- 20 Marks
Question
Customer Focused Ltd has updated its management accounts (Exhibit 1) to produce a
forecast for the year 2020 and these have indicated some significant problems. The business
owners are unsure what to do next.
Required:
You are acting as an advisor to the company and they ask you to:
Prepare a SWOT analysis of Customer Focused Ltd. You should list the strengths, weaknesses, opportunities, and threats in the SWOT analysis of Customer Focused Ltd. You should then select from your list the key strengths, weaknesses, opportunities, and threats and explain why they are important.
Answer
SWOT ANALYSIS
| Strengths | Weaknesses |
|---|---|
| The company’s location is a significant advantage | Lack of strategic experience of the management team |
| Being next to a mall results in high footfall | Available funds to invest are limited |
| Company has traded profitably | No significant technology presence OR Lack of expertise to develop technology |
| Opening hours offer convenience | Declining profitability |
| Bulk ordering enables competitive prices to be offered | Lease on the premise is about to expire |
| Good liquidity position | Lack of risk management policy |
| Relevant experience of the founders | Lack of marketing information |
| Significant reduction in agency problem and its associated costs | Poor inventory management and lack of knowledge of which products sold well and those that did not |
| Use of debt capital resulting in tax savings |
| Opportunities | Threats |
|---|---|
| Technology developments in operations management can assist the business | The competition level is high |
| Technology developments in loyalty cards can increase marketing opportunities | Price competition may reduce profitability |
| New product ranges with higher margins could be sold | New businesses can enter the market relatively easily |
| Dietary changes create opportunities to sell healthier products | Customer loyalty may be low as customers are easily able to switch |
| Higher disposable incomes enable higher-priced/higher-margin products to be sold | Obesity crisis/Lifestyle changes may shift demand for goods |
| Shift in demand for processed food with longer shelf life and easier inventory management | The lease on the premises is due to expire and the business may face substantial increased costs. |
| Increased demand for convenience | |
| Development of online ordering (order and collect, home delivery) | |
| Change in customer demographics opening opportunities to sell high margin items like cosmetics |
Key areas:
Key strengths
- The business’ location is a key strength but this is presumably costly in terms of the lease agreement.
- The company has traded profitably and, hence, knows how to run a convenience store profitably.
- The company has substantial liquidity, providing flexibility in decision-making.
Key weaknesses
- Lack of technology development hinders marketing and business growth.
- Liquidity is high, but demands on those funds are imminent, particularly for lease renewal and investments.
- Strategic and inventory management weaknesses may cause costly mistakes.
Key opportunities
- Technology improvements can enhance marketing and operations efficiency.
- Product range expansion, especially healthier options, can secure business sustainability.
Key threats
- Profit decline may be due to competition and/or lack of product development.
- Low customer loyalty emphasizes the need for better market intelligence.
- Expiring lease poses risks to location sustainability.
Conclusion:
Customer Focused Ltd has demonstrated profitability but faces declining performance. Strategic decisions will determine its sustainability and future success.
- Topic: Strategy, stakeholders, and mission
- Series: MAY 2020
- Uploader: Theophilus