Sonic Automotive (SAH) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Specialty)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sonic Automotive (United States)
Based on various researches at Oak Spring University , Sonic Automotive is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, there is backlash against globalization, supply chains are disrupted by pandemic , increasing energy prices, increasing household debt because of falling income levels,
cloud computing is disrupting traditional business models, 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 Sonic Automotive can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sonic Automotive, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sonic Automotive 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 Sonic Automotive can be done for the following purposes –
1. Strategic planning of Sonic Automotive
2. Improving business portfolio management of Sonic Automotive
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 Sonic Automotive
Strengths of Sonic Automotive | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sonic Automotive are -
Low bargaining power of suppliers
– Suppliers of Sonic Automotive in the Services sector have low bargaining power. Sonic Automotive has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sonic Automotive to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Sonic Automotive 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.
Cross disciplinary teams
– Horizontal connected teams at the Sonic Automotive 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.
Learning organization
- Sonic Automotive 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 Sonic Automotive is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sonic Automotive emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Sonic Automotive 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.
High switching costs
– The high switching costs that Sonic Automotive has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Effective Research and Development (R&D)
– Sonic Automotive has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sonic Automotive 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.
Diverse revenue streams
– Sonic Automotive is present in almost all the verticals within the Retail (Specialty) industry. This has provided Sonic Automotive 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.
Sustainable margins compare to other players in Retail (Specialty) industry
– Sonic Automotive has clearly differentiated products in the market place. This has enabled Sonic Automotive to fetch slight price premium compare to the competitors in the Retail (Specialty) industry. The sustainable margins have also helped Sonic Automotive to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Sonic Automotive 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 Sonic Automotive have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Sonic Automotive is one of the most innovative firm in Retail (Specialty) sector.
Ability to lead change in Retail (Specialty)
– Sonic Automotive 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 Sonic Automotive in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Sonic Automotive | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sonic Automotive are -
Lack of clear differentiation of Sonic Automotive products
– To increase the profitability and margins on the products, Sonic Automotive needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Retail (Specialty) industry
– because of the regulatory requirements in United States, Sonic Automotive 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.
Aligning sales with marketing
– From the outside it seems that Sonic Automotive 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 Sonic Automotive can leverage the sales team experience to cultivate customer relationships as Sonic Automotive is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Sonic Automotive has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Specialty) industry over the last five years. Sonic Automotive 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.
Need for greater diversity
– Sonic Automotive has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
No frontier risks strategy
– From the 10K / annual statement of Sonic Automotive, 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.
Interest costs
– Compare to the competition, Sonic Automotive 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 operating costs
– Compare to the competitors, Sonic Automotive has high operating costs in the Retail (Specialty) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sonic Automotive lucrative customers.
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 Sonic Automotive supply chain. Even after few cautionary changes, Sonic Automotive is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sonic Automotive vulnerable to further global disruptions in South East Asia.
High dependence on Sonic Automotive ‘s star products
– The top 2 products and services of Sonic Automotive 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 Sonic Automotive has relatively successful track record of launching new products.
Employees’ less understanding of Sonic Automotive strategy
– From the outside it seems that the employees of Sonic Automotive 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.
Sonic Automotive Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sonic Automotive 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. Sonic Automotive can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Sonic Automotive 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sonic Automotive can use these opportunities to build new business models that can help the communities that Sonic Automotive operates in. Secondly it can use opportunities from government spending in Retail (Specialty) sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sonic Automotive 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 Sonic Automotive to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Sonic Automotive can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Sonic Automotive 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. Sonic Automotive 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sonic Automotive 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
– Sonic Automotive 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sonic Automotive is facing challenges because of the dominance of functional experts in the organization. Sonic Automotive 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sonic Automotive can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Sonic Automotive 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 Sonic Automotive to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sonic Automotive to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Sonic Automotive 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 Sonic Automotive in the Retail (Specialty) industry. Now Sonic Automotive can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Sonic Automotive External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sonic Automotive are -
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. Sonic Automotive needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.
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 Sonic Automotive business can come under increasing regulations regarding data privacy, data security, etc.
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.
Shortening product life cycle
– it is one of the major threat that Sonic Automotive is facing in Retail (Specialty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Specialty) industry are lowering. It can presents Sonic Automotive with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Specialty) sector.
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 Sonic Automotive.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sonic Automotive 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 dependence on third party suppliers
– Sonic Automotive 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.
Consumer confidence and its impact on Sonic Automotive 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.
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 Sonic Automotive in the Retail (Specialty) sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sonic Automotive 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.
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. Sonic Automotive 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.
Regulatory challenges
– Sonic Automotive 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.
Weighted SWOT Analysis of Sonic Automotive Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sonic Automotive 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 Sonic Automotive 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 Sonic Automotive 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 Sonic Automotive 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 Sonic Automotive needs to make to build a sustainable competitive advantage.