Introduction
Smith & White Incorporated and Makatume International have different market positions, advantages and future threats. Compared to Able Corporation they are in far better shape and status. By analyzing their actual strength and weaknesses, their future opportunities and threats, we can learn how to better manage the situation of Able Corporation. It is through the performance of a SWOT analysis that we would be able to understand thoroughly any company’s (like in our case Smith & White and Makatume) actual position along with their future (Hill, T. & R. Westbrook, 1997, p. 46).
Smith & White Incorporated
Smith & White has the advantage of being a multi-national conglomerate. This situation has given to the company the possibility of having dominant market positioning. The fact of having large shares in all the markets in which operates is a major strength factor for Smith & White.
Another strength factor lies in the unified marketing strategy that the company pursues all its product lines, power tool, and non-power tool. There has also been an ongoing effort in creating and maintaining positive brand name recognition through massive advertising campaigns through the national media. This has led to a “demand formation” strategy in which the company has influenced the market to generate demand for different products it offered. Up until the present moment, this has been a strong factor that has led the company to keep higher prices than the market price. Also, it has helped the company with retailers who have ordered large stock quantities from its products and have given high profile shelf space due to the high-end consumer demands. But this can turn into a negative effect of which we will discuss below.
The fact of being so “big” as a company has its negative effects as well. First of all, the wide variety of products, comprising those for professional or consumer use, all in the same shelf space has brought confusion in the mind of the customers. They do not have a “clear idea” (different branding) for specific tools and their appliance, professional, or customer use. Secondly, the company being so he has reacted very slowly to the market innovations regarding wireless and new, innovative, technologies. This way the size has been a “time losing and bureaucratic” factor for the company. Another weakness factor is the fact of negative feelings from its distributors due to the perceived abuse of their dominant market position. The relationship a company has with its staff and relating human resources is critical to its health (Stroup, 2008, p. 2). The negative feelings of the distributors can break the good management chain that brings the products from the productions sites to the hands of the customer. This will have an effect on the brand recognition of the company from the public. As a result, from a negative effect, this situation can turn into a threat that can damage the market position of the company. Another weak point for Smith & White is its inability to meet market innovation standards. We have mentioned above that the big size of the company has led to inefficient reaction toward the sector on wireless device development. But the major factors affecting this lateness in a reaction are the high costs of labor and old manufacturing technology in its plants.
This weakness can easily turn into a major threat for the company. The threat is that it will gradually lose market share as the market moves constantly toward new technology-advanced tools. Combined with its high costs of labor and non-adequate manufacturing technology this situation could lead to financial stress and eventually disaster. This will make the company unattractive to investors as well as customers. In order to avoid these threats and explore future opportunities, the company has to take drastic measures.
First, it has to cut its labor costs by moving its manufacturing plants to other places with low costs of labor. Another important aspect will be to introduce the use of informative technologies in work processes in order to help make them more efficient (Davenport, 1993, p. 14). With an increase in efficiency, the company will have the opportunity to respond more quickly to market changes. Another opportunity derives from the fact that it already has a dominant market share in its markets. The increase in efficiency will allow it to further consolidate that position. in turn, this will open up the opportunity for the company to attract investors to build capital to renovate its manufacturing technology. This renovation will give the opportunity in developing new technological tools, such as wireless ones. And a final aspect that the company should change is that it must become more specialized in what it produces. The fact that customers are confused in distinguishing its professional or consumer-base tools must end. The company should give priority to one of the forms, either professional or consumer-based tools, and put the majority of its efforts in this sector. This will give to the company the opportunity of becoming the leader in that aspect and then it will be easier to introduce new products.
Makatume International
Makatume has a different position from Smith & White yet they are similar to each other as companies. The major strength for Makatume is that its brand name for professional tools is well known and has a positive recognition among consumers both in Japan and U.S. the fact of being the biggest market player in japan and the second in the U.S is proof of this. The second strength is the low cost of manufacturing due to its modern technology plants. This situation enabled Makatume to go first in new cordless technology tools and become the dominant player in this market sector. These are the three major strengths of this company from which it can derive its opportunities for the future.
But the policy it has adopted in the last years has had a weak point that can result fatally to the company. Due to favorable exchange rates, it has gained good profits but now seems that the wind will change and dealing in yen (and not in the customer market currency, the US$) has become a weak point that can easily transform into a threat. And the last weakness of this company is that due to its early entrance into the cordless market sector it is now locked in producing low voltage battery tools in a time where the market is moving toward high voltage batteries. Thus, the threats for Makatume can be financial stress due to the reverse in favor related to the exchange rates. The profits will decrease not because of product quality but to exchange rates.
Also, there are Chinese exporters which are favored by the low price of manufacture and the favorable Yuan/US$ exchange rates. This can become a major threat for Makatume. This way the Chinese appliances will gradually substitute Makatume’s products causing the contraction of its market share. Less market share combined with a non-favorable exchange rate will negatively affect Makatume’s revenues and brand image in the public. This is the second, and perhaps the biggest, threat for Makatume.
Thus the company has to react fast. Good brand recognition among the US consumers gives Makatume a big opportunity. It is appropriate for the company to gradually transfer part of its production line processes to the United States in order to avoid its yen-to-dollar exchange problem. Maybe it can transfer only part of its assembly processes. This will enable Makatume to sell directly in US$. The increase in cost can be managed because of its highly positive brand recognition. Another opportunity is the fact that it is a leader in cordless tools and professional tools markets. It should begin gradually transferring from low-voltage to high-voltage batteries. First, only in new tools offered in the market, coexisting with low-voltage battery ones, and then gradually totally transfer all of its products into high-voltage battery ones. The considerable market share it has will give Makatume the opportunity of minimizing the negative effects of this transferring.
References
- Davenport, Th. (1993). Process Innovation: Reengineering work through information technology. Harvard Business School Press, Boston.
- Hill, T. & R. Westbrook (1997). “SWOT Analysis: It’s Time for a Product Recall”. Long Range Planning30 (1): 46–52.
- Stroup, J. (2008). Organizational leadership. The Managing leadership On-Line journal. Web.