Sonic (SONC) SWOT Analysis / TOWS Matrix / MBA Resources
Restaurants
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sonic (United States)
Based on various researches at Oak Spring University , Sonic is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, cloud computing is disrupting traditional business models, there is backlash against globalization, challanges to central banks by blockchain based private currencies, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China,
supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sonic can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sonic, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sonic 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 can be done for the following purposes –
1. Strategic planning of Sonic
2. Improving business portfolio management of Sonic
3. Assessing feasibility of the new initiative in United States
4. Making a Restaurants sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sonic
Strengths of Sonic | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sonic are -
Cross disciplinary teams
– Horizontal connected teams at the Sonic 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.
High switching costs
– The high switching costs that Sonic 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.
Operational resilience
– The operational resilience strategy of Sonic comprises – understanding the underlying the factors in the Restaurants 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.
Training and development
– Sonic 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.
Successful track record of launching new products
– Sonic has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sonic 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.
Superior customer experience
– The customer experience strategy of Sonic in Restaurants industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Sonic
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sonic does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Sonic has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Restaurants industry. Secondly the value chain collaborators of Sonic have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Restaurants
– Sonic is one of the leading players in the Restaurants industry in United States. Over the years it has not only transformed the business landscape in the Restaurants industry in United States but also across the existing markets. The ability to lead change has enabled Sonic in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Sonic in the Services sector have low bargaining power. Sonic has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sonic to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Restaurants industry
- digital transformation varies from industry to industry. For Sonic digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sonic 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.
Sustainable margins compare to other players in Restaurants industry
– Sonic has clearly differentiated products in the market place. This has enabled Sonic to fetch slight price premium compare to the competitors in the Restaurants industry. The sustainable margins have also helped Sonic to invest into research and development (R&D) and innovation.
Weaknesses of Sonic | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sonic are -
Workers concerns about automation
– As automation is fast increasing in the Restaurants industry, Sonic 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.
Slow decision making process
– As mentioned earlier in the report, Sonic has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Restaurants industry over the last five years. Sonic 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.
Low market penetration in new markets
– Outside its home market of United States, Sonic needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring in Restaurants industry
– The stress on hiring functional specialists at Sonic has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Employees’ less understanding of Sonic strategy
– From the outside it seems that the employees of Sonic 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.
Need for greater diversity
– Sonic 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.
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 supply chain. Even after few cautionary changes, Sonic is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sonic vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sonic is slow explore the new channels of communication. These new channels of communication can help Sonic to provide better information regarding Restaurants products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Sonic is dominated by functional specialists. It is not different from other players in the Restaurants industry, but Sonic needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sonic to focus more on services in the Restaurants industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Sonic 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 Restaurants industry using digital technology.
Products dominated business model
– Even though Sonic has some of the most successful models in the Restaurants industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sonic should strive to include more intangible value offerings along with its core products and services.
Sonic Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sonic are -
Manufacturing automation
– Sonic can use the latest technology developments to improve its manufacturing and designing process in Restaurants 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Restaurants industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sonic 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 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sonic is facing challenges because of the dominance of functional experts in the organization. Sonic can utilize new technology in the field of Restaurants industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Sonic 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 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sonic can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions in Restaurants industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sonic in the Restaurants industry. Now Sonic can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Sonic can develop new processes and procedures in Restaurants 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.
Better consumer reach
– The expansion of the 5G network will help Sonic to increase its market reach. Sonic 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.
Learning at scale
– Online learning technologies has now opened space for Sonic 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.
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 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sonic 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.
Creating value in data economy
– The success of analytics program of Sonic has opened avenues for new revenue streams for the organization in Restaurants industry. This can help Sonic to build a more holistic ecosystem for Sonic products in the Restaurants industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Sonic External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sonic are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sonic may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Restaurants 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 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.
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.
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.
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 in the Restaurants sector and impact the bottomline of the organization.
Environmental challenges
– Sonic 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 can take advantage of this fund but it will also bring new competitors in the Restaurants industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sonic 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 prominent markets.
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.
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 business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Restaurants industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sonic can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Sonic
– 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 Sonic.
Shortening product life cycle
– it is one of the major threat that Sonic is facing in Restaurants sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 needs to understand the core reasons impacting the Restaurants industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Sonic Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sonic 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 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 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 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 needs to make to build a sustainable competitive advantage.
