To maximize their effectiveness, color cases should be printed in color.Red Lobster, a 40-year-old chain of seafood restaurants, has just completed some market research revealing an opportunity to shift their target customer segment. The chain is in the final stages of a 10-year plan of rejuvenation under CEO Kim Lopdrup. When he took over as CEO in 2004 the chain was closing restaurants and suffering declining same store sales and declining customer satisfaction. But in 2010, even in a recession, the fortunes of the chain are improving. A recently commissioned market research study has revealed, unexpectedly, that 25% of Red Lobster's customers are "experientials," people coming for a "good evening out" rather than Red Lobster's traditional core customer who came because of a craving for seafood. Should this news cause Lopdrup to do anything differently?
Swot Analysis of "Red Lobster" written by David E. Bell, Jason Riis includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lobster's Lopdrup facing as an external strategic factors. Some of the topics covered in Red Lobster case study are - Strategic Management Strategies, Financial analysis, Market research and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Red Lobster casestudy better are - – supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, technology disruption,
increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Red Lobster case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lobster's Lopdrup, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lobster's Lopdrup 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 Red Lobster can be done for the following purposes –
1. Strategic planning using facts provided in Red Lobster case study
2. Improving business portfolio management of Lobster's Lopdrup
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lobster's Lopdrup
Strengths Red Lobster | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lobster's Lopdrup in Red Lobster Harvard Business Review case study are -
Learning organization
- Lobster's Lopdrup 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 Lobster's Lopdrup is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Red Lobster Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Lobster's Lopdrup in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Lobster's Lopdrup digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lobster's Lopdrup 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.
Sustainable margins compare to other players in Sales & Marketing industry
– Red Lobster firm has clearly differentiated products in the market place. This has enabled Lobster's Lopdrup to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Lobster's Lopdrup to invest into research and development (R&D) and innovation.
High brand equity
– Lobster's Lopdrup has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lobster's Lopdrup to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Red Lobster 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.
Low bargaining power of suppliers
– Suppliers of Lobster's Lopdrup in the sector have low bargaining power. Red Lobster has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lobster's Lopdrup to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Lobster's Lopdrup 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 Red Lobster HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Lobster's Lopdrup has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Cross disciplinary teams
– Horizontal connected teams at the Lobster's Lopdrup 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.
Ability to recruit top talent
– Lobster's Lopdrup is one of the leading recruiters in the industry. Managers in the Red Lobster are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Lobster's Lopdrup is one of the most innovative firm in sector. Manager in Red Lobster Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Red Lobster | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Red Lobster are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Red Lobster, it seems that the employees of Lobster's Lopdrup 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.
Increasing silos among functional specialists
– The organizational structure of Lobster's Lopdrup is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Lobster's Lopdrup needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lobster's Lopdrup to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study Red Lobster that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Red Lobster can leverage the sales team experience to cultivate customer relationships as Lobster's Lopdrup is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Red Lobster, is just above the industry average. Lobster's Lopdrup 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Red Lobster 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 Lobster's Lopdrup 's lucrative customers.
Interest costs
– Compare to the competition, Lobster's Lopdrup 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.
Slow to strategic competitive environment developments
– As Red Lobster HBR case study mentions - Lobster's Lopdrup takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Low market penetration in new markets
– Outside its home market of Lobster's Lopdrup, firm in the HBR case study Red Lobster needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Lobster's Lopdrup 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.
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 Lobster's Lopdrup supply chain. Even after few cautionary changes mentioned in the HBR case study - Red Lobster, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lobster's Lopdrup vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lobster's Lopdrup is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Red Lobster can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Red Lobster | 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 Red Lobster are -
Creating value in data economy
– The success of analytics program of Lobster's Lopdrup has opened avenues for new revenue streams for the organization in the industry. This can help Lobster's Lopdrup to build a more holistic ecosystem as suggested in the Red Lobster case study. Lobster's Lopdrup 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 Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lobster's Lopdrup 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. Lobster's Lopdrup 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Lobster's Lopdrup can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Lobster's Lopdrup 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 Sales & Marketing segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lobster's Lopdrup 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 Lobster's Lopdrup to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Lobster's Lopdrup can develop new processes and procedures in Sales & Marketing 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lobster's Lopdrup can use these opportunities to build new business models that can help the communities that Lobster's Lopdrup operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lobster's Lopdrup in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Leveraging digital technologies
– Lobster's Lopdrup 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.
Using analytics as competitive advantage
– Lobster's Lopdrup 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 Red Lobster - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lobster's Lopdrup to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Lobster's Lopdrup to increase its market reach. Lobster's Lopdrup 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lobster's Lopdrup 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Lobster's Lopdrup can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Red Lobster External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Red Lobster are -
Increasing wage structure of Lobster's Lopdrup
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Lobster's Lopdrup.
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 Lobster's Lopdrup business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Lobster's Lopdrup 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lobster's Lopdrup with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Lobster's Lopdrup 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lobster's Lopdrup in the Sales & Marketing industry. The Sales & Marketing 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.
Shortening product life cycle
– it is one of the major threat that Lobster's Lopdrup is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Lobster's Lopdrup has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Lobster's Lopdrup needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High dependence on third party suppliers
– Lobster's Lopdrup 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.
Regulatory challenges
– Lobster's Lopdrup 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 Sales & Marketing industry regulations.
Environmental challenges
– Lobster's Lopdrup 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. Lobster's Lopdrup can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
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.
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.
Weighted SWOT Analysis of Red Lobster 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 Red Lobster 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 Red Lobster 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 Red Lobster 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 Red Lobster 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 Lobster's Lopdrup needs to make to build a sustainable competitive advantage.