Case Study Description of El Cerrito: Driving Growth
Michael Belden, longtime manager of the El Cerrito brand of high-end leather products and accessories, had just concluded a presentation to the senior executive team on his plan to increase profits by 4 percent over the next year. His new boss, Sara Jensen, was not pleased and instructed him to go back to the drawing board: "You and I both know that a 4 percent profit increase just isn't sufficient. I was hoping to see an increase of 20 percent or more." Belden was deeply concerned. El Cerrito was a mature brand that catered to exclusive, high-end clientele. Would it be possible to generate the kind of growth Jensen wanted without damaging the brand's equity? This is the real story of a well-known luxury brand that has been disguised for purposes of this case. Students sometimes will correctly guess at the brand's true identity, but this does not impact the discussion. The disguised brand gives the case an entertaining twist when the brand's true identity is revealed.
Swot Analysis of "El Cerrito: Driving Growth" written by Tim Calkins, Jenn Karakkal includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cerrito Belden facing as an external strategic factors. Some of the topics covered in El Cerrito: Driving Growth case study are - Strategic Management Strategies, Product development and Sales & Marketing.
Some of the macro environment factors that can be used to understand the El Cerrito: Driving Growth casestudy better are - – geopolitical disruptions, increasing energy prices, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of El Cerrito: Driving Growth
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in El Cerrito: Driving Growth case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cerrito Belden, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cerrito Belden 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 El Cerrito: Driving Growth can be done for the following purposes –
1. Strategic planning using facts provided in El Cerrito: Driving Growth case study
2. Improving business portfolio management of Cerrito Belden
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 Cerrito Belden
Strengths El Cerrito: Driving Growth | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cerrito Belden in El Cerrito: Driving Growth Harvard Business Review case study are -
Effective Research and Development (R&D)
– Cerrito Belden 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 El Cerrito: Driving Growth - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Sales & Marketing industry
– El Cerrito: Driving Growth firm has clearly differentiated products in the market place. This has enabled Cerrito Belden to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Cerrito Belden to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Cerrito Belden is one of the leading recruiters in the industry. Managers in the El Cerrito: Driving Growth are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Cerrito Belden has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cerrito Belden 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.
Analytics focus
– Cerrito Belden 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 Tim Calkins, Jenn Karakkal 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.
Superior customer experience
– The customer experience strategy of Cerrito Belden in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Cerrito Belden 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.
Highly skilled collaborators
– Cerrito Belden 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 El Cerrito: Driving Growth HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Cerrito Belden is one of the most innovative firm in sector. Manager in El Cerrito: Driving Growth Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Cerrito Belden digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Cerrito Belden 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.
Strong track record of project management
– Cerrito Belden is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Cerrito Belden 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.
Weaknesses El Cerrito: Driving Growth | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of El Cerrito: Driving Growth are -
High cash cycle compare to competitors
Cerrito Belden 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.
Products dominated business model
– Even though Cerrito Belden 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 - El Cerrito: Driving Growth should strive to include more intangible value offerings along with its core products and services.
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 Cerrito Belden supply chain. Even after few cautionary changes mentioned in the HBR case study - El Cerrito: Driving Growth, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cerrito Belden vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the El Cerrito: Driving Growth 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 Cerrito Belden has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Cerrito Belden is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Cerrito Belden needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Cerrito Belden to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Cerrito Belden, firm in the HBR case study El Cerrito: Driving Growth needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Cerrito Belden products
– To increase the profitability and margins on the products, Cerrito Belden needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study El Cerrito: Driving Growth 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 El Cerrito: Driving Growth can leverage the sales team experience to cultivate customer relationships as Cerrito Belden is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As El Cerrito: Driving Growth HBR case study mentions - Cerrito Belden 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.
Need for greater diversity
– Cerrito Belden 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study El Cerrito: Driving Growth, is just above the industry average. Cerrito Belden 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.
Opportunities El Cerrito: Driving Growth | 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 El Cerrito: Driving Growth are -
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. Cerrito Belden can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Cerrito Belden 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, El Cerrito: Driving Growth, 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 Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Cerrito Belden 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. Cerrito Belden 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
– Cerrito Belden can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. El Cerrito: Driving Growth 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.
Using analytics as competitive advantage
– Cerrito Belden 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 El Cerrito: Driving Growth - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cerrito Belden to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Cerrito Belden 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.
Developing new processes and practices
– Cerrito Belden 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.
Leveraging digital technologies
– Cerrito Belden 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.
Loyalty marketing
– Cerrito Belden 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.
Building a culture of innovation
– managers at Cerrito Belden 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Cerrito Belden 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cerrito Belden is facing challenges because of the dominance of functional experts in the organization. El Cerrito: Driving Growth 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
– Cerrito Belden 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.
Threats El Cerrito: Driving Growth External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study El Cerrito: Driving Growth are -
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. Cerrito Belden 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.
Technology acceleration in Forth Industrial Revolution
– Cerrito Belden has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Cerrito Belden 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.
Consumer confidence and its impact on Cerrito Belden 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 Cerrito Belden 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.
Environmental challenges
– Cerrito Belden 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. Cerrito Belden can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
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 Cerrito Belden.
Stagnating economy with rate increase
– Cerrito Belden 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 Cerrito Belden with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cerrito Belden 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 El Cerrito: Driving Growth .
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 dependence on third party suppliers
– Cerrito Belden 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.
Increasing wage structure of Cerrito Belden
– 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 Cerrito Belden.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cerrito Belden can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of El Cerrito: Driving Growth 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 El Cerrito: Driving Growth 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 El Cerrito: Driving Growth 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 El Cerrito: Driving Growth 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 El Cerrito: Driving Growth 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 Cerrito Belden needs to make to build a sustainable competitive advantage.
