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 – there is increasing trade war between United States & China, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, central banks are concerned over increasing inflation, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy,
wage bills are increasing, supply chains are disrupted by pandemic , 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 -
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.
Digital Transformation in Retail (Specialty) industry
- digital transformation varies from industry to industry. For Lithia Motors digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lithia Motors 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.
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.
Innovation driven organization
– Lithia Motors is one of the most innovative firm in Retail (Specialty) sector.
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.
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.
Analytics focus
– Lithia Motors is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Retail (Specialty) industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
Cross disciplinary teams
– Horizontal connected teams at the Lithia Motors 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.
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.
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 -
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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Lithia Motors, in the dynamic environment of Retail (Specialty) industry it has struggled to respond to the nimble upstart competition. Lithia Motors has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
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.
Increasing silos among functional specialists
– The organizational structure of Lithia Motors is dominated by functional specialists. It is not different from other players in the Retail (Specialty) industry, but Lithia Motors needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lithia Motors to focus more on services in the Retail (Specialty) industry rather than just following the product oriented approach.
Employees’ less understanding of Lithia Motors strategy
– From the outside it seems that the employees of Lithia Motors 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.
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.
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 -
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.
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 Lithia Motors 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 Lithia Motors 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 Lithia Motors to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Lithia Motors 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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Lithia Motors to increase its market reach. Lithia Motors 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.
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.
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. Lithia Motors 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. Lithia Motors 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.
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.
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.
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.
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.
Threats Lithia Motors External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lithia Motors are -
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.
Increasing wage structure of Lithia Motors
– 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 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.
Consumer confidence and its impact on Lithia Motors 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.
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 dependence on third party suppliers
– Lithia Motors 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.
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.
Technology acceleration in Forth Industrial Revolution
– Lithia Motors has witnessed rapid integration of technology during Covid-19 in the Retail (Specialty) industry. As one of the leading players in the industry, Lithia Motors 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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lithia Motors 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 Lithia Motors prominent markets.
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.
Shortening product life cycle
– it is one of the major threat that Lithia Motors is facing in Retail (Specialty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.