Tag: Analysis

An Analysis of Wells Fargo & Company (WFC)

Wells Fargo & Company (WFC) is a huge Western and Midwestern bank that provides a diverse array of financial services to its more than 23 million customers. The company employs more than 150,000 people at its over 6,000 locations nationwide. Wells Fargo has about $500 billion in assets.

While the company continues to derive more than half its revenues from interest income (about $26 billion), its activities are not limited to collecting deposits and lending money. Wells Fargo engages in other businesses such as brokerage services, asset management, and investment banking. The company also makes venture capital investments.

Over the last ten years, Wells Fargo has averaged a 1.57% return on assets and an 18.19% return on equity.

Location

Wells Fargo is closely associated with California in the minds of most investors. The company now operates in 23 different states. However, the concentration in California remains.

Mortgage lending in California accounts for approximately 14% of Wells Fargo’s total loan portfolio. Commercial real estate loans in California account for another 5% of the company’s total loans. No other single state accounts for a similarly sized portion of total loans. In fact, neither mortgage lending nor commercial real estate lending in any other state accounts for more than 2% of Wells Fargo’s total loans.

Cross-Selling

Wells Fargo’s focus on cross-selling is well known. The company has a stated goal of doubling the number of products the average consumer and business customer has with Wells Fargo to eight products per customer (from the current four products per customer).

Cross-selling increases customer stickiness. It also helps increase profitability by decreasing expenses relative to revenues. The need for a large physical footprint is reduced – as is the need for a large number of bankers. Instead, the existing infrastructure is able to provide additional revenue from the same customers.

Wells Fargo’s Chairman & CEO, Richard Kovacevich, explains the importance of the company’s cross-selling in the “Vision & Values” section of the corporate website:

Cross-selling — or what we call “needs-based” selling — is our most important strategy. Why? Because it is an “increasing returns” business model. It’s like the “network effect” of e-commerce. It multiplies opportunities geometrically. The more you sell customers the more you know about them. The more you know about them the easier it is to sell them more products. The more products customers have with you the better value they receive and the more loyal they are. The longer they stay with you the more opportunities you have to meet even more of their financial needs. The more you sell them the higher the profit because the added cost of selling another product to an existing customer is often only about ten percent of the cost of selling that same product to a new customer. This gives us–as an aggregator — a significant cost advantage over one product or one channel companies. Cross-selling re-invents how financial services are aggregated and sold to customers — just like other aggregators such as Wal-Mart (general merchandise), Home Depot (home improvement products) and Staples (office supplies).

Mr. Kovacevich’s enthusiasm for the cross-selling model is well justified. It is difficult to quantify the importance of meeting all the varied needs of your customers, because you can not measure the opportunities you missed. However, it is obvious that reducing each customer’s interest in considering a competitor’s services will greatly increase long-term profitability for any company engaged in any line of business – not just for a bank.

Later, in the same website section, Mr. Kovacevich addresses the importance of customer stickiness:

(Cross-selling) is our most important customer-related sales metric. We want to earn 100 percent of our customers’ business. The more products customers have with Wells Fargo the better deal they get, the more loyal they are, and the longer they stay with the company, improving retention. Eighty percent of our revenue growth comes from selling more products to existing customers.

This focus on retention is an important part of a long-term plan to maintain Wells Fargo’s above-average returns on assets and equity. Extraordinary profitability comes from differentiating your product or service from those of your competitors. Increasing customer stickiness and reducing “comparison shopping” is a key part of maintaining extraordinary profitability.

Some businesses are blessed with enviable economics because of their product’s natural prominence in the minds of their customers. Most businesses are obsessed with market share. But, how many really think about “mind share”? Obviously, a product like Coke (KO), Hershey (HSY), or Snickers is going to have a positive association in the minds of consumers.

For many people, these products will also have a prominent place in each customer’s mind (relative to other products and services on which money can be spent). A few other businesses have a healthy mind share without the positive association; GEICO is the most obvious example. The company’s brand conjures up nothing but the words “auto insurance”. Of course, that’s all the GEICO brand has to do.

So, what does all this have to do with Wells Fargo? Mind share isn’t just the result of exposure to advertising. In fact, in most cases, exposure to advertising can not duplicate the kind of results that a direct, differentiated experience creates. Entertainment properties are by far the leaders in mind share. People who saw and loved Star Wars remember the film. In fact, they don’t just remember the film, they actually file it away (or, more precisely, cross reference it) in countless ways within their mind.

The evidence for this particular example is abundant. There are countless references to Star Wars in other media. The name, the music, the opening text and countless other elements are immediately recognizable. Even the films Star Wars fans hated made more money than almost any other movies in the history of cinema – and this was decades after the original came out. So, obviously Star Wars has the kind of lasting mind share any business should aspire to if it hopes to continuously earn extraordinary profits.

Unfortunately, most businesses, however well run, can not attain this kind of mind share. The products and services they provide can never be as differentiated and memorable as a motion picture. Just as importantly, the positive associations will not be present, simply because the product or service is not inherently exciting, entertaining, or pleasant. This is clearly the case in financial services.

So, what can a financial services company do to improve its mind share? The most obvious tactic is simply to “wow” its customers. In fact, Wells Fargo’s CEO discusses this particular option in the “Vision and Values” section of the company’s website:

We have to “wow!” them. We know what that feels like because we’re all customers. We go to the cleaners, the grocery store, a restaurant or whatever, and we find a situation where we’re “wowed!” We walk out and we say, those people really listened to me and helped me get what I need. All of us hear stories about customers, say, who pick a certain line at the supermarket because they know the person who bags the groceries connects with customers — smiles, greets regular customers by name, asks how their families are doing. When a personal banker helps a customer in one of our stores, or when a customer gets help from one of our phone bankers or does transactions on wellsfargo.com we want them to say, “That was great. I can’t wait to tell someone.”

Another option worth pursuing is widening the associations present in the customer’s mind. Financial services is a business where associations tend to be more conscious, categorized, and hierarchical than the associations formed in more heavily branded businesses. Put simply, the (potential) customer usually thinks of a “set” before thinking of an “element” within that set. Like many mental associations, the information can be returned in either direction. For example, the customer may normally think “banks” and then think “Wells Fargo”, but will also be able to return the word “bank” if prompted by the name “Wells Fargo”. This categorization is important, because it provides (limited) permission for Wells Fargo to expand its mind share horizontally (across service categories).

In other words, providing a diverse range of financial services doesn’t just make sense from the provider’s perspective, it also makes sense from the user’s perspective, because the user of financial services has already grouped deposits, borrowing, credit cards, insurance, brokerage services, asset management, etc. together in a very loose way within his mind. As a result of this mental network, one positive experience with Wells Fargo will greatly affect a customer’s desire to pay for an additional service, even if the two services are not really all that similar.

The three key elements here are: a broader definition of what Wells Fargo is (a place that does “money things”, not just a bank), a positive experience, and some sense of trust that the quality of service will be consistent. The last requirement is the easiest to meet, because it’s natural for a customer to assume that the positive experience was not a fluke, much the way a diner assumes the good meal he had at a particular restaurant was not caused by his picking the best offering from the menu. The diner usually assumes the overall quality of the restaurant’s various entrees is superior. Likewise, a good experience with one of Wells Fargo’s products or services will likely rub off on its other offerings.

Valuation

Shares of Wells Fargo currently yield just over 3%. The stock trades at a price-to-book ratio of just under 2.75 and a price-to-earnings ratio of less than 15.

Conclusion

Over the last 5, 10, 15, and 20 years shareholders of Wells Fargo & Company have fared better than the S&P 500. As of the end of last year, WFC’s total return over the last ten years was 17% vs. 9% for the S&P. Over the last 20 years, WFC outpaced the S&P 500 by an even wider margin: 21% vs. 12%.

Wells Fargo has a stellar reputation with investors. The company is the only U.S. bank to earn Moody’s highest credit rating. Wells Fargo also boasts a well-known major shareholder. The largest owner of the company’s common stock is Berkshire Hathaway. Warren Buffett’s holding company has a roughly 5.5% stake in Wells Fargo. Berkshire’s last reported purchase occurred during the first quarter of this year.

Wells Fargo has a stated goal of achieving double-digit growth in earnings and revenue while managing a return on assets over 1.75% and a return on equity over 20%. Those are both very ambitious goals. The company has achieved some of the highest returns on assets and equity of any major U.S. bank. However, Wells Fargo will probably need to increase the percentage of revenue it derives from fee businesses if it is to achieve these goals.

In the years ahead, the company may well become more of a diversified financial services business. In fact, that’s what I expect will happen. The company’s commitment to cross-selling is not some fad. Eventually, this commitment will change the way investors think about Wells Fargo. Soon, it may be considered much more than a bank.

Wells Fargo’s CEO makes the case that his company’s P/E is simply too low. Wells Fargo has a solid history of strong growth and profitability. So, why should it be valued similarly to most other banks? Shouldn’t it be awarded a multiple more in line with a growth company?

There’s actually some merit to this argument. Wells Fargo is unusually well positioned for a bank. Often, those banks that seem certain to earn very high returns on assets and equity for many years to come are poorly positioned for future growth. These banks are often smaller than their competitors and focused on a specific geographic niche. Any acquisitions would dilute the exceptional profitability of the bank’s niche.

Of course, there are also many consolidators in the banking industry. Unfortunately, many of these banks do not have a history of earning the kind of returns on assets and equity that Wells Fargo has achieved. Even more importantly, there is little differentiation between these titans of the banking industry and their national competitors. Therefore, their moats are highly suspect.

Wells Fargo is a different kind of bank. It has a history of extraordinary growth and profitability. There are two obvious opportunities for future growth: geographic expansion and cross-selling. Of these two opportunities, it’s clear I’m more enamored with the latter. An eastward push is not necessary, and certainly not via an ill-advised acquisition.

There is a lot of value in the Wells Fargo franchise and there is plenty of room within that franchise for future growth. That’s one of the great advantages of the financial services industry. With the right model, limits to growth are almost non-existent. In other highly-profitable industries, there is often nowhere to reinvest new capital at a similar rate of return.

If Wells Fargo is a growth stock, it is a peculiar sort of growth stock. Maybe that is what attracted Buffett to the company in the first place. Here is a business with a strong franchise that can grow for many years to come. Perhaps most importantly, it is a growth business that frequently trades in the market at value like multiples, simply because it’s a bank.

At the current market price, Wells Fargo is the sort of investment you make once and forget. The valuation is not so cheap as to promise a good return if the business falters. But, the business is not so suspect as to require the margin of safety be provided by a low P/E ratio. Sometimes, near certain growth is the margin of safety.

On a separate topic, I’d like to encourage anyone with an interest in competitive advantages to read the entire “Vision and Values” section of the Wells Fargo site.

Superficially, it looks like any other online presentation to investors. In truth, it is nothing like those hollow, sugary slide shows. It’s actually an engaging exploration of competitive advantages within an industry that seems totally unlike the sort of branded, consumer-oriented businesses one normally associates with strong franchises. Even if you aren’t interested in the banking industry in particular, I recommend reading this section for its insights into customer psychology and behavior.

The Paramounted Importance of Critical Analysis in International Trade Policies

International trade is largely based on the constant fluctuations in the world-wide economy, this resulting in constant changes with regards to tariffs, trade subsidies and unending amendments of regulations with regards to international trade. “Trade policy and economic Growth”, a paper by Keith Maskus, PhD, focuses on the relationship between trade policies and the growth of the economy or lack thereof, the main point of interest of the paper was to establish whether the variance of trade policies will affect the economic growth of any country. The conclusion reached was that open economies tend to grow faster than closed economies, ceteris paribus. therefore concluding that open competition is good in the sense that it improves resource distribution and the country gains in Investment and innovation.

An organisation that is involved in international trade has to pay special attention to such information. There might not be any countries with closed economies however there are countries that have low imports to the point that they are regarded as closed economies for instance Brazil. In 2011 Brazil recorded 13% as its import percentage which was quite low for a country of its stature. Is it not then imperative to constantly be up to date with changes in the trade policies of countries one is interested in pursuing trade relations with? since there is a proven positive relationship between the openness of an economy to competition (thus meaning the country is greatly involved in trade) and the growth of that country`s economy, this serves as an indication of how lucrative and profitable a business venture would be under such circumstances. The Critical analysis aspect then comes into play by determining how much gain or loss would result from substantial changes to the policies, which are measures and instruments that can influence export and imports, the objective being the policies influence the trade sector to the result of profit for the business venture. one might feel a degree in commercial management is then needed in order to fully understand all the kinks and edges of the international business, and they would be right, but the eventuality is that it will always boil down to intelligence and efficiency in the analysis of trends, calculation of potential profit/loss, predictions of future stability or fluctuations in the world economy prompting changes to prices in the trade sector.

There is one other important factor that can alter potential business plans, and that is the politics of the country in question, policies are easily influenced by the politics of the nation, and it is thus advisable that critical analysis be also engaged, this results in better understanding of the country and its stability thus reducing the chances of incurring a bad business eventuality. Nations are not governed by robots, unfortunately, but are governed by people with interests and human nature desires to differ from individual to individual making it difficult to maintain a constant effective system. if politicians are elected they tend to focus on altering policies for their own benefit, and the benefit of those they promised (if there are still honest politician available) from that point it is important that international business consider such factors before pursuing business. Prime examples being, whenever there are strikes in South Africa investors tend to shy away, and most of the strikes are birthed from political influence, thus deeming South Africa an Unstable nation to invest in, or Zimbabwe a nation sanctioned, due to political infringements, making the country undesirable for investment irregardless of the profitability of the business idea. It is thus an excellent idea to firstly research in-depth to the politics of the country before hand and invest with,much-needed information, guiding the innovative decision made.

The Good, the Bad and the Ugly of the Detailed SWOT Analysis

If you are an advertising or marketing student, an entrepreneur or a business professional – be prepared to learn about one of the most basic and functional tools for marketers still practiced heavily today – the SWOT Analysis. Like many topics in school that students seem to avoid (learning the quadratic formula in Calculus, reading a Brave New World for English lit or that extremely uncomfortable topic everyone in health class is embarrassed to learn about) – the detailed SWOT analysis is just something you are going to have to face learning and get used to writing regardless of how advanced our advertising methods get. The detailed SWOT analysis will be around forever and can really help you get a grasp of the environment your product or service is getting into and what you have to give to your potential customers that your competitors have forgotten. So here it is in plain English – the good, the bad and the ugly of the detailed SWOT Analysis.

As a professional marketer that has been working in this field, representing a multitude of companies throughout North America for over 15 years I continuously stand behind the benefits and effectiveness of developing and using a detailed SWOT analysis. Before I start any new project, whether for myself or for a customer, I have, and will continue to include the development of a SWOT analysis. My suggestion to you is that if you want your marketing initiatives to perform like a professionally developed plan then you need to think and act like a professional marketer. In this article I am going to share with you…

o What is Good about developing a proper SWOT Analysis “The Good”

o What is the downside of developing a proper SWOT Analysis “The Bad”

o What if the SWOT analysis doesn’t appear to provide value to my marketing plan? “The Ugly”

So why do seasoned advertising executives claim that a detailed SWOT Analysis of your product/service could open your eyes to an opportunity you had never imagined? Let’s put it this way – if you are the owner of a brand new company and you need to sell your business to your future employees who are ultimately responsible for reselling the idea of your business – it is probably best that you have a clear sense of what your enterprise is about. Your business’ vision, mission and core values are so important to determining whether or not customers see your product/service as a need. Is the product category you are in thriving, full of competition or are you yesterday’s trend? All these answers can be yours – by breaking down your company in a SWOT Analysis.

What’s so great about a SWOT? The easiest way to answer this question – is found in the acronym – plainly stated – a SWOT will tell you what the strengths, weaknesses, opportunities and threats are for your business. Strengths and weaknesses are attributes of your business that are identified internally -what’s going on within your own company’s environment? Some of the strengths you may have is that you were the first entrant into a category (i.e. Red Bull in the energy drink category), has your company won any awards, what makes you different from your competitors (do you have something they don’t that difficult to copy?) Weaknesses could be that you were not “one of the originals” and you are lumped in with all the other gazillion varieties of soap available today – you lack that “must-have” feature. Or maybe your product or service is a seasonal item – so your key selling peak only happens during a certain quarter of the year – in which case – how does the company survive for the other 3 quarters? Strengths and weaknesses are easy to identify if you really sit and think about what your company is, stands for and what it offers your customers. Opportunities and threats are identified externally – these are aspects that happen outside of your company that you are unable to control. Going back to the Red Bull example, the fact that the general public was finding themselves more frequently exhausted and looking for a “pick me up” – paved the way for Red Bull to really pack a punch with the public. And perhaps, the easiest example of a threat is something most companies seem to be facing today – the depressing state of the economy and the public cautious with their spending. These four aspects are quick and easy ways to access your company and with a little thought – you may open your company up to opportunities you have not have originally seen.

What’s so bad about a detailed SWOT Analysis – well for a first timer, be prepared this is only one of a gazillion SWOT Analyses you will do on a variety of companies and products. But don’t worry – practice makes perfect. Sometimes the first few SWOT’s can take a fair bit of time to nail down the formula, but soon it will become as simple as riding a bike.

The ugly of the detailed SWOT analysis is very rare but has seen the light of day. Perhaps the product category is so complex that a SWOT really doesn’t answer any immediate questions for your business. Or you’ve finally completed what you thought was an amazing analysis, only to realize that after investing a large amount of money in your “dream project” you’ve entered into an overly-saturated market and your product (with no great added value) will soon be lost in the masses – YIKES! Also, some companies mistake their internal strengths as external opportunities – in which your SWOT analysis becomes skewed and rendered non-helpful.

So even though as a first timer you become frustrated with what makes an attribute internal or external, the fact that sometimes you need to research your category to really get into some interesting opportunities once you become familiar with this process, there’s a good possibility you may begin to dream about SWOT analyses and begin applying them to your everyday life – one of the great things about a detailed SWOT analysis is that it’s a basic structure that really puts your business into perspective for yourself, your employees and most importantly what you have to offer your customers.

The Dangers of Traditional SWOT Analysis

It’s that time of year again. And, no, I’m not referring to Christmas shopping. It’s only September, for gosh sake!

I’m talking about strategic planning.

This is the time of year to pause for a bit longer than usual and think and about what winning will look like next year. It’s when we peer into the future to determine where our organizations need to go and what we need to do to get there in the upcoming calendar year. It’s when we identify our top three to five strategic objectives, lay out the specific action steps needed to achieve them, and determine a realistic timeframe for reaching our destinations.

For most companies, conducting a SWOT (strengths, weaknesses, opportunities & threats) analysis is an integral part of the strategic planning process. And it can be very helpful because an accurate identification of SWOTs plays an important role in determining subsequent steps in the planning process.

For those not familiar with SWOT, strengths are those areas where we excel that are not easily copied by others. These include things like financial and people resources, infrastructure, management, price, delivery time, brand strength, customer service, product quality and so on. Weaknesses are the risks or limitations that get in our way. Anything that constitutes a strength can also be a weakness if we don’t perform well in that area.

Opportunities represent possibilities that we can capitalize on or leverage. They come in all shapes and sizes and can pop up as a result of market trends, new technologies, changes in the political or economic environment, competitor actions, and more. Threats consist of events in the external environment that give us cause for concern. For example, what are our current competitors likely to do, and where might unexpected competitors come from? An opportunity can also be considered a threat if our competitors are better positioned to take advantage of it.

When used properly, SWOT is a powerful planning tool. Unfortunately, many companies misuse it by getting stuck in old patterns of thinking about problems and threats rather then looking ahead to where the company needs to go and focusing on winning.

A primary goal of strategic planning is figuring out what you can do, not what you can’t. However, rather than looking for new and better ways to add value to their customers, many companies use the SWOT process to focus on blaming competitors, the economy, or other external factors for things they can’t control. As a result, they end up spinning their wheels rather than gaining any real traction to move the company toward its destination.

The key to using SWOT effectively is not just identifying your strengths, weaknesses, opportunities and threats. It’s asking the right questions and using the information that gets uncovered in an appropriate manner.

For example, when considering your organizational strengths, ask questions like:

  • Where have we really been able to excel?
  • Is there something we have that we don’t use/do enough?
  • Is there something we can develop quickly that we can leverage?
  • What do others consider our greatest strength?

When considering weaknesses:

  • What has gotten in our way in the past?
  • How do we get in our own way?
  • What processes do we have for identifying weaknesses in the organization, and how well do these processes work?
  • What processes do we have for addressing these deficiencies, and how well do these processes work?
  • What functional silos are scattered across the organization?
  • Are we monitoring signs and signals from the marketplace that can both support our expectations, if appropriate, and provide strong evidence when new paths are desirable or necessary?

When identifying possible opportunities:

  • Is there a product, a customer relationship, or a market presence that we can better leverage?
  • Is there something we would pursue if we had more resources (people, dollars, time, etc.)?
  • What are our competitors most worried we will do? Should we?
  • What signals are critical to assessing our relationships with our market and customers?
  • How diverse is our portfolio of business relationships and opportunities? Are there numerous ways to succeed?
  • What investments are we making whose primary returns will be in the long term?
  • Are our plans formulated in ways that they will support adapting to evolving or new market opportunities, including unexpected opportunities?

When considering threats:

  • What are we most concerned about?
  • Are their new or different competitors likely to emerge?
  • Is there a potential supply problem?
  • Do we have good relationships with employees, vendors and customers?

It also pays to analyze and review how you conduct the SWOT process itself. Not just after the fact, but as you’re engaged in the process. For example:

  • What proportions of our organization’s resources go towards maintaining and enhancing the status quo?
  • How much time do we spend leading and nurturing new directions?
  • What new efforts have we started in the past year? What efforts have we stopped?
  • Is our long-term thinking focused on the few critical things that matter? Are we vigilantly avoiding the many possible diversions?
  • Do we have the people and financial resources to execute our plans successfully?
  • Do near-term problems and opportunities frequently preempt long-tem plans and undermine progress?
  • Does it seem like the rest will be easy once we have finished our plans?

Becoming a leader in today’s chaotic markets requires fast, flexible and highly adaptable organizations. Ones that anticipate and plan for change rather than react to it after the fact.

A SWOT analysis can help you achieve this strategic agility, but only if you use the information to break away from old patterns of thinking and make strategic decisions based on where you’re going rather than where you’ve been.

Next year will get here before we know it. What are you waiting for?

How to Manage Your Call Center Using the PEST Analysis?

PEST analysis means strictly the Political, Economics, Social, and Technical analysis, which can be applied perfectly at any time. The following paragraphs will explain this analysis.

Political Issue

During the operation of managing your Call Center, you can apply the political issue in most of your unique programs. You may need long inclusive enforced copyrights. Thus, for your Call Center to show its political awareness, it must direct its topics to the involved clients in your origin country, which may consider a powerful source of votes during elections.

As an example, your Call Center can lead a voter registration campaign debuts at its web site. It will show how to practice the political rights online. In the site, there may be online polls, to give the users the chance to vote on some basic topics of the present days. Introducing an ad to encourage audience to vote in election will be great too.

Economical Issue

Applying the economical issue is very easy. From the beginning, you may wish to keep barriers to entry high. Thus, you can begin your entry to other markets. As an example, promoting your advertising online to be able to reach more customers in other countries will be great.

Understanding the economical elements, such as supply, demand, price, inflation, deflation, and marketing will be important. You must try to insert the existence of your Call Center into the frame of globalization.

Social Issue

Considering the social elements will be incredible. You may target to involve young people in good causes. Releasing a new web site to realize your aim will assist your management operation to great degrees. Hence, the new web site could provide young with a wide social place to get information and cooperate with others too. However, all categories of ages could recognize the basic social topics along with exchange their cultural issues, via your Call Center’s social web.

Technological issue

Following the latest technology must be provided as well.

For your information, you can get strong digital rights management. Thus, when you continue to use this tool as a comprehensive framework, you can guarantee the success of your Call Center’s management target.

You may be in a necessity for an automated system. Therefore, you can keep trace of your huge advertising sales from many proposals via scheduling and invoicing. On the other hand, you may desire to decrease the time-consuming and error-prone processes of manually entering and reconciling advertising schedules of your Call Center as well. Of course, this could provide a seamless workflow for your sales and scheduling staff.

Through the operation of management of any Call Center, you must aware how to select well your items of PEST analysis. Providing your employees with more training is advised in all times.

A Retail Clothing Store Business Plan – Customer Analysis

Your retail clothing store’s business plan requires a well-thought out customer analysis which describes what type of customers will make your store succeed.

Not Too Broad, Not Too Narrow

When choosing your customer target markets, make sure that they are neither too broad nor too narrow. The broader a target market, the more expensive and difficult to reach it and sell to it. For example, if the target market is simply “Residents of the Tri-state Area” this will tell you and readers little about the most effective means of reaching them.

Think further about who the most profitable customers within these broader markets will be and whether there are distinct groups of profitable customers worth mentioning. Profitable here refers to the total revenue that a certain customer will bring in through clothing purchases over a certain period, the customer’s likelihood to remain loyal and keep purchasing after that period, and the cost of achieving that customer through marketing and sales work.

If customer groups are too small, readers will be concerned that there isn’t enough potential revenue from the target markets for the store to show a profit. Remember that readers will not believe that you can ever achieve 100% of a market. You have to show that you will be able to break even with much smaller market shares, especially in the early days of your store.

Three or Four Segments Is Good Enough

To prove the excellence of your store’s potential, you may be tempted to write a list of target markets segments that you can target. Resist this temptation, and clearly show your focus on three or four segments at most for the short-term. If the amount of revenues that you can achieve from these groups seems limited over time, then you can go on to describe some future target markets, labeled as such, to detail the next steps the company can take when the original targets are tapped out.

Customer Values

For customers in each segment you describe, write about their specific reasons to buy from your store based on their values. Show the difference between each segment, because if two segments have the same values and needs, they could probably be lumped together as one. Don’t detail your promotion methods and product line again here as a way of explanation – those are covered elsewhere in your plan. Do be clear as to why each group listed is a good target for your clothing store.

Marketing Strategy Plan: Key Ingredients Of A SWOT Analysis

In every marketing strategy plan, the first step in determining your current position in the market is through a comprehensive SWOT analysis. This helps you identify and improve your Strengths and Weakness while focusing on the external Opportunities and Threats that may positively or negatively affect your company.

1. Strengths

In a SWOT analysis, Strengths are considered part of the internal factors favorable to your marketing strategy plan. This basically covers areas regarding your competencies, assets, income generation, and other intangibles like customer support and positive public image and reputation, good admin – employees relationship, and camaraderie in the work place. When you define your strengths, it must reflect the present situation and have a clear plan on how you will be able to maintain and nurture it so these factors will always be the driving force of your company.

2. Weaknesses

Weaknesses can be derived both from internal and external factors. These are usually the areas in your operation that may have a negative impact on your marketing strategy plan. The purpose of creating a list of your weaknesses is so you can adjust your strategies to include improvements in these areas. Among the common weaknesses of companies are where your operation is losing money, lack of experience, skills, and or resources among others. Weaknesses can also account for a bad reputation, significant decline in the levels of trust among consumers, or simply due to the absence of any strength.

3. Opportunities

Opportunities are basically external factors that offer potential benefits for your business. When creating a marketing strategy plan, having a good grasp of the opportunities is highly beneficial. This enables you to take advantage of various factors that may have positive effects on your endeavors such as the current economic condition, cultural climate, market volume, economic demand, etc. When you know your opportunities, you can also see the actual needs of your target market that are not being met. In essence, these opportunities are actually your future strengths and must be prioritized.

4. Threats

Although threats are usually viewed as an external condition that may impede your marketing strategy plans, they can also be viewed internally. Threats can be an unstable economic condition, cultural differences, unfriendly social conditions, significant changes in political stability, new industry regulations and legislation, and the current position of your competitor. Internally, threats are often found in the workplace such as the unstable admin – employee relationship and other related conditions. As opposed to Opportunities, Threats in essence are your company’s future weaknesses and must be addressed as soon as possible.

With the help of a SWOT analysis, you can analyze your business internally against your various resources, financial standing, support, etc. When you look at various external factors, you can examine various areas of the economy, political stability, industrial regulations, demographic, social, competitions, and technology that may have a direct impact on your business.

The Sales and Marketing SWOT Analysis

The S.W.O.T. Analysis, where you evaluate your Strengths, Weaknesses, Opportunities, and Threats, is well known in the business planning process. Many companies use this method during strategic planning exercises as a way to form strategies and make decisions on new business ventures or initiatives. It is powerful because it looks at both internal (strengths, weaknesses) and external (opportunities, threats) forces.

As powerful as the S.W.O.T. Analysis is for business planning, it is equally powerful in sales and marketing decision-making. By employing this traditional tool to each of your sales and marketing activities, you can take advantage of your strengths, uncover new opportunities, minimize your weaknesses, and eliminate your threats in amazing ways. That is, however, only if you can be objective. Otherwise, the exercise falls flat.

While the S.W.O.T. Analysis can be applied to decisions about business planning, product development and other strategic decision-making tasks, consider using it for the following two sales and marketing activities:

1. Deciding Marketing Vehicles: Use the S.W.O.T. Analysis to evaluate each marketing vehicle in your marketing plan. This will allow you to focus marketing efforts on the vehicles where you have the most advantage or opportunity and the most minimal amount of weakness or threat.

2. Developing Sales Presentation/Proposals: Apply the S.W.O.T. Analysis to the development of each of your sales presentations and proposals. Be sure to focus the analysis on evaluating each section based on issues specific to the customer you are pitching.

As you approach your S.W.O.T. Analysis, consider the following questions.

  • Strengths: What advantages does your company/product have that no one else has? What makes you most unique? Focus on those things that make your offer most compelling to a prospect or customer.
  • Weaknesses: Where can you improve? Where have you made mistakes in the past? What do you not have that other companies/products in your industry have? Focus on those things that most detract from your offer.
  • Opportunities: What trends lend to your strengths? What is the potential “expansion” potential over time? Opportunities are external factors that represent why your company exists or should/can growth.
  • Threats: What challenges do you face? What are your competitors doing? What is the overall competitive landscape? Threats are external forces that could impact your success, such as competition, operational capacity, cost of goods increases, etc.

    • No matter the purpose, using the S.W.O.T. analysis can force thoughtful, strategic, and creative thinking. And, when used properly, the S.W.O.T. Analysis not only helps you identify your strengths, weaknesses, opportunities, and threats, but it also helps you determine your strategies for addressing each.

    Website SWOT Analysis – A Real Life Example

    Do you wonder what is happening to your Internet Business? Why is that you cannot get traffic to your website; the conversion rate is too low; or opt-in visitor is too few?

    I was faced with a similar situation lately and I attempted to use what I knew about SWOT Analysis into my Internet Business. I use the same technique to perform a SWOT on a website and had surprisingly discovered some valuable facts for my Website

    In this article, I share with you my real-life example of my Website SWOT Analysis. You are invited to use it as a reference to your won Internet Business.

    Below is a sample website SWOT Analysis performed on my own Total Quality Management website I published in year 2001. It was written based on a knowledge-based approach. The ranking for this website is on Google page # 9 and has a PR=2. After 8 years published, it has never moved up to within Google page#3. Some of you may know that my newly published 3 months old SWOT analysis Blog has ranked Google page#1 for the last 3 months. This success story has prompted me to wonder why my Total Quality Management website page ranking is so far behind.

    My objective is to move my Total Quality Management website to Google page# 1 – 3 and I performed a Website SWOT Analysis using the SWOT Analysis template and example as my guides. Below are sample my Website SWOT analysis:

    The SWOT Factor – Strengths

    S1 – 8 years old website – matured

    S2 – website contained focused practical examples and case studies of Total Quality Management

    S3 – website ranked Google page#1 on Google.com.my with single keyword – “tqm”

    The SWOT Factor – Weaknesses

    W1 – design of the website is not professional

    W2 – website content remain static for several years

    W3 – navigation of the website is not comprehensive

    The SWOT Factor – Opportunities

    O1 – online research on Total Quality Management has high demand

    O2 – availability of TQM case studies and report are limited on website

    O3 – online website builder software are commonly available

    The SWOT Factor – Threats

    T1 – website with fresh contents and blogs have moved up to top Google page

    T2 – visitor to this TQM website is very low (from awstat)

    From the four SWOT factors, I continue to evaluate the seriousness and impact of each factors as a way to prioritize as I continue to use the SWOT template to formulate strategies. Once the strategies are formulated, then only I can take action. I encourage you to take this sample as a case study for your own Internet business or website and Application SWOT Analysis

    SWOT Analysis is No Magic 8 Ball

    Q: A key investor in my business has suggested that I hire a consultant to do a SWOT Analysis to help plan for the future. I try not to argue with my investors, but I’m not so sure I need to have this done. What do you think?

    — Laurie B.

    A: Laurie, before you call in the SWOT team to deal with this investor (sorry, couldn’t resist that one), let me tell you exactly what a SWOT Analysis is and how it can not only help you plan for the future, but get a gauge of how your business is doing today.

    SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT Analysis is a written exercise that can help you clarify and focus on the specifics that make up the four areas that most affect your business. The purpose of a SWOT Analysis is to help you build on your business’ strengths, minimize and correct the weaknesses, and take the greatest possible advantage of potential opportunities while formulating a plan to deal with potential threats.

    Think of a SWOT Analysis as a checkup for your business. By spending a little time examining the internal and external factors that affect your business’ health you can better gauge the present state of your business and identify things that may adversely affect your business’ health in the future.

    It’s a good idea for every business to perform a SWOT Analysis on occasion, especially if you are doing strategic planning, contemplating a change in direction or formulating new strategies for distribution, marketing and sales.

    Should you hire a consultant to perform a SWOT Analysis for you? Speaking as a consultant who has been paid to perform SWOT Analyses for companies in the past, I can honestly (and yes, without bias) say that depends on three factors: (1) the size of your company; (2) how in-depth the SWOT Analysis needs to be; and (3) how much of your investor’s money you’d like to spend.

    Larger corporations are most likely to hire professional firms to perform such analyses, primarily due to the complex nature of big business. Some corporate SWOT Analyses can run on for several hundred pages. Typically, a consultant will charge up to $100 or more per hour to perform a detailed corporate SWOT Analysis and most large companies consider this money well spent as a good SWOT Analysis can reveal otherwise ignored factors that might increase the company’s bottom line or help avert future losses.

    For a smaller business, however, a professional SWOT Analysis can be an exercise in overkill. For your money you will get an impressive, detailed report that will make for great show at your next investor or board meeting and a wonderfully expensive door stop the rest of the time. I don’t mean to belittle the value of a professional SWOT Analysis for small businesses. It’s just that smaller companies can learn as much from their own efforts as that of an expensive consultant.

    You can perform a simple SWOT Analysis with a #2 pencil and a fast food napkin, but to get a truly accurate view of your company’s SWOT factor I suggest you do things a bit more formally (and without the aid of condiments). I recommend that you involve all the key players in your business, including management, employees, your attorney, accountant, even your spouse. My wife often gives me insights into my business just from listening to me talk at dinner. Sometimes we business owners and managers can’t see the forest for the trees. It’s good to have someone else point out things we might miss.

    Here’s how to perform a simple SWOT Analysis. On a piece of paper draw a vertical line down the center. Now draw a horizontal line through the center of the page. The paper is now divided into four quadrants. In the first quadrant (upper left) write the word “Strengths.” In the quadrant next to that write “Weaknesses.” Drop down to the second tier and label the first quadrant (lower left) “Opportunities” and the remaining quadrant “Threats.”

    Now just fill in each quadrant accordingly. Strengths and weaknesses are internal factors that affect your business. Opportunities and threats are the external factors. Let’s look at a quick overview of each.

    Strengths are those things that make your business stronger. Strengths might include: a product or service that sells well; an established customer base; a good reputation in the marketplace; a good track history; a high traffic location; strong management; qualified employees; ownership of patents and trademarks; and any other aspect that adds value to your business and makes it stand out from the competition. Strengths should always be gauged by the strengths of your competitors. If your business does something well just to keep up with the competition, it is not a strength. It is a necessity.

    Weakness are the antitheses of strengths. Weaknesses are those areas in which your company does not perform well or could stand improvement. These are the areas of your business that make you susceptible to negative market forces and aggressive competitors. Weaknesses might include: poor management; employee problems; lack of marketing and sales expertise; lack of capital; bad location; poor products or services; damaged reputation; etc.

    Opportunities are those things that have the potential to make your business stronger, more enduring, and more profitable. Opportunities might include: new markets becoming available or old markets that are expanding; possible mergers, acquisitions, or strategic alliances; a competitor going out of business or leaving the marketplace, making their customers open to you; and the potential availability of a desired employee.

    Threats are those things that have the potential to adversely affect your business. Threats might include: changing marketplace conditions; rising company debt; cash flow problems; a strong competitor entering your market; competitors with lower prices; possible laws or taxes that may negatively impact your profits; and strategic partners going out of business.

    Once you have filled in all four quadrants, you can use this information to create strategies that will help you make the best of the information learned. For example, once you have identified your strengths you can better use them to determine which opportunities to pursue and to help reduce your vulnerability to potential threats.

    Now that you know your weaknesses you can formulate strategies to overcome them so you can pursue opportunities. Knowing your weaknesses can also help you establish a defensive plan to prevent your weaknesses from making your business particularly susceptible to external threats.

    Whether you use a consultant or create a SWOT Analysis on your own it is important to remember that a SWOT Analysis is a subjective analysis tool that can be strongly influenced by the opinions of those performing the analysis. For small businesses especially it is imperative to keep the analysis simple and to the point. Don’t overanalyze and don’t immediately take the results as gospel.

    Remember, it’s an analysis tool, not a magic 8 ball.

    Here’s to your success!

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