SWOT - Strengths, Weaknesses, Opportunities and Threats

The Caravan SWOT Analysis

The Caravan conducted a SWOT analysis of Company X, a car rental company in Surrey, BC. It is a growing and a relatively new company. Despite the fierce competition, it has been able to grow to several locations. The SWOT questions were composed with a combination of questions from Lepsinger’s six Bridge Builders (2010) and Hughes et al., strategic leadership material in Chapter 4 (2014). The interview was with Company X’s regional manager (West Coast), and we found that the business was generally effective; Company X rented cars and made revenue. The SWOT analysis gave a well-rounded picture of the company, both internally and externally and provided a starting point for growth. The analysis of the SWOT is useful in creating an action plan to understand the vision of the company, what it has done thus far and what it has learned thus far. These easily lead into what actions should be taken by the company to increase its successes.

SWOT ANALYSIS
The company’s top three strengths, weaknesses, opportunities, and threats are summarized below:

Strengths:
a) newest model cars (oldest are two years old)
b) low prices (at least 50% cheaper than other rental companies)
c) appropriate types of vehicles for the market

Weaknesses:
a) understaffed
b) lack of physical space to expand
c) traffic tickets and revenue drain due to vehicles parked improperly because of lack of space.

Opportunities:
a) excellent profit margin opportunities
b) opportunity to build a strong brand name because of great prices
c) unusual contracts (one branch in the US received a contract for a movie production)

Threats:
a) UBER car-sharing taking the place of car rentals
b) vehicle damage leading to loss of insurance
c) competition

The strengths the company identified were having the newest cars (all models are 2018 or 2019) and these appeal to the customer, both to their identity and status but also to their desire for a vehicle in good condition. The second strength of Company X is its prices; its prices are 50% lower than competitor car rental agencies. The third strength the company identified was that the types and models of cars are appropriate for the rental (versus purchasing) market.

The company identified three weaknesses that significantly affected the running of the business. Importantly, the company is highly understaffed, and employees must switch between roles frequently to cover all the bases of its daily operation. This leaves no room for strategic planning or otherwise building up the company. Secondly, the physical space for the cars is insufficient. This lack of parking space creates the third weakness: high financial loss because the cars get ticketed for being in the wrong place.

Despite these challenges, Company X’s opportunities abound because it is a very profitable company and has much potential to build a strong brand name by providing a service at an unbeatable price. Further possibilities include cooperate car rental contracts; for example, a sister business in another city signed an agreement to supply vehicles for a movie production.
Though the opportunities are significant, Company X faces real threats. The primary threat is that of UBER, which can significantly detract from car rentals. A secondary threat is that of other car rental competitors. A third threat is that of damage to the cars, which increases insurance fees and can ultimately lead to losing insurance, thus closing the business.

These strengths, weaknesses, opportunities, and threats provide insight into the company’s internal and external impact and influence. Looking more deeply at these four areas offers a unique insight into areas for growth. Considering the strengths and weaknesses together provides an internal perspective. The strengths of Company X need to be further expanded and built on, while the weaknesses need to be shored up. The opportunities and threats provide an external perspective on the company, showing where the opportunities to invest are and which threats to monitor over time.

Conducting this SWOT provides an opportunity to build the company’s future and combining the four areas offer exciting and new insights. For this analysis, the Caravan has chosen to examine how to use Company X’s strengths to capitalize on its opportunities, how to use the strengths to mitigate the threats, how the weaknesses could be used against the company in the areas it faces threats and how the weaknesses impact the opportunities.

How can Company X use its strengths to capitalize on its opportunities?

Identifying strengths can maximize the productivity of Company X. Company X should analyze which strength can be used as leverage in the market. Brand new cars, for example, create profits for this company and can enable this company to supersede its opponents. Solving the problems this company faces will help its influence on the market. Identifying the opponent’s shortcoming is the key to success.

How can Company X use its strengths to mitigate its threats?

Company X can bridge the gap among competing companies by advertising and buying more brand-new cars to capture the market. If Company X is not popular enough, the popularity of other companies will be the threat. According to the company, Uber is the main threat. To deal with that threat, Company X had better use the same strategy as Ubers’ to balance the leverage. Alternatively, through a win-win attitude, making a contract to initiate cooperation with Uber would control Uber’s effect on Company X.

How can Company X’s weaknesses be used by its threats?

The amount of damage to cars and concerns about the cost of insurance charged by the insurance company creates an insecure climate. Facing insecurity, Company X will resist additional measures, thus reducing the number of brand-new cars owing to the cost of insurance and the shortage of parking space. Company X cannot take risks. Therefore, Uber, the main threat, will take advantage of Company X ’s concern of taking risks, thereby capturing the rest of the market with a win-lose attitude. The shortcomings of the Company X are acting like an internal threat to the company, despite facing the external threat as Uber. In conclusion, weakness turns out to be an internal issue for the company.

How do Company X’s weaknesses impact and minimize its opportunities?

Company X’s weaknesses are understaffing, lack of physical parking space and high losses owing to lack of adequate parking space. Threats (particularly UBER) do not have staffing issues or parking space needs and by no means suffer from damaged inventory. The competitive edge held by Company X’s competitors, i.e., UBER, poses all the identified threats and a “blue ocean” opportunity by UBER. As this competition uses a different business model, Company X can focus on competing in its “red ocean” by continuing to listen to the customer and performing analysis and strategically integrating the proposals.

Suggested solutions and strategies to strengthen the Company X:

1) The biggest threat to the company is UBER, and though UBER is not available in Vancouver yet, it could prove detrimental for car rental business. However, car rentals have the upper hand when it comes to tourists that are in the area for long-term travel. So, one way to strengthen Company X will be marketing in a way that people are aware of the company’s advantage. The Caravan suggests that Company X should advertise to all types of corporate customers who would require the services of vehicles for their professional reasons and bid to provide car services for them. Company X should be very competitive in its pricing strategy as it relates to other similar car rental agencies like UBER. It should carefully establish prices so that they do not seem too high or too low, while at the same time allowing Company X to reach its business goals and establish its own customers so that even if UBER, or any other car rental company in the city increased competition, Company X would be stable.

2) Secondly, the threat is insurance costs going up or losing insurance altogether due to too many damage claims. To combat this, the company should sell the ICBC insurance at a mark-up price and the customer bear this cost. For example, regular ICBC insurance includes a $300 deductible. Company X can sell a minimum of $1000 deductible, and the insurance rate charged to the customer is double the standard. This insures coverage of the costs and does not cause much loss (financially) in case of a damage claim but like mentioned before, does not negate the risk of losing insurance altogether. One effective strategy to combat loss of insurance would be to give the customer the option to buy insurance from third-party websites like Travel Guard or Allianz Global while making the booking. Using this strategy will help keep the damages on the company’s coverage in check.

3) Another threat that company faces is not one of the top three but is that of local renters. With an international customer the company is certain that the car will be returned as the international customer will be highly unlikely to abandon the vehicle before leaving the country. With local customers, however, there have been some significant problems in the past. Sometimes the company has had to report the vehicle stolen, and the RCMP has had to track it down. It is essential to learn from such events and have stricter policies for local renters to avoid such circumstances in the future.

4) One of the weaknesses listed above is understaffing, and it is a top weakness in the company right now. The severity of this problem is such that sometimes the manager has to clean cars to get the vehicle ready on time in rush hour. Hiring more people is necessary. Employing the right kind of people who are fit for the job is also necessary. Due to being understaffed, Company X sometimes hires people not perfect for a particular position but who contributes to the company’s overall performance. Hiring unsuitable people must end. For Company X to experience top performance, regular feedback is needed from the customers, and an accurate study of customer satisfaction is also needed. Employing and training the right people for the job is very critical in order to take explicit feedback that will be useful for the company’s improvement and future services development. Staff are needed who can help build a relationship with customers as they will be in direct contact with the customers.

5) The company should invest in buying more property to have sufficient parking space for cars and avoid unnecessary drainage of money to parking tickets. Parking outside also keeps the vehicles at risk of being broken into or stolen. Company X should invest in properties with garages near the significant high-travel areas, and the parking spot should have an attendant who looks out for the company’s car and makes sure the drivers are parking appropriately.

6) As far as competition is concerned, the prices offered by the company are unbeatable. There are a lot of new customers every day, but all of them say that they have never heard of the company before. Despite having multiple locations and being in existence over the years now, the company has been highly unsuccessful in building a brand name. Company X needs to invest in marketing and advertising. By doing this in the long run, the company can even raise their prices and still be as successful because it will have a good brand name. The company has excellent offers, and with the right marketing and advertising, it can grow faster than ever.

To sum it up, the company needs to invest in resources like physical spaces, marketing and hiring people. Moreover, the company has to take a good look at what has not worked in the past and not make the same mistakes by establishing new policies or amending the older ones.

Using Lepsinger’s Bridge Builders as an outline for suggested changes to Company X, the Caravan has listed a few more suggestions below. All these can be applied once the company decides on a strategic initiative. According to Hughes et. al, (2014), finding a strategic initiative is about identifying a new initiative that the company could launch to take advantage of changing competition conditions while helping sharpen the existing strategies and insights. It also involves learning from the success or failure of the initiative.

How can Company X translate strategy into action?

The company’s vision provides the link between strategy and actions and is a prerequisite for ensuring that the strategic direction and project plans will be aligned (Lepsinger, 2010). The company needs to focus on the vision and align its actions with it. With the vision in mind, the company needs to set challenging but realistic strategies and implement them on every level. Firstly, the strategies will be communicated to the whole team, and this will inspire those working on the strategy.

How can Company X Expect and encourage top performance and hold people accountable?

People need to be held accountable, and they need to feel a sense of belonging to the Company. There needs to be an improvement in team-work. According to Lepsinger, “[b]y increasing team and individual accountability and encouraging people to take responsibility for their decisions, organizations can have a highly positive impact on team performance and improve its ability to execute plans and initiatives” (2010). Having a team made up of individuals who are emotionally vested in the company will make an immeasurable difference to performance.
How can company X involve the right people in making decisions?

Involving the right people will ensure that Company X has access to information and perspectives that might not otherwise be available to it and decreases the likelihood that it will take action based solely on the familiarity of the situation (Lepsinger, 2010). Involving the right people in decision making is crucial. Company X must include people who are familiar with the situation and have varying perspectives so that the company can consider all possibilities, and make an informed decision.

How can company X facilitate change readiness?

Change readiness is one of the qualities Company X needs to address. According to Lepsinger (2010), the factors influencing change readiness are relatively simple practices, like providing frequent updates, sharing honest information, providing employees with the opportunity to express their opinion, making sure management actions align with the change initiative, identifying and handling obstacles and ensuring adequate resources are available. There needs to be more transparency and a free flow of information in Company X. Actions and progress need to be checked regularly along with the availability of resources. A culture of good communication needs to be developed and carefully maintained. This requires a competent and careful employee who is detail oriented.

How can Company X increase coordination and cooperation?

To increase coordination and cooperation, factors such as staff requirements, resource requirements, personal experiences, and conflicting priorities need to be investigated (Badiru, 2007). Company X needs the assistance and joint effort of all stakeholders; the management, the employees, and the customers have to work together towards the same goals. The company policies on car renting and services should be communicated clearly to the customer, informing him or her of expectations and what the consequences will be when not expectations are not complied with. To increase cooperation among the staff communication must be clear and transperancy must exist (Lepsinger 2010). Furthermore, the team must understand what its responsibilities are at any given moment, from parking cars and their customer service. Company X should also hire staff who are suitable to the job, who have an interest in car rental services, and those willing to work towards achieving the company’s shared goals and outcome.

Likelihood of Company X implementing the above strategies:

Having compiled an excellent analysis of Company X, the Caravan expects that Company X will likely implement some of the above strategies and probably not implement others. It is likely that more physical space will be purchased as this is both a strategic and physical barrier to expanding or even merely being successful. Hiring more staff will likely happen also; whether these new staff members are well-suited or not is less predictable. The other “soft” or intangible strategies may be less likely to be consistently or methodically implemented as they require a great degree of emotional intelligence of a skilled leader.

After Action Review (based on AAR in Hughes et al., [2014]):

1) What is the intent of Company X?

The organization has excellent capability to expand, and the vision for the company would be to have 600+ cars, 100 reservations a day (which happens a lot but not regularly), and to be a significant player in the car rental business. The ultimate goal of the company is to operate on all major airports in North America and eventually in Europe. The manager believes that “[Company X] need[s] to invest more in technology. The checking in and out process should be more computer-based.” Despite this, the Caravan team feels that the company is overlooking some significant problems like understaffing and potential threats and needs to focus on these before technology.

2) Which of The Caravan’s suggestions will Company X probably carry out?

Team Caravan hopes that the company will carry out all the suggestions, but as everything needs to be done one at a time, Company X will likely start with the tangible suggestions of buying or renting property to park the cars in and hiring more staff. This may be followed by building up their brand and then increasing the free flow of information and holding people accountable. These are the necessary steps towards a strategic organization and the foundation of an excellent strategic company. After they have implemented these the company can move on to work on facilitating change readiness as it is one of the weak links in the company. Setting clear priorities helps promote coordinated action across the enterprise and provides a basis for actively deciding for short and long-term changes (Hughes et al., 2014).

3) What will Company X have learned?

The Caravan believes that the company is aware of change reactions. Change actions that will help Company X initiate and respond to change in ways that create an advantage, minimize risk, and sustain their performance. The company will understand how to integrate strategic leadership into their coordination and in acting systematically. Ultimately, Company X will have learned from its past mistakes or experiments.

4) How will Company X disseminate the lessons learned?

The company needs to try implementing the suggested strategies and see what works for them. As emphasized earlier, there needs to be transparency and all the people in the organization should be clear about the change strategy as well as its results. This way, everyone is on the same page and pulling in the same direction, and this also invites multiple perspectives and suggestions for improvement. The strategies and situation will not fit all circumstances, and Company X will need to display change readiness to understand the appropriate changes for each situation. Company X can disseminate the lessons learned in their long-term plan. Plans on how to become market leaders in the car rental business, build a brand or increase their name recognition and on how to be recognized for outstanding services. All in all, Company X has great potential and can achieve everything it aspires to.

Anticipating success and failure of the change:

Our team has suggested various solutions and strategies for Company X with a hope to help it grow, but there are always chances of the suggested changes failing at any given time while implementing new strategies. There can be two possibilities: success and growth of the company or the changes not aligning with the company’s agenda and the process being a failure. The chances of suggested changes being successful are higher as these are some simple changes and they largely do not involve significant risks. As the Caravan team has worked on providing a solution and strategy for each problem, these will benefit the company as they eliminate potential weaknesses and threats. We firmly believe these changes, if implemented, will help the company grow better and faster. However, some significant changes like stricter policies for local renters or encouraging customers to buy insurance from third-party websites might affect the revenue of the company to some extent. If the loss is higher than the loss the company is currently facing with these problems, it will be a win-win situation. In the event that the suggestions do not work for the Company, it can choose not to implement them while implementing other strategies and learning from the process. Again, we predict that this SWOT analysis and its implications will be helpful for Company X and are confident it will help it grow to its full potential.

References

Badiru, A. B. (2007). Communication, Cooperation, and Coordination Model for Process
Improvement of C2 Projects. Retrieved from https://apps.dtic.mil/dtic/tr/fulltext/u2/a481250.pdf

Hughes R., Colarelli-Beatty K. & Dinwoodie D. (2014) Becoming a strategic leader. San Francisco: Jossey-Bass Second Edition.

Lepsinger, R. (2010). Closing the execution gap: How great leaders and their companies get results. San Francisco: Jossey-Bass.