Fastenal Company

Fastenal Company

Fastenal Company, commonly referred to as Fastenal, sells construction and industrial supplies, along with its subsidiaries. Besides, the company offers a wide range of products and services such as hydraulics and pneumatics, material handling, safety supplies, storage and packaging solutions, tools and equipment, inventory management, electrical supplies, among others. Notably, its product line consists of two broad categories: hardware, such as concrete anchors, machinery keys, wire rope, and rivets, and threaded fasteners, such as screws, bolts, studs, and related washers. The firm’s products are offered through under numerous brands: Fastenal Racing, Gynaflo Equiprite, FNL, among others. The firm has 2, 662 stores across 14 distribution centers worldwide. Its headquarter is in Winona, United States.

As a framework, a SWOT analysis analyzes a firm’s competitive positioning in environmental business. At Fastenal, it analyses the company’s brand with its strengths, weaknesses, opportunities, as well as threats by benchmarking its performance and business (Gürel & Tat, 2017). According to Gürel and Tat, a successful analysis is determined by how an individual considers an interactive process through coordinating a firm’s departments such as operations, finance, human resource, management information systems, marketing, among others.

Strengths of Fastenal Company

The company has capitalized on distribution and reach. According to Narsingh, McNally, Zenke, Johnson, and Rasmussen (2017), Fastenal Company is one of the companies with the most significant number of outlets. It has more than 2, 600 stores across 14 distribution centers worldwide. For example, in the United States, the company has an outlet in every state. Narsingh et al. note out that its strong distribution network ensures that the products are readily available to a large number of consumers promptly.

The company has an effective cost structure. Narsingh et al. define cost structure as the relative and types of variable and fixed costs that a firm incurs. Fastenal’s low-cost structure enables it to produce goods at a low cost and sell them at an affordable price. Low prices attract more customers as they fall under their budget.

The company is actively involved in social media. Its presence on social media platforms such as Instagram, Facebook, and Twitter has attracted millions of followers (Narsingh, McNally, Zenke, Johnson, & Rasmussen, 2017). As a result, the company has created a high level of engagement with short customer response.

The company has, in recent years, entered into new markets. According to Gürel and Tat, globalization and innovativeness have forced firms to approach new markets to maximize profits. On the same note, the company’s innovative teams develop new products that allow it to enter new markets. For example, the teams have developed an interactive and well-functioning website, which draws the number of sales, traffics and will enable customers from new markets to learn quickly about its products.

The company has a robust financial position. Financial position refers to a firm’s current equity, assets, and liabilities. The strength of a firm’s financial position determines the amount of success it enjoys. Fastenal has a dominant financial position. Notably, the firm’s past five years accumulated profit can finance future projects and expenditures.

The company has a record of a healthy partnership. The firm has been in the market for decades, which has not only made it made people aware but also created trust in its partners. The company has established a strategic partnership with its retailers, dealers, suppliers, as well as stakeholders. The partnership has created an opportunity for leverage if a need occurs in the future.

The company has a strong relationship with its dealers. The strong relationship ensures there is a smooth supply of inputs from the dealers as well as helping in promoting the firm’s product (Narsingh, McNally, Zenke, Johnson, & Rasmussen, 2017). Fastenal Company has prioritized and enhanced its relationship with the dealers. The relationship has not only created a healthy business environment but also enhanced trust.

Fastenal’s Weaknesses

The company has not succeeded in research and development. Despite the firm spending a large amount of money on research and development within the industry, the program has been of less success. Kogan, Papanikolaou, Seru, and Stoffman (2017) note that its innovative products make the company spend way less than its competitors within the industry.

Most of its property is rented. According to Kogan et al., the company has a significant proportion of the leased property. As a result, the firm pays huge amounts of rents that add to its cost. Rents have affected its current ratio making it hard to meet short term financial requirements than other players in the industry.

The company lacks a diversification strategy in the workforce. At Fastenal Company, the workforce is concentrated mostly with local workers and few workers from other racial backgrounds. As a result, employees from different backgrounds face adjustment challenges at the workplace, which causes loss of talent.

The company has an inadequate number of workers. The workload per worker is higher than the actual work required. Overworking workers makes the worker less productive as they are put under psychological stress.

Ethical decisions affect the performance of a company. Poor ethical decisions affect companies in numerous ways. For example, poor ethical decisions can lead to poor employees’ performance. A lack of ethics within the Fastenal Company would affect how employees do their jobs. Workers can decide on breaking the rules if the leaders break them.

Opportunities of Fastenal Company

Increase in the number of internet users. In recent years, the number of internet users has increased rapidly. Internet usage has brought numerous opportunities for contemporary companies. Fastenal Company can capitalize on internet opportunities to expand its presence online. An example is interacting with customers through internet sites such as social media platforms.

Advancement in technology. Technology developments have brought numerous benefits to firms. For example, technology development has increased the production of goods and reduced costs through automation (Kogan, Papanikolaou, Seru, & Stoffman, 2017). Besides, technology has enabled firms to collect data on customers as well as improving marketing efforts.

Globalization has made it possible for firms to invest beyond their countries. Globalization does not limit Fastenal to its homeland. The company can extend to other nations to exploits new opportunities that lie in foreign markets. For example, there have been a number of new growing niche markets that have opened up. Consequently, the company can take advantage of these markets by selling its products.

The transport industry in most countries has been flourishing. In recent years, the transport industry has grown. The growth has seen transportation costs reduce, which is beneficial to companies such as Fastenal as it lowers their overall costs.

Advancement in the education system has led to an increase in the number of skilled workers. An increase in training and education by several institutions has increased the number of skilled workers in various industries. This makes it possible for Fastenal Company to hire skilled workers and, most importantly, spend less on training.

Threats of Fastenal Company

The number of new entrants has increased competition. Companies have lost existing market share as numerous players have entered the market. New entrants are a threat to Fastenal as the company can lose its customers. On the other hand, competition within the industry has exerted downward pressure on prices. Competition has forced the company to adjust its product prices to avoid losing its market share.

Political uncertainties and exchange rates are significant challenges for foreign companies. The former is a barrier in business as it hinders its performances and incurs unnecessary costs. On the other hand, the fluctuation s of exchange rates affects companies like Fastenal whose suppliers are local and sales are international.

When competitors advance in technology, new technology leads to the development of new products that attract customers (Kogan, Papanikolaou, Seru, & Stoffman, 2017). Technological development by competitors poses a significant threat to Fastenal as it can lose its customers, leading to a decrease in revenue share.

Suppliers’ bargaining power has risen. Over the years, companies have experienced the increased cost of inputs as the number of suppliers has decreased, and their bargaining power has increased. The bargaining power among suppliers is a significant threat to the Fastenal Company.

Increase in fuel prices. The rise in fuel prices has increased the company’s costs of inputs. On the same note, the other industries that provide Fastenal with inputs have suffered from an increase in the prices of fuel, causing a more change.

Exploiting Fastenal’s Internal Strengths

The company should capitalize on its strong distribution network with numerous outlets. The company should offer customer-tailored solutions. In addition, its manufacturing facilities should tailor products to meet different customer needs. Besides, the company should bundle packages of different products to create a unique customer offering, primarily through its numerous outlets and more so its trained personnel would make bundling services easier. In addition, the company should supply chain activities. Notably, an integrated supply chain would create a formidable barrier to new competitors. For example, according to Gürel and Tat, Fastenal owns inventory supply systems, a transportation fleet, sales, distribution centers, and retailing service facilities. Integrating these facilities would enable them to survive in both bad and good times, as well as reward patient investors.

The company must exploit its cost structure. The company has one of the most effective cost structures. The primary goal of a cost structure is to reduce the cost of production. One of the best methods to lower cost is automation. Mechanization minimizes the number of employees hence reducing wages. Currently, the firm’s thirteen distribution centers are equipped with a mini-load automated picking crane machine. The employees remain stationary while the machine picks the product from the cranes inside a tote. Each tote is placed directly on a convey belt. The prompts on the screens have instructions on what the employees are expected to do. Notably, the system is flawless, less physical, and process services faster. Therefore, the company should ensure most of its outlets have these machines as the cost of production would decrease. However, when the mini-load cranes’ malfunction, one crane aisle could potentially become disabled for some minutes, hours, or days. This would affect the production process and can also result in a pile of totes jammed, and it could cause the entire crane system to shut down.

The company is actively involved in social media. Social media use is rapidly growing in the digital age. According to statistics, at least 75% of youths own a social media account. As mentioned above, Fastenal is on social media platforms such as Instagram, Facebook, and Twitter. However, the company has yet to capitalize on the platform given by the number of followers it has. Fastenal is a people’s business indicated by its lower cash flow profile. Therefore, the company should engage with customers through social media for feedbacks.

Mitigating Fastenal’s Weaknesses

The company should exploit its effective cost structure. Fastenal is a people’s business indicated by its lower cash flow profile. Its growth is characterized by increasing the number of employees. Wages and other expenses flow through the current cash flow statements. Therefore, provided they keep growing, the cash flow will remain lower in a recession and or will grow up when the recession stops. Thus, the company’s success will rely on its expertise in the business environment. Also, the company should have proper working invoicing systems that will help them manage cash flow. Assessing how profitable the business is critical since it helps in tracking how the firm spends its finance. Proper management of funds makes it easier to know how profitable a business is going to be in the future through projections.

Leadership is the driving force of every business. Poor leadership leads the company into the path of dissolution and wipes its entire existence. Fastenal Company has been having leadership challenges that have to affect the performance of the company. Poor decisions drive down the profitability of the business. For example, at Fastenal Company, poor leadership decisions led to the concentration of the workforce, mostly with local workers and few workers from other racial backgrounds. As a result, employees from different backgrounds faced adjustment challenges in the workplace, which caused a loss of talent.

Fastenal’s Readiness to Compete in the Business Environment

In the contemporary world, businesses are facing numerous challenges. Most companies, primarily in the service industry, face similar challenges daily. To ensure they continue making profits and remain competitive, managers and other stakeholders must address both internal and external challenges. Therefore, businesses should be prepared to overcome storms that occur in every season of business. Fastenal Company, like other businesses, faces different factors involved in the industrial and construction supplies services. To remain competitive, Fastenal Company has established different strategies, among them the SWOT analysis that analyses its strengths, weaknesses, opportunities, as well as threats.

To remain competitive, businesses, especially those in the construction industry, should have a reliable source of raw materials. The process of accessing raw materials should be short and less expensive. As a result, Fastenal has organized and leveraged with contractors who provide raw materials. Their healthy relationship with the contractors has enabled them to bear the risks of delivering raw materials (Pease, 2010). The relationship has helped the company acquire raw materials at a lower price. Besides, Fastenal buys raw materials in bulk to save both costs and time. Unreliable suppliers slow down the production process and can easily jeopardize a firm in they do not deliver. Notably, the costs incurred during the production process determine the price of the final product. Therefore, if the cost of production is high, the prices rise, forcing the customers to seek cheaper alternatives.

One of the main challenges has been facing the company is growing revenue. The primary target of any business is increasing revenue. The company must create an upward trajectory in revenues to remain competitive. However, expand in the number entrants into the industry has created competition, making it hard for the company to sell its products or get new customers. Therefore, it finds it hard to penetrate the market due to an already established local competitor. Moreover, the industry has been facing different challenges, such as people abandoning their underdeveloped lands. This makes it hard to increase revenue in the service industry and can be a more laborious task for a small business (Turner, 2009). To remain competitive, Fastenal has to build over a long period. For instance, its existence in the industry for more than forty years has enabled it to generate enough revenue to sustain itself, creating a strong financial position.

Moreover, cost is one of the significant factors that affect business operations. The primary objective of a cost manager is to lower costs without compromising the quality of the product. Several strategies reduce the cost of productions, including automation, reducing the number of employees, innovation, among others. Fastenal is lowering the cost of the production processes through automation. Automation enables the company to reduce the amount of workers, hence cutting down wages. As a result, the company’s profit margin remains consistent, ensuring the firm remains sustainable for a long time. Besides, a stable profit margin ensures the company does not get into many debts. Therefore, a large profit margin gives the company a comfortable financial life. Increased profits ensure the company has a good cash flow.