O'Reilly (ORLY) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Parts
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for O'Reilly (United States)
Based on various researches at Oak Spring University , O'Reilly 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, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , geopolitical disruptions, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google,
cloud computing is disrupting traditional business models, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that O'Reilly can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the O'Reilly, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which O'Reilly 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 O'Reilly can be done for the following purposes –
1. Strategic planning of O'Reilly
2. Improving business portfolio management of O'Reilly
3. Assessing feasibility of the new initiative in United States
4. Making a Auto & Truck Parts sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of O'Reilly
Strengths of O'Reilly | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of O'Reilly are -
Low bargaining power of suppliers
– Suppliers of O'Reilly in the Consumer Cyclical sector have low bargaining power. O'Reilly has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps O'Reilly to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– O'Reilly has one of the best training and development program in Consumer Cyclical 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.
Effective Research and Development (R&D)
– O'Reilly has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – O'Reilly staying ahead in the Auto & Truck Parts industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Auto & Truck Parts industry
– O'Reilly has clearly differentiated products in the market place. This has enabled O'Reilly to fetch slight price premium compare to the competitors in the Auto & Truck Parts industry. The sustainable margins have also helped O'Reilly to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– O'Reilly is one of the leading players in the Auto & Truck Parts 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.
Highly skilled collaborators
– O'Reilly has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Auto & Truck Parts industry. Secondly the value chain collaborators of O'Reilly have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- O'Reilly 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 O'Reilly is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at O'Reilly emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the O'Reilly 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.
Digital Transformation in Auto & Truck Parts industry
- digital transformation varies from industry to industry. For O'Reilly digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. O'Reilly 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.
Superior customer experience
– The customer experience strategy of O'Reilly in Auto & Truck Parts industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– O'Reilly is one of the most innovative firm in Auto & Truck Parts sector.
Organizational Resilience of O'Reilly
– The covid-19 pandemic has put organizational resilience at the centre of everthing O'Reilly does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of O'Reilly | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of O'Reilly are -
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 O'Reilly supply chain. Even after few cautionary changes, O'Reilly is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left O'Reilly vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though O'Reilly has some of the most successful models in the Auto & Truck Parts industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. O'Reilly should strive to include more intangible value offerings along with its core products and services.
High dependence on O'Reilly ‘s star products
– The top 2 products and services of O'Reilly still accounts for major business revenue. This dependence on star products in Auto & Truck Parts industry has resulted into insufficient focus on developing new products, even though O'Reilly has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Auto & Truck Parts industry, O'Reilly 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.
High cash cycle compare to competitors
O'Reilly has a high cash cycle compare to other players in the Auto & Truck Parts industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that O'Reilly needs to have more collaboration between its sales team and marketing team. Sales professionals in the Auto & Truck Parts industry have deep experience in developing customer relationships. Marketing department at O'Reilly can leverage the sales team experience to cultivate customer relationships as O'Reilly is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, O'Reilly is slow explore the new channels of communication. These new channels of communication can help O'Reilly to provide better information regarding Auto & Truck Parts products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Auto & Truck Parts industry
– because of the regulatory requirements in United States, O'Reilly 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 Auto & Truck Parts industry.
Ability to respond to the competition
– As the decision making is very deliberative at O'Reilly, in the dynamic environment of Auto & Truck Parts industry it has struggled to respond to the nimble upstart competition. O'Reilly has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, O'Reilly has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Auto & Truck Parts industry over the last five years. O'Reilly 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.
No frontier risks strategy
– From the 10K / annual statement of O'Reilly, it seems that company is thinking out the frontier risks that can impact Auto & Truck Parts 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.
O'Reilly Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of O'Reilly are -
Buying journey improvements
– O'Reilly can improve the customer journey of consumers in the Auto & Truck Parts industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Parts industry, but it has also influenced the consumer preferences. O'Reilly can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, O'Reilly is facing challenges because of the dominance of functional experts in the organization. O'Reilly can utilize new technology in the field of Auto & Truck Parts industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects O'Reilly can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. O'Reilly can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– O'Reilly has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Parts sector. This continuous investment in analytics has enabled O'Reilly to build a competitive advantage using analytics. The analytics driven competitive advantage can help O'Reilly to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for O'Reilly 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.
Leveraging digital technologies
– O'Reilly 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.
Manufacturing automation
– O'Reilly can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Parts 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, O'Reilly 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, O'Reilly 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 O'Reilly to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for O'Reilly 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 O'Reilly to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help O'Reilly to increase its market reach. O'Reilly 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.
Threats O'Reilly External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of O'Reilly are -
Increasing wage structure of O'Reilly
– 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 O'Reilly.
Consumer confidence and its impact on O'Reilly 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 Auto & Truck Parts industry and other sectors.
Easy access to finance
– Easy access to finance in Auto & Truck Parts industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. O'Reilly can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– O'Reilly 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 Auto & Truck Parts industry.
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 O'Reilly.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for O'Reilly in Auto & Truck Parts industry. The Auto & Truck Parts 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.
Environmental challenges
– O'Reilly 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. O'Reilly can take advantage of this fund but it will also bring new competitors in the Auto & Truck Parts industry.
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. O'Reilly 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 O'Reilly 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 O'Reilly in the Auto & Truck Parts sector and impact the bottomline of the organization.
High dependence on third party suppliers
– O'Reilly 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.
Technology acceleration in Forth Industrial Revolution
– O'Reilly has witnessed rapid integration of technology during Covid-19 in the Auto & Truck Parts industry. As one of the leading players in the industry, O'Reilly needs to keep up with the evolution of technology in the Auto & Truck Parts 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. O'Reilly needs to understand the core reasons impacting the Auto & Truck Parts industry. This will help it in building a better workplace.
Weighted SWOT Analysis of O'Reilly Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at O'Reilly 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 O'Reilly 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 O'Reilly 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 O'Reilly 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 O'Reilly needs to make to build a sustainable competitive advantage.
