Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Sales & Marketing
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion
Lay's was a second mover when it introduced its potato chips to rapidly evolving post-communist Hungary. By inserting cash into its potato chip bags, Lay's increased sales dramatically and permanently (i.e., also post-promotion). In contrast, after withdrawing a second "Money in the Bag" promotion, sales fell. Students prepare case A (5 pages) at home. Three in-class cases and a teaching note provide analysis and managerial implications.
Authors :: Miguel Brendl, Prashant Malaviya, Szocs Laslo
Swot Analysis of "Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion" written by Miguel Brendl, Prashant Malaviya, Szocs Laslo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lay's Potato facing as an external strategic factors. Some of the topics covered in Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion case study are - Strategic Management Strategies, Decision making, Sales, Strategic thinking and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion casestudy better are - – increasing government debt because of Covid-19 spendings, technology disruption, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, cloud computing is disrupting traditional business models, increasing commodity prices,
central banks are concerned over increasing inflation, there is backlash against globalization, etc
Introduction to SWOT Analysis of Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lay's Potato, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lay's Potato 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion can be done for the following purposes –
1. Strategic planning using facts provided in Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion case study
2. Improving business portfolio management of Lay's Potato
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 Lay's Potato
Strengths Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lay's Potato in Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion Harvard Business Review case study are -
Learning organization
- Lay's Potato 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 Lay's Potato is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Sales & Marketing industry
– Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion firm has clearly differentiated products in the market place. This has enabled Lay's Potato to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Lay's Potato to invest into research and development (R&D) and innovation.
High brand equity
– Lay's Potato has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lay's Potato to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Lay's Potato is one of the leading recruiters in the industry. Managers in the Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Lay's Potato in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Lay's Potato 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.
Diverse revenue streams
– Lay's Potato is present in almost all the verticals within the industry. This has provided firm in Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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.
Operational resilience
– The operational resilience strategy in the Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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
– Lay's Potato has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lay's Potato 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.
Low bargaining power of suppliers
– Suppliers of Lay's Potato in the sector have low bargaining power. Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lay's Potato to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Lay's Potato 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Lay's Potato 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 Miguel Brendl, Prashant Malaviya, Szocs Laslo 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.
Weaknesses Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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 Lay's Potato has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Lay's Potato 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.
Aligning sales with marketing
– It come across in the case study Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion can leverage the sales team experience to cultivate customer relationships as Lay's Potato is planning to shift buying processes online.
High cash cycle compare to competitors
Lay's Potato 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.
Low market penetration in new markets
– Outside its home market of Lay's Potato, firm in the HBR case study Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Lay's Potato 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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 Lay's Potato 's lucrative customers.
Need for greater diversity
– Lay's Potato 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Lay's Potato 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.
Increasing silos among functional specialists
– The organizational structure of Lay's Potato is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Lay's Potato needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lay's Potato to focus more on services rather than just following the product oriented approach.
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 Lay's Potato supply chain. Even after few cautionary changes mentioned in the HBR case study - Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lay's Potato vulnerable to further global disruptions in South East Asia.
Opportunities Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion | 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion are -
Creating value in data economy
– The success of analytics program of Lay's Potato has opened avenues for new revenue streams for the organization in the industry. This can help Lay's Potato to build a more holistic ecosystem as suggested in the Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion case study. Lay's Potato 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 Lay's Potato 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 Lay's Potato 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 Lay's Potato to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Lay's Potato 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lay's Potato 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, Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Lay's Potato can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lay's Potato can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Lay's Potato 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. Lay's Potato 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. Lay's Potato can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lay's Potato 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lay's Potato 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.
Better consumer reach
– The expansion of the 5G network will help Lay's Potato to increase its market reach. Lay's Potato 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lay's Potato is facing challenges because of the dominance of functional experts in the organization. Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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.
Threats Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion are -
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 Lay's Potato in the Sales & Marketing sector and impact the bottomline of the organization.
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.
Environmental challenges
– Lay's Potato 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. Lay's Potato can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Increasing wage structure of Lay's Potato
– 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 Lay's Potato.
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.
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 Lay's Potato business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lay's Potato 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.
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. Lay's Potato needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lay's Potato 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion .
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. Lay's Potato 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.
Consumer confidence and its impact on Lay's Potato 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 Lay's Potato is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Lay's Potato 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.
Weighted SWOT Analysis of Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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 Lay's Potato Chips in Hungary (C): The Second 'Money in the Bag' Promotion 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 Lay's Potato needs to make to build a sustainable competitive advantage.
