SWOT Analysis Example

This example uses the international car manufacturer Audi to illustrate how the SWOT analysis can be applied at the organizational level. It is a well-known and popular example that is frequently used to illustrate SWOT in action.

Under each of the SWOT categories there is a list of key facts, as you would expect in such a report. This is followed by a fuller explanation as to why each fact has been categorized in this way giving you an insight into the type of discussions that would normally take place as part of this process.

Background to Audi
Audi is one of the major car manufacturers in the premium and supercar segments. The company has a strong brand image, giving it a competitive advantage that enables it to record high sales growth in both its domestic and international markets.

Strengths
• Backed by Volkswagen, the second largest automotive corporation in the world.
• Presence through its parent company in over 153 countries.
• Parent is financially secure - recorded revenues of €126,875 million ($168,325.1 million) in 2010.
• Audi's backing by Volkswagen gives it significant competitive advantage.
• Audi's track record shows high domestic and international sales growth.
• It has high return on equity (ROE) and return on assets (ROA) compared to its competitors.

Explanation
As a subsidiary of Volkswagen Audi has the financial backing and expertise of this corporation's substantial development in vehicles, engines, parts, production, distribution, and sales at its disposal.
Volkswagen's expertise covers a wide range of vehicle types - passenger cars, commercial vehicles, trucks, and buses.

Volkswagen's financial track record is secure, ranking 13th in the Fortune Global 500 list of companies.
Audi's return on equity (ROE) was 23.1% in 2010. This compares to significantly lower ROE for two of its main competitors in the same period: 13.9% ROE for BMW and 12.4% ROE for Daimler.
High ROE shows Audi are efficiently using their shareholders' investments and rewarding them with higher returns than their competitors.
Audi's return on assets (ROA) was 8.4% in 2010, substantially more than BMW's ROA at 2.9% and Daimler's ROA at 3.3% for the same year.
Its high ROA indicates that Audi is efficiently deploying its assets and allocating its resources in comparison to its competitors.

Weaknesses
• Significant product recalls over recent years shows poor control over parts and/or product quality.
• High recall levels in recent years have reduced consumer confidence in Audi's brand which could result in lower sales.
• Its market share in terms of revenue means its lacks the scale to compete with large players such as Ford, BMW, and Daimler.

Explanation
There were 34,000 recalls of problem Audi A4 and Audi A6 vehicles in August 2011 due to defective engine fuel pump.

There were 5,992 units of Audi A6 (2001-04), RS6 (2003) & S6 (2002-03) recalled in May 2011 due to a fuel system flaw.

There were 10,200 Audi TTs (2010) recalled in April 2011 due to problems with the fuel tank ventilation system's spring.

In 2010 Ford recorded revenues of $128,954 million, BMW recorded revenues of €60,477 million ($80,283 million), and Daimler recorded revenues of €97,761 million ($129,777 million). This compares to Audi's recorded revenues of €35,441 million ($47,047 million), which is roughly 36% of Ford's, 57% of BMW's and 35% of Daimler's.

Opportunities
• Audi has placed considerable focus on developing hybrid electric vehicles (HEVs) for which demand worldwide is expected to grow.
• Rising energy costs and increased emissions regulations are likely to increase demand for HEVs.
• Global environmental issues and legislation to control global warming plus the need to conserve worldwide resources are key motivators for consumers in finding HEVs more acceptable.

Explanation
By 2015, the largest market for HEVs and plug-in hybrid electric vehicles is expected to be the US, with China second.

Sales are forecast to be in the region of 640,000 in the US and 560,000 in China for these two vehicles types combined.

Audi is one of the major manufacturers of electric vehicles having launched several hybrid models in 2010 (e-tron Spyder, e-tron Silvretta, and A1 e-tron). Its research and development is also looking into plug-in and full hybrid vehicles as well as other electric concepts for plug-in hybrids, ranging from the fuel cell to the battery-only electric vehicle.

Threats
• The global automotive industry is highly competitive and Audi is not one of the larger corporations.
• Recessions in Europe, the US, and other parts of the world have resulted in sharp falls in demand.
• Car manufacturers face relatively high fixed labor costs.
• Manufacturers' ability to close facilities and reduce fixed costs is significantly limited.
• Sales offerings of subsidized financing or leasing programs, or price reductions impacts Audi's ability to maintain its profitability per vehicle and its market share.
• The introduction of environmental engine emissions and fuel (bio and fossil fuels) requirements significantly increase R&D costs and margins.

Explanation
Some of Audi's key competitors are BMW, General Motors, Honda, Hyundai, Nissan, Peugeot Citroen, Porsche, Renault, and Toyota.

EU regulations introduced a wide range of stricter requirements, primarily impacting diesel technology, e.g. after-treatment system for nitrogen oxide.

70% of Audi's revenue is from the US and Europe.

Diesel technology needs to alter significantly to cater for biofuels.

EU Regulation requires average carbon dioxide (CO2) emissions to be reduced to 130 grams per kilometer (g/km) for all new vehicles by 2015. Any manufacturer not meeting these targets faces penalties.

The US requires uniform consumption and CO2 regulation for all 2012-16.
The Japanese government has statutory regulations for 2010-15 to reduce consumption.

The IMF expects the output of the European and US regions to remain well below potential. Tentative signs or recovery at the end of 2010 were not realized as certain setbacks and new risks came to light.
The US GDP growth rate was 1.6% in 2011 and 1.1% in 2012.
The European Commission expects EU recovery to remain sluggish, especially in view of relatively high consumer-price inflation.

You may also be interested in: SWOT Analysis PDF, Definition of SWOT Analysis, Strengths, Weaknesses, Opportunities, and Threats, Internal Factors (Strengths and Weaknesses), External Factors (Opportunities and Threats), Matching and Converting, Advantages and Disadvantages and SWOT Analysis Example.

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