing regulations regarding data privacy, data security, etc.
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 Lithia Motors in the Retail (Specialty) sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Lithia Motors 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Specialty) industry are lowering. It can presents Lithia Motors with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Specialty) sector.
Environmental challenges
– Lithia Motors 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. Lithia Motors can take advantage of this fund but it will also bring new competitors in the Retail (Specialty) industry.
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.
Weighted SWOT Analysis of Lithia Motors Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lithia Motors 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 Lithia Motors 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 Lithia Motors 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 Lithia Motors 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 Lithia Motors needs to make to build a sustainable competitive advantage.