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 - – technology disruption, increasing commodity prices, talent flight as more people leaving formal jobs, geopolitical disruptions, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, 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 -
Ability to recruit top talent
– Faber Castell is one of the leading recruiters in the industry. Managers in the Faber-Castell are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Faber Castell digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Faber Castell has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Operational resilience
– The operational resilience strategy in the Faber-Castell Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Successful track record of launching new products
– Faber Castell has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Faber Castell has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
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.
Strong track record of project management
– Faber Castell is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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.
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.
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 -
Products dominated business model
– Even though Faber Castell has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Faber-Castell should strive to include more intangible value offerings along with its core products and services.
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.
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.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Faber-Castell, it seems that the employees of Faber Castell don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Faber-Castell has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Faber Castell 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Faber-Castell, is just above the industry average. Faber Castell needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Low market penetration in new markets
– Outside its home market of Faber Castell, firm in the HBR case study Faber-Castell needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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 -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Faber Castell can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Faber Castell to increase its market reach. Faber Castell will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Faber Castell to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
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.
Manufacturing automation
– Faber Castell can use the latest technology developments to improve its manufacturing and designing process in Organizational Development segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Faber Castell can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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 -
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Faber Castell in the Organizational Development sector and impact the bottomline of the organization.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Faber Castell in the Organizational Development industry. The Organizational Development industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Faber Castell can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Faber-Castell .
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 .
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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Faber Castell needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Faber Castell.
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.