Table of Contents
TSCO has a robust competitive advantage because of its unique niche retailing strategy. Besides, the firm has also situated most of its stores in the smaller and rural markets where there is are plentiful customers and limited competition. Below is a detailed competitive analysis, which examines the firm’s strengths, weaknesses, opportunities, and threats as proposed by (Edwards, 2014, p.33).
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- Leading retailer – TSCO is one of the leading retailers in its corresponding offerings across the U.S (Tractor Supply Company, n.d, para 2).
- Major operator – The firm is possibly the major operator of rural lifestyle retail stores across the U.S. Besides, the company has a multitude of key categories to choose from, such as hardware, seasonal products, maintenance products, and recreational clothing and footwear among others (Tractor Supply Company, n.d, para 1).
- Solid presence – TSCO has established a solid presence with over 1400 stores located across the states in the U.S (Tractor Supply Company, n.d, para 2).
- Strong understanding of its market – The company has a robust understanding of the rural lifestyle market due to its countless years of legacy in the industry (Tractor Supply Company, n.d, para 3).
- Advertising – Even though TSCO uses circulars and the various forms of social media to advertise, the firms general advertising efforts are still minimal compared to those of other retailers in the same industry (Tractor Supply Company Report, 2016, p.37).
- Limited brand awareness – The company has its brand awareness limited largely to the U.S geographical market (Odell, 2015, para 4).
- Firm’s image – TSCO is largely viewed as a farm store, thereby making it difficult for suburban and urban customers to shop there (Bloomberg, 2017, para 1).
- Emerging economies – There is a strong demand for most of TSCO’s products in the emerging economies, and the firm can take advantage of this to boost its sales (Johnson, 2017, para. 11).
- Growing demand – There is a growing demand for agricultural products and services, home improvement, and pet care services which TSCO provides to its customer base (Johnson, 2017, para.12).
- Acquisitions – There are similar small firms offering the same services that TSCO could acquire and enhance its chances of growing extensively (Street Insider, 2016, para. 4).
- Wide range competition – There is a growing number of competitors in the marketplace since more retailers seem to be gravitating towards the rural lifestyle sector (Smith, 2017, para. 1).
- Weather conditions – Weather is a key threat for TSCO since most of its customers who are farmers and gardeners are highly affected by the weather conditions (Newswire, 2017, para. 18).
- Cyber security – TSCO has a large database of customers and vendors, and it is imperative that the company protects their data. However, it is difficult to achieve total protection in an era dominated by cybercrime. Cyber security is a serious threat considering the impact of recent breaches at Target as well as Home Depot (CSA Staff, 2017, para. 1).
This section details TSCO’s financial analysis based on the firm’s 2016 annual report. From the report, it is evident that the cost of merchandise has been relatively stable and increasing for the past three years. In particular, the cost of merchandise sold in 2014 was $3,761,300, 4,083,333 in 2015, and 4,454, 377 in 2016 (Tractor Supply Co. Annual Report, 2016, p.43). Due to the increasing cost of merchandise over the past three years, it is conceivable to argue that TSCO’s net income has been less or increasing marginally. From the 2016 financial report, the firm’s net income was $370,885 in 2014, $410,395 in 2015, and $437,120 in the 2016 fiscal year (Tractor Supply Co. Annual Report, 2016, p. 43). Even so, this could mean that the business has not been making as much money, and should focus on keeping the costs of sales down to increase its profits.
The gross profit performance of the company has been excellent from the 2014 to the 2016 fiscal year (Tractor Supply Co. Annual Report, 2016, p.43). Specifically, the company has reported a 19.21% increase in gross profit between 2014 and 2016. Such an increasing gross profit margin is one of the key indicators that the firm is in good financial health. Moreover, the increase could be a key indicator of the efficient distribution processes by the company.
This section examines TSCO from a technical perspective. Important tools used in the analysis include the IFE matrix, EFE matrix, CPM matrix, IE matrix, and the QSPM.
Internal Factor Evaluation
|Leading retailer in the corresponding offerings in the U.S.||0.13||4||0.52|
|Major operator of rural lifestyle stores.||0.15||4||0.60|
|Solid presence across the U.S.||0.12||3||0.36|
|Strong understanding of its market.||0.15||3||0.45|
|Minimal advertising efforts.||0.15||2||0.30|
|Limited brand awareness.||0.13||2||0.26|
|Total Weight Score||1.00||2.66|
The total weighted score of 2.66 is more than the average of 2.5, and this indicates that TSCO has a strong internal position. Possibly, the company is taking more advantage of its strengths to minimize the impact of the weaknesses.
External Factor Evaluation
|Strong demand for TSCO products in emerging economies.||0.10||2||0.20|
|Growing demand for agricultural products and services.||0.20||3||0.60|
|There is a chance to acquire similar small firms to grow extensively.||0.10||3||0.30|
|Wide range competition from retailers who seem to be opting for rural lifestyle stores.||0.25||3||0.75|
|Poor weather conditions can threaten TSCO’s sales.||0.20||1||0.20|
|Challenges in protecting customer and vendor data from cybercrime.||0.15||1||0.15|
|Total Weighted Score||1.00||2.2|
The total weighted score from TSCO’s external factor evaluation is 2.2, and is below the average of 2.5. From this score, it is possible to conclude that the firm is responding poorly to the opportunities and threats that affect its operations. Considering the total weighted score of 2.66 obtained in the IFE matrix, it is possible to suggest that TSCO should focus its strategies externally to take more advantage of the available opportunities and minimize the impact of the threats.
Competitive Profile Matrix
|Tractor Supply Company||Home Depot||Lowe’s|
|Critical Success Factors||Weight||Rating||Weighted Score||Rating||Weighted Score||Rating||Weighted Score|
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Based on the CPM scores above, it is evident that TSCO has an inferior net competitive advantage over its industry rivals, more so Home Depot. There is no huge difference between the total scores of TSCO – 2.90, and Home Depot – 2.80. Although TSCO appears to be the market leader in the above CPM, it’s closest competitor dominates most of the other critical success factors. Hence, it is possible to claim that Tractor Supply Company has a competitive edge over Lowe’s, but faces stiff competition from Home Depot.
|High: 3.0 – 4.0||Grow||And||Build|
|Medium: 2.0 – 2.99||Hold||And||Maintain|
|Low: 1.0 – 1.99||Harvest||Or||Divest|
|Strong: 3.0 – 4.0||Average: 2.0 – 2.99||Weak: 1.0 – 1.99|
Following TSCO’s IFE total weighted score of 2.66 and EFE total weighted score of 2.2, the above IE matrix illustrates that the firm must hold and maintain its strategic position. In particular, the firm should focus on following strategies that aim at increasing its market penetration, as well as product development. These two business-level strategies are further examined in the quantitative strategic planning matrix illustrated below.
|Key Internal Factors||Product Development||Market Penetration|
|Internal Strengths||Weight||Attractiveness Score||Total Attractiveness Score||Attractiveness Score||Total Attractiveness Score|
|Leading retailer in corresponding sector in the U.S.||0.13||4||0.52||2||0.26|
|Major operator of rural lifestyle stores.||0.15||2||0.30||2||0.30|
|Solid presence across the U.S.||0.12||1||0.12||2||0.24|
|Strong understanding of its industry.||0.15||4||0.60||4||0.60|
|Minimal advertising efforts||0.15||4||0.60||2||0.30|
|Limited brand awareness||0.13||1||0.13||4||0.52|
|Improper firm image.||0.17||–||–||4||0.68|
|Key External Factors|
|Strong demand for TSCO products in emerging markets.||0.10||4||0.40||3||0.30|
|Growing demand for agricultural products and services.||0.20||3||0.60||4||0.80|
|Possibility of acquisitions.||0.10||1||0.10||3||0.30|
|Wide range competition from other retailers in the same industry.||0.25||1||0.25||4||1.0|
|Poor weather conditions affecting customers impact of TSCO sales.||0.20||1||0.20||–||–|
|Challenges in protecting customer and vendor data against cyber criminals.||0.15||–||–||2||0.30|
|Total Sum of Attractiveness Score||3.82||5.60|
From the sum of the total attractiveness score in the QSPM matrix above, it is conceivable to conclude that the market penetration option is the most significant compared to the product development approach. The market penetration alternative has a total sum of the attractiveness score of 5.6, while the product development strategy has an inferior score of 3.82. The market penetration strategy requires that Tractor Supply Company increases its advertising expenditures to enhance awareness of the brand and its services across geographical boarders (Pearce, 1982, p. 30). Besides, this strategic development approach may require the firm to consider various special promotional items that can boost its sales and enhance the awareness of its customer base about the products offered.
- Bloomberg. (2017). About Tractor Supply Co. Bloomberg. Retrieved from: https://www.bloomberg.com/quote/TSCO:US
- CSA Staff. (2017, March 6). Four keys to cyber security: Protecting restaurants and retailers from data breaches. Retrieved from https://www.chainstoreage.com/article/four-keys-cyber-security-protecting-restaurants-and-retailers-data-breaches/
- Edwards, J. (2014). Leading strategically. In J. Edwards, Mastering strategic management (pp. 37-71). The Saylor Foundation.
- Johnson, M. (2017, May 10). What retail apocalypse? These stores are expanding, not closing. Nasdaq. Retrieved from: http://www.nasdaq.com/article/what-retail-apocalypse-these-stores-are-expanding-not-closing-cm787553
- Newswire, G. (2017, October 25). Tractor Supply company reports third quarter results. CNBC. Retrieved from: https://www.cnbc.com/2017/10/25/globe-newswire-tractor-supply-company-reports-third-quarter-results.html
- Odell, P. (2015, August 21). Tractor supply takes farm life on the road. Chief Marketer. Retrieved from: http://www.chiefmarketer.com/tractor-supply-takes-farm-life-road/
- Pearce, J. A. (1982). Selecting among alternative grand strategies. California Management Review, 24(3), 23-31.
- Smith, S. (2017, May 29). This retailer doesn’t fear Amazon. Seeking Alpha. Retrieved from: https://seekingalpha.com/article/4077127-retailer-fear-amazon
- Street Insider. (2016, September 29). Tractor Supply (TSCO) to acquire Petsense in net $116M deal. Retrieved from https://www.streetinsider.com/Corporate+News/Tractor+Supply+%28TSCO%29+to+Acquire+Petsense+in+Net+%24116M+Deal/12085989.html
- Tractor Supply Co. Annual Report. (2016). Moving forward with confidence 2016 annual report. Tractor Supply Co.
- Tractor Supply Company. (n.d). About Us. Retrieved from https://www.linkedin.com/company/15434/
- Tractor Supply Company Report. (2016). Tractor Supply Company – Second Quarter 2016. Tractor Supply Company.