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 government debt because of Covid-19 spendings, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs,
central banks are concerned over increasing inflation, there is increasing trade war between United States & China, 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 -
Innovation driven organization
– O'Reilly is one of the most innovative firm in Auto & Truck Parts sector.
Diverse revenue streams
– O'Reilly is present in almost all the verticals within the Auto & Truck Parts industry. This has provided O'Reilly 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.
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.
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.
Ability to lead change in Auto & Truck Parts
– O'Reilly is one of the leading players in the Auto & Truck Parts industry in United States. Over the years it has not only transformed the business landscape in the Auto & Truck Parts industry in United States but also across the existing markets. The ability to lead change has enabled O'Reilly in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– O'Reilly has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. O'Reilly 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.
High brand equity
– O'Reilly has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled O'Reilly to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
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.
Operational resilience
– The operational resilience strategy of O'Reilly comprises – understanding the underlying the factors in the Auto & Truck Parts 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.
Strong track record of project management in the Auto & Truck Parts industry
– O'Reilly is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of O'Reilly | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of O'Reilly are -
Lack of clear differentiation of O'Reilly products
– To increase the profitability and margins on the products, O'Reilly needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, O'Reilly 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 Auto & Truck Parts industry using digital technology.
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.
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.
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.
Slow to strategic competitive environment developments
– As O'Reilly is one of the leading players in the Auto & Truck Parts industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Auto & Truck Parts industry in last five years.
Compensation and incentives
– The revenue per employee of O'Reilly is just above the Auto & Truck Parts industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Employees’ less understanding of O'Reilly strategy
– From the outside it seems that the employees of O'Reilly 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.
Increasing silos among functional specialists
– The organizational structure of O'Reilly is dominated by functional specialists. It is not different from other players in the Auto & Truck Parts industry, but O'Reilly needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help O'Reilly to focus more on services in the Auto & Truck Parts industry rather than just following the product oriented approach.
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.
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.
O'Reilly Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of O'Reilly are -
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.
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.
Use of Bitcoin and other crypto currencies for transactions in Auto & Truck Parts industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for O'Reilly in the Auto & Truck Parts industry. Now O'Reilly can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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 O'Reilly 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 O'Reilly in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Auto & Truck Parts industry, and it will provide faster access to the consumers.
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.
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.
Developing new processes and practices
– O'Reilly can develop new processes and procedures in Auto & Truck Parts 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.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Auto & Truck Parts industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. O'Reilly 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. O'Reilly 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.
Threats O'Reilly External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of O'Reilly are -
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 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.
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.
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.
Regulatory challenges
– O'Reilly 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 Auto & Truck Parts industry regulations.
Shortening product life cycle
– it is one of the major threat that O'Reilly is facing in Auto & Truck Parts 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 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, O'Reilly 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 O'Reilly prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Auto & Truck Parts industry are lowering. It can presents O'Reilly with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Auto & Truck Parts sector.
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.
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.
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.
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.