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 – competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, technology disruption, geopolitical disruptions, there is backlash against globalization, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, 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 -
Innovation driven organization
– Sonic Automotive is one of the most innovative firm in Retail (Specialty) sector.
High brand equity
– Sonic Automotive has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sonic Automotive to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Organizational Resilience of Sonic Automotive
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sonic Automotive does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Analytics focus
– Sonic Automotive 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.
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.
Strong track record of project management in the Retail (Specialty) industry
– Sonic Automotive is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Operational resilience
– The operational resilience strategy of Sonic Automotive 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.
Weaknesses of Sonic Automotive | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sonic Automotive are -
Ability to respond to the competition
– As the decision making is very deliberative at Sonic Automotive, in the dynamic environment of Retail (Specialty) industry it has struggled to respond to the nimble upstart competition. Sonic Automotive has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
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.
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.
Low market penetration in new markets
– Outside its home market of United States, Sonic Automotive needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Sonic Automotive is dominated by functional specialists. It is not different from other players in the Retail (Specialty) industry, but Sonic Automotive needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sonic Automotive to focus more on services in the Retail (Specialty) industry rather than just following the product oriented approach.
Products dominated business model
– Even though Sonic Automotive 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. Sonic Automotive 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, 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sonic Automotive is slow explore the new channels of communication. These new channels of communication can help Sonic Automotive to provide better information regarding Retail (Specialty) products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Sonic Automotive 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.
Sonic Automotive Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sonic Automotive are -
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.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sonic Automotive in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Specialty) industry, and it will provide faster access to the consumers.
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.
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.
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.
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 Sonic Automotive 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.
Better consumer reach
– The expansion of the 5G network will help Sonic Automotive to increase its market reach. Sonic Automotive 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.
Buying journey improvements
– Sonic Automotive can improve the customer journey of consumers in the Retail (Specialty) 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.
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.
Creating value in data economy
– The success of analytics program of Sonic Automotive has opened avenues for new revenue streams for the organization in Retail (Specialty) industry. This can help Sonic Automotive to build a more holistic ecosystem for Sonic Automotive products in the Retail (Specialty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Sonic Automotive External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sonic Automotive are -
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Sonic Automotive has witnessed rapid integration of technology during Covid-19 in the Retail (Specialty) industry. As one of the leading players in the industry, Sonic Automotive 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sonic Automotive 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 Sonic Automotive prominent markets.
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.
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.
Stagnating economy with rate increase
– Sonic Automotive 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.
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.
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.
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.
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.
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.