By 2016, Count Anton-Wolfgang von Faber-Castell had led the 255-year-old pencil manufacturer Faber-Castell through waves of technological change. The pocket calculator decimated Faber-Castell's slide rule business in the 1970s, and computer aided design technology undermined the company's manual drafting tools in the 1980s. With each new threat the Count had to decide whether to adapt to new technologies, or maintain focus on the company's core products and identity. Analysts continued to ask Count Anton-Wolfgang the same question they had posed to his grandfather: could the company strategy endure in the modern era?
Swot Analysis of "Faber-Castell" written by Ryan Raffaelli, Christine Snively includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Faber Castell facing as an external strategic factors. Some of the topics covered in Faber-Castell case study are - Strategic Management Strategies, and Organizational Development.
Some of the macro environment factors that can be used to understand the Faber-Castell casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google,
increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Faber-Castell case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Faber Castell, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Faber Castell operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Faber-Castell can be done for the following purposes –
1. Strategic planning using facts provided in Faber-Castell case study
2. Improving business portfolio management of Faber Castell
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Faber Castell
Strengths Faber-Castell | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Faber Castell in Faber-Castell Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Faber Castell are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Superior customer experience
– The customer experience strategy of Faber Castell in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Faber Castell is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Ryan Raffaelli, Christine Snively can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- Faber Castell is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Faber Castell is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Faber-Castell Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Faber Castell has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Faber-Castell - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Organizational Development field
– Faber Castell is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Faber Castell in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Faber Castell has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Faber Castell to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Faber Castell is present in almost all the verticals within the industry. This has provided firm in Faber-Castell case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Organizational Development industry
– Faber-Castell firm has clearly differentiated products in the market place. This has enabled Faber Castell to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Faber Castell to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Faber Castell in the sector have low bargaining power. Faber-Castell has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Faber Castell to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Faber Castell has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Faber-Castell HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Faber Castell is one of the most innovative firm in sector. Manager in Faber-Castell Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Faber-Castell | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Faber-Castell are -
Increasing silos among functional specialists
– The organizational structure of Faber Castell is dominated by functional specialists. It is not different from other players in the Organizational Development segment. Faber Castell needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Faber Castell to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Faber Castell needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Faber-Castell HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Faber Castell has relatively successful track record of launching new products.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Faber Castell supply chain. Even after few cautionary changes mentioned in the HBR case study - Faber-Castell, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Faber Castell vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Faber Castell has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow decision making process
– As mentioned earlier in the report, Faber Castell has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Faber Castell even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Faber Castell has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Faber Castell has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring
– The stress on hiring functional specialists at Faber Castell has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Lack of clear differentiation of Faber Castell products
– To increase the profitability and margins on the products, Faber Castell needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Faber Castell has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities Faber-Castell | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Faber-Castell are -
Developing new processes and practices
– Faber Castell can develop new processes and procedures in Organizational Development industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Faber Castell is facing challenges because of the dominance of functional experts in the organization. Faber-Castell case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Faber Castell has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Creating value in data economy
– The success of analytics program of Faber Castell has opened avenues for new revenue streams for the organization in the industry. This can help Faber Castell to build a more holistic ecosystem as suggested in the Faber-Castell case study. Faber Castell can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Faber Castell can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Organizational Development segment.
Learning at scale
– Online learning technologies has now opened space for Faber Castell to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Faber Castell has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Faber-Castell - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Faber Castell to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Faber Castell can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Faber Castell in the consumer business. Now Faber Castell can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Faber Castell to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Faber Castell to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Faber Castell can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Faber-Castell, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Organizational Development industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Faber Castell can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Faber Castell can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Faber Castell can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Faber-Castell suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats Faber-Castell External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Faber-Castell are -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Faber-Castell, Faber Castell may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
Stagnating economy with rate increase
– Faber Castell can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High dependence on third party suppliers
– Faber Castell high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Shortening product life cycle
– it is one of the major threat that Faber Castell is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Faber Castell demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Faber Castell will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Organizational Development field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Faber Castell can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Faber Castell with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Faber Castell needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Faber Castell can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
Regulatory challenges
– Faber Castell needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Organizational Development industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Faber Castell business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Faber-Castell Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Faber-Castell needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Faber-Castell is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Faber-Castell is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Faber-Castell is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Faber Castell needs to make to build a sustainable competitive advantage.
