Smart Motors Ltd: SWOT Analysis for a Second Hand Motor Vehicle Selling Company

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This is an analysis of internal and external environments for a proposed second hand motor vehicle selling company, SMART MOTORS LTD. The company will be located in New York City. The company will be dealing with buying and selling of second hand motor vehicle at national and international levels. The company’s management should clearly assess the internal and external environments and their influence to the business operations. This is best achieved through conducting a strength, weaknesses, opportunity and threat analysis (SWOT). This analysis will enables the company to establish its strengths, weaknesses, opportunities as well as threats that may affect the way the business operates in the market. The management therefore will study and analyze its environment so as to come up with a good action plan on how the business will operate. The company will carry out a trend analysis of both internal and external environmental factors that will affect the business (Armstrong. M. 2006 p. 48).

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The external environmental factors that would affect Smart Motors Company will require the analysis of economical, technological, political, legal, demographical and social trends that can affect positively or negatively the realization of the company’s objectives. The first step is to identify those factors at each level, which are pertinent to the attainment of the company’s objectives and attach a scale of preference as to their importance. This will enable it to recognize those factors that have influence on its operations. The company will have very little powers if any to control these factors and therefore it has to find ways and means to adapt to these factors if it has to operate (Lamb and Boyden 1984 pp. 154-158).

The political, legal and regulatory environment constitute of that environment that encompasses both short term and long term alterations in the government plan and policies. The company should establish the extent to which these factors have influence in the operation of its business. Political interference in the economy can be through taxation procedures, law governing labour policies, environmental management regulation, trade duty, trade restrictions and political stability of a country. The government can provide a favorable environment for the company’s operations by considerably lowering tariffs on imports and exports. This might be an opportunity to expand the business and increase its trade internationally.

Similarly the government may decide to provide subsidies to businesses dealing with this particular type of trade, with an aim of promoting international trade in a bid to improve its balance of payment. The company should take this opportunity to develop its financial base by increasing the sales of the business. Consequently, the company may be faced by some challenges in its efforts to promote the commodity due to structural rigidity to change. This can be viewed as a weakness and an advantage to its competitors.

The government can also institute strict labour laws such as high rate of minimum wages. This means that a high proportion of the company’s profit will go to payment of the employees. This in its effect is a threat to the success of the company. Strict union laws, laws pertaining to worker’s safety, pollution laws and laws on environmental protection may negatively affect the operations of the company and hence a threat to its success (Sweet and Franklyn H. 1964 p. 578).

The company should take into account the economical environment in which it is operating. It should asses the situation of the economy generally and the consumers buying pattern and their spending. It must consider the level of economic growth, the rates of exchange, rate of inflation and the cost of borrowing money. These factors may favour or lower the rate of its activities in the economy. If the interest rate is very high, the cost of borrowing capital is equally high. The company therefore may not be able to expand its operations and this is a threat to its growth. Similarly, if the cost of borrowing money is very low, the company will be able to borrow large sums of money and hence able to finance all its expansion activities. This can be perceived as an opportunity to the business.

Since the company deals with export and import business the rate of exchange may favour or limit the scope of their business. High rate of inflation lowers the purchasing power of the consumers and this reduces the amount of sales and hence a threat to the company’s growth. Consequently, if the levels of inflation is low, the citizens has a high purchasing power and hence an opportunity for the company to increase its sales and hence growth (Van der Meer 2005 p. 74-85).

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The business is also subject to social environment. This constitutes the changes regarding what is important or not important to people in that environment. These are the social factors associated with the community around. These factors include the cultural factors such as diet and housing conditions, the demographic factors such as the rate of population size and distribution, attitudes towards religion, materialism and career. These factors determine the level of demand of the company’s products and the way it operates.

Social factors may provide opportunities or threats to its success. In a population where the majority comprises of ageing population, the company may find it difficult to get the required workforce. This may intern raise the cost of labour posing a threat to the survival of the company. Similarly, if the population majority consists of young and energetic people, the cost of labour is relatively low and hence an opportunity for the company to cut on operations cost. (Ward J. and Peppard J. 2002 pp.70-81).

The company may face a threat if the community beliefs those second hand goods are inferior. With such belief, the company may face a challenge in its promotional efforts leading to low sales. The operations of the company are also highly dependent on the cultural beliefs and attitude of the population. The company should strive to convince the society that its products are the best in the market and that their belief is a misconception. This can be done through intensive marketing and promotion of their vehicles. (Porter, M. 1980 p. 98).

The company should also take into consideration its internal environment. This constitutes those factors that can enable it to acquire advantages or suffer disadvantages as it struggles to meet the requirements of its customers and out do its competitors. These factors include Business strategy, Structures, Resources, goals, culture, technologies, innovations and leadership. These factors can be looked at as either strengths or weaknesses of the company depending on whether they will affect it positively or negatively.

The company should asses its strengths. These are factors that will give the company advantages in meeting the requirements of its customers over its competitors. The company’s strengths should be customer oriented as they will only be significant if they make the company meet its customers’ requirements. The company should establish its weakness and strive to overcome them. The weaknesses refer to those factors that may hinder the company from achieving the needs of the customer.

The company should identify its resources and classify them as either Human, tangible and intangible. It should then evaluate its financial and physical assets such as business structures. The intangible resources should be well identified because they can give the company competitive advantage over its competitors. The human resources include the services rendered to the business by the employees. The company can have competitive advantage by having skilled employees who are professionals (Menon, A. et al. 1999 pp 18-40).

The company will also require identifying its weaknesses in terms of leadership. This can be overcome by devising a good working plan which involves all the stakeholders in the business. Decision making should not be left entirely to the high level mangers, but the views of the subordinate staffs should be encouraged. This in effect makes the junior staff have a sense of belonging and consequently increase their efforts towards attainment of the company’s goals. The company should develop a strategy aimed at providing the overall direction of the business operations. The management will constantly evaluate and control the business direction to achieve the intended objectives and to have competitive advantage over its competitors (Porter, M. 1980 pp. 98-99).

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Factors associated with technological aspects involve ecological as well as environmental consideration. The company should employ high levels of research and technology in order to renovate the vehicles to match the latest designs. In a competitive world the company should keep on changing designs and variety of its vehicle to meet the ever changing taste and preference of its customers. Technology also facilitates efficient conduction of market research. This will assist the business establish what the customers’ need and the features they would require added to the vehicles. The company should keep on shifting technology to bring about innovation which changes the design and physical appearance of the vehicles making them look modern and hence increasing the sales. (Armstrong J., 1982 pp.197-211).

All these factors can be summarized in a SWOT analysis table.

Forces Strength Weaknesses Opportunities Threats
Legal and regulatory Conducive working environment ( e.g. good security) Not having legal documents e.g. trade license Tax holidays and subsidies Cancellation of trade permits
Economic High level of inflation High cost of borrowing capital Low levels of inflation (high purchasing power) Low amount of sales
Technological Ability to adopt new technologies Rigidity to adopt new changes Ability to change features of the vehicles Competitors able to modify vehicles better
Social High population large market for the vehicles Low population resulting to low sales High population translates to more sales Cultural beliefs (Second hand vehicles of low quality)
Environmental Strict policies on environmental conservation (high pollution) Unable to meet the expected levels on pollution Environmental changes favoring the business.(les strict rules) Heavy fines by legal authorities on defaulters (competitors able to meet the rule)
Strategy Well developed strategies on achieving the goals Goal of the business not well defined Good market research and promotional methods Risk of being out done by competitors in product promotion
Innovations Continuous changes to the motor vehicles Lack of innovations (vehicles seeming very old) Good quality vehicles Unable to compete favourably. Due to lack of innovations
Leadership Good leadership and management skills Authoritative leadership Good interaction with the society around Issues of strikes and work boycotts due to poor leadership.

A table summarizing factors that affects the strength, weaknesses, opportunities and threats that can affect a business.

Reference list

Armstrong J., 1982. “The Value of Formal Planning for Strategic Decisions“. Strategic Management Journal 3: 197-211. Web.

Lamb and Boyden. 1984. Competitive strategic management, Englewood Cliffs, NJ: Prentice- Hall. Web.

Menon, A. et al. 1999. “Antecedents and Consequences of Marketing Strategy Making“. Journal of Marketing 63: 18-40. Web.

Porter, M. 1980. Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press.

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Sweet and Franklyn H. 1964 Strategic Planning… A Conceptual Study, Bureau of Business Research, The University of Texas. Web.

Van der Meer P. 2005. Omgevings analyse. In Ondernemerschap in hoofdlijnen. (pp 74 -85). Houten: Wolters-Noordhoff.

Ward J. and Peppard J. 2002. The Strategic Framework. In Strategic Planning for information systems. (pp. 70 – 81).England: John Wiley & Sons. Web.

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