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 – central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, technology disruption,
increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
Superior customer experience
– The customer experience strategy of Sonic Automotive in Retail (Specialty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
Digital Transformation in Retail (Specialty) industry
- digital transformation varies from industry to industry. For Sonic Automotive digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sonic Automotive 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.
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.
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.
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.
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.
Innovation driven organization
– Sonic Automotive is one of the most innovative firm in Retail (Specialty) sector.
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.
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 -
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Retail (Specialty) industry, Sonic Automotive 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.
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.
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.
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 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.
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.
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 cash cycle compare to competitors
Sonic Automotive has a high cash cycle compare to other players in the Retail (Specialty) 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 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.
Sonic Automotive Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sonic Automotive are -
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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sonic Automotive 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 Sonic Automotive to hire the very best people irrespective of their geographical location.
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.
Developing new processes and practices
– Sonic Automotive can develop new processes and procedures in Retail (Specialty) 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.
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.
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.
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.
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.
Loyalty marketing
– Sonic Automotive 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.
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.
Threats Sonic Automotive External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sonic Automotive are -
Environmental challenges
– Sonic Automotive 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. Sonic Automotive can take advantage of this fund but it will also bring new competitors in the Retail (Specialty) industry.
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.
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.
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.
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. Sonic Automotive can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
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.
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.
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.
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.
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.
