Question

Develop a SWOT Analysis for Novagold

Answer 1

The SWOT Analysis framework helps an organization to identify internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

SWOT analysis is a strategic planning tool that can be used by NovaGold Resources Inc. managers to do a situational analysis of the organization. It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) NovaGold Resources Inc. is facing in its current business environment.

NovaGold Resources Inc. is one of the leading companies in its industry. NovaGold Resources Inc. maintains its prominent position in the market by critically analyzing and reviewing the SWOT analysis. SWOT analysis an immensely interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems, and strategic planning.

Strengths of NovaGold Resources Inc. – Internal Strategic Factors

As one of the leading organizations in its industry, NovaGold Resources Inc. has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of NovaGold Resources Inc. are –

• Successful track record of integrating complimentary firms through mergers & acquisitions. It has successfully integrated a number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
• Superb Performance in New Markets – NovaGold Resources Inc. has built expertise in entering new markets and making a success of them. The expansion has helped the organization to build a new revenue stream and diversify the economic cycle risk in the markets it operates in.
• Strong dealer community – It has built a culture among distributors & dealers where the dealers not only promote the company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
• Strong distribution network – Over the years NovaGold Resources Inc. has built a reliable distribution network that can reach the majority of its potential market.
• High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among potential customers.
• Successful track record of developing new products – product innovation.
• Highly successful at Go To Market strategies for its products.
• Highly skilled workforce through successful training and learning programs. NovaGold Resources Inc. is investing huge resources in the training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.

Weakness of NovaGold Resources Inc. – Internal Strategic Factors

Weakness is the areas where NovaGold Resources Inc. can improve upon. The strategy is about making choices and weaknesses are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

• Investment in Research and Development is below the fastest growing players in the industry. Even though NovaGold Resources Inc. is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
• Limited success outside core business – Even though NovaGold Resources Inc. is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
• The company has not been able to tackle the challenges present by the new entrants in the segment and has lost a small market share in the niche categories. NovaGold Resources Inc. has to build an internal feedback mechanism directly from the sales team on the ground to counter these challenges.
• Not highly successful at integrating firms with different work cultures. As mentioned earlier even though NovaGold Resources Inc. is successful at integrating small companies it has its share of failure to merge firms that have different work cultures.
• Not very good at product demand forecasting leading to a higher rate of missed opportunities compare to its competitors. One of the reasons why the day's inventory is high compare to its competitors is that NovaGold Resources Inc. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in a channel.
• Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of NovaGold Resources Inc.
• We need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, NovaGold Resources Inc. needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.

Opportunities for NovaGold Resources Inc. – External Strategic Factors

• New trends in consumer behavior can open up new markets for NovaGold Resources Inc. It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• The market development will lead to dilution of the competitor’s advantage and enable NovaGold Resources Inc. to increase its competitiveness compare to the other competitors.
• The new technology provides an opportunity for NovaGold Resources Inc. to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
• The new taxation policy can significantly impact the way of doing business and can open new opportunities for established players such as NovaGold Resources Inc. to increase its profitability.
• Decreasing the cost of transportation because of lower shipping prices can also bring down the cost of NovaGold Resources Inc.’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
• Government green drive also opens an opportunity for the procurement of NovaGold Resources Inc. products by the state as well as federal government contractors.
• New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represents a great opportunity for NovaGold Resources Inc. to drive home its advantage in new technology and gain market share in the new product category.
• Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in the bank, the company can invest in new technologies as well as in new product segments. This should open a window of opportunity for NovaGold Resources Inc. in other product categories.

Threats NovaGold Resources Inc. Facing - External Strategic Factors

• Growing strengths of local distributors also present a threat in some markets as the competition is paying higher margins to the local distributors.
• No regular supply of innovative products – Over the years the company has developed numerous products but those are often responses to the development by other players. Secondly, the supply of new products is not regular thus leading to high and low swings in the sales number over a period of time.
• New environment regulations under the Paris agreement (2016) could be a threat to certain existing product categories.
• Imitation of the counterfeit and low-quality product is also a threat to NovaGold Resources Inc.’s product especially in the emerging markets and low-income markets.
• The shortage of skilled workforce in certain global markets represents a threat to the steady growth of profits for NovaGold Resources Inc. in those markets.
• Rising pay level especially movements such as $15 an hour and increasing prices in China can lead to serious pressure on the profitability of NovaGold Resources Inc.
• The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
• Increasing the trend toward isolationism in the American economy can lead to a similar reaction from other government thus negatively impacting international sales.