Strengths
The firm’s product is a well known fragrance that is recognized for satisfying customers’ needs in its European target markets. This makes it possible for the firm to implement best practices in the US market to help it increase consumers’ loyalty in its products. However, the firm needs to take note of other products that have a large market share which may not be dislodged from their market position easily.
The firm has a strong retail network that gives it an advantage over its competitors (Pastinen, 2010, p. 52). The firm has partnered with several high end franchises that only sell its products, which gives it more market access to high worth customers. However, some of its competitors use department stores that have large retail networks and this helps them sell their products to more consumers.
Weaknesses
The firm has several weaknesses in the industry. The foreign currency market is volatile and this has weakened the euro to dollar exchange rate. Other local firms which sell their products in Japan and China are also facing the same problem. The firm needs to increase its dollar reserves to help it overcome this risk.
Another weakness is that the firm has no experience in the U.S. market and this may not work to its advantage. This makes it difficult for the firm to predict the amount of future earnings it is likely to get while operating in the industry (Armstrong & Kotler, 2011, p. 64). However, this gives it an opportunity to initiate market strategies that help it boost the confidence of its customers.
Opportunities
In the next six months it is estimated that there will be a reduction in interest rates charged on credit by various lending institutions. This will also benefit other firms which are looking for more funds to expand their operations. The firm needs to put in place proper plans that will help it take advantage of this opportunity.
An increase in the number of young consumers who have good incomes is an opportunity the firm needs to exploit in future (Armstrong & Kotler, 2011, p. 67). However, this may not have a positive effect on the firm’s future performance since some of them may prefer substitutes. The firm stands to gain more market share if it engages effectively with them.
Threats
Existence of counterfeit products which target low income consumers is a threat. These counterfeits mislead customers and they dent consumer confidence in the market. The firm needs to invest in strong trademarks to help it discourage this negative habit. It is projected that taxes and other licence charges will be increased and this will have a negative consequence on the performance of the firm’s products in the market. The firm needs to formulate effective strategies to help it overcome these problems (Porter, 2000, p. 103).
Significance of SWOT
This tool helps a business firm understand specific issues that are either beneficial or harmful to its operations in the industry it operates. The classification of various factors through the SWOT tool helps a firm plan its operations in the market effectively. Factors which a firm excels in are considered strengths because they help differentiate its products from its competitors.
Weaknesses are internal factors that have a negative effect on a firm’s ability to improve its competitiveness in the industry. Opportunities are those positive prospects in the market that a firm is well positioned to exploit to grow its revenues. Threats are those external factors in the industry that are likely to have a negative effect on a firm’s operations (Kolb, 2008, p. 130).
References
Armstrong, G.M. & Kotler, P.J. (2011). Marketing: An introduction. London: Pearson.
Kolb, B. (2008). Marketing research: A practical approach. London: Sage Publications.
Pastinen, M. (2010), High-performance process improvement. London: Springer.
Porter, M.E. (2000). Competitive advantage: Creating and sustaining superior performance. New York, NY: Simon and Schuster Publications.