Pricing as a Strategic Capability SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Sales & Marketing
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Pricing as a Strategic Capability
This is an MIT Sloan Management Review article. For too long, people have made unwarranted but detrimental assumptions about pricing. Changing prices, for example, has been looked on as an easy, quick, and reversible process, and new technologies have only reinforced that way of thinking. Similarly, extracting value from a product by pricing it correctly has been seen as relatively uncomplicated; the hard part is creating the valuable product in the first place. But these dismissive attitudes toward pricing miss the mark. Pricing is complex, and it's only growing more so as new tools and techniques become available. The ability to set the right price at the right time, any time--the very definition of a pricing capability--is also becoming increasingly important. In fact, in the course of working with dozens of companies in the past couple of years, the authors have spoken with several executives who believe that developing a pricing capability is essential to their business' survival. And they are backing up their views by investing in three areas: human capital, systems capital, and social capital. The authors explain the nature of these investments and how they come together to form a pricing capability that competitors will have a hard time imitating. Building such a capability requires an effort that some companies may not be in a position to undertake. Those that do take a comprehensive approach, however, can make superior pricing decisions that fit with their positioning, customers, suppliers, and evolving market conditions for years to come.
Authors :: Shantanu Dutta, Mark Bergen, Daniel Levy, Mark Ritson
Swot Analysis of "Pricing as a Strategic Capability" written by Shantanu Dutta, Mark Bergen, Daniel Levy, Mark Ritson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pricing Capability facing as an external strategic factors. Some of the topics covered in Pricing as a Strategic Capability case study are - Strategic Management Strategies, Marketing, Pricing and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Pricing as a Strategic Capability casestudy better are - – increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, technology disruption, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation,
increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Pricing as a Strategic Capability
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Pricing as a Strategic Capability case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pricing Capability, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pricing Capability 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 Pricing as a Strategic Capability can be done for the following purposes –
1. Strategic planning using facts provided in Pricing as a Strategic Capability case study
2. Improving business portfolio management of Pricing Capability
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 Pricing Capability
Strengths Pricing as a Strategic Capability | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pricing Capability in Pricing as a Strategic Capability Harvard Business Review case study are -
Ability to recruit top talent
– Pricing Capability is one of the leading recruiters in the industry. Managers in the Pricing as a Strategic Capability are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Pricing Capability 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.
High switching costs
– The high switching costs that Pricing Capability 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.
Analytics focus
– Pricing Capability 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 Shantanu Dutta, Mark Bergen, Daniel Levy, Mark Ritson 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.
Operational resilience
– The operational resilience strategy in the Pricing as a Strategic Capability 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.
Effective Research and Development (R&D)
– Pricing Capability 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 Pricing as a Strategic Capability - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Pricing Capability is present in almost all the verticals within the industry. This has provided firm in Pricing as a Strategic Capability 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.
Learning organization
- Pricing Capability 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 Pricing Capability is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Pricing as a Strategic Capability Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Pricing Capability has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pricing Capability to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Pricing Capability in the sector have low bargaining power. Pricing as a Strategic Capability has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Pricing Capability to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Pricing Capability has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pricing Capability 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.
Sustainable margins compare to other players in Sales & Marketing industry
– Pricing as a Strategic Capability firm has clearly differentiated products in the market place. This has enabled Pricing Capability to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Pricing Capability to invest into research and development (R&D) and innovation.
Weaknesses Pricing as a Strategic Capability | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Pricing as a Strategic Capability are -
Workers concerns about automation
– As automation is fast increasing in the segment, Pricing Capability 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.
Products dominated business model
– Even though Pricing Capability 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 - Pricing as a Strategic Capability should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Pricing Capability is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Pricing as a Strategic Capability can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, firm in the HBR case study Pricing as a Strategic Capability 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 Pricing Capability 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Pricing as a Strategic Capability, is just above the industry average. Pricing Capability 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.
Need for greater diversity
– Pricing Capability 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.
High cash cycle compare to competitors
Pricing Capability has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring
– The stress on hiring functional specialists at Pricing Capability has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Lack of clear differentiation of Pricing Capability products
– To increase the profitability and margins on the products, Pricing Capability needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Shantanu Dutta, Mark Bergen, Daniel Levy, Mark Ritson suggests that, Pricing Capability is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to strategic competitive environment developments
– As Pricing as a Strategic Capability HBR case study mentions - Pricing Capability 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.
Opportunities Pricing as a Strategic Capability | 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 Pricing as a Strategic Capability are -
Leveraging digital technologies
– Pricing Capability 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Pricing Capability can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Pricing Capability 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, Pricing as a Strategic Capability, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Pricing Capability can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Pricing as a Strategic Capability 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.
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. Pricing Capability 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. Pricing Capability 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 Pricing Capability 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 Pricing Capability to hire the very best people irrespective of their geographical location.
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. Pricing Capability can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Pricing Capability to increase its market reach. Pricing Capability 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
– Pricing Capability 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.
Loyalty marketing
– Pricing Capability 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.
Learning at scale
– Online learning technologies has now opened space for Pricing Capability to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Pricing Capability 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 Pricing as a Strategic Capability - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pricing Capability to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Pricing Capability can use these opportunities to build new business models that can help the communities that Pricing Capability operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Threats Pricing as a Strategic Capability External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Pricing as a Strategic Capability are -
Shortening product life cycle
– it is one of the major threat that Pricing Capability is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Pricing as a Strategic Capability, Pricing Capability may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Regulatory challenges
– Pricing Capability 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.
High dependence on third party suppliers
– Pricing Capability 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 Pricing Capability.
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. Pricing Capability can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Pricing Capability 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. Pricing Capability can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Technology acceleration in Forth Industrial Revolution
– Pricing Capability has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Pricing Capability 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 Pricing Capability 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.
Increasing wage structure of Pricing Capability
– 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 Pricing Capability.
Stagnating economy with rate increase
– Pricing Capability 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Pricing Capability 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Pricing Capability with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Pricing as a Strategic Capability 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 Pricing as a Strategic Capability 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 Pricing as a Strategic Capability 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 Pricing as a Strategic Capability 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 Pricing as a Strategic Capability 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 Pricing Capability needs to make to build a sustainable competitive advantage.
