The Fall of Circuit City Stores, Inc. SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of The Fall of Circuit City Stores, Inc.
On January 16, 2009, after a dismal holiday season, Circuit City was forced into liquidation. Unable to meet creditors' demands, and with no acquirer in sight, Circuit City began the process of liquidating its remaining 567 U.S. stores. Circuit City had been the leader in consumer electronics retailing for nearly twenty years when its profits peaked in 2000. What led to its dramatic decline? Why did three CEOs fail to turn it around? Were these problems present before the 2000 peak?
Swot Analysis of "The Fall of Circuit City Stores, Inc." written by John R. Wells, Galen Danskin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Circuit City facing as an external strategic factors. Some of the topics covered in The Fall of Circuit City Stores, Inc. case study are - Strategic Management Strategies, Leadership, Strategic planning and Strategy & Execution.
Some of the macro environment factors that can be used to understand the The Fall of Circuit City Stores, Inc. casestudy better are - – increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, talent flight as more people leaving formal jobs,
there is backlash against globalization, technology disruption, etc
Introduction to SWOT Analysis of The Fall of Circuit City Stores, Inc.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Fall of Circuit City Stores, Inc. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Circuit City, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Circuit City 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 The Fall of Circuit City Stores, Inc. can be done for the following purposes –
1. Strategic planning using facts provided in The Fall of Circuit City Stores, Inc. case study
2. Improving business portfolio management of Circuit City
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Circuit City
Strengths The Fall of Circuit City Stores, Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Circuit City in The Fall of Circuit City Stores, Inc. Harvard Business Review case study are -
Organizational Resilience of Circuit City
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Circuit City does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Circuit City 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 Circuit City is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The Fall of Circuit City Stores, Inc. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Strategy & Execution field
– Circuit City is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Circuit City in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Circuit City has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Circuit City 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 Circuit City in the sector have low bargaining power. The Fall of Circuit City Stores, Inc. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Circuit City to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Circuit City has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Circuit City to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Circuit City is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the The Fall of Circuit City Stores, Inc. 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.
Sustainable margins compare to other players in Strategy & Execution industry
– The Fall of Circuit City Stores, Inc. firm has clearly differentiated products in the market place. This has enabled Circuit City to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Circuit City to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Circuit City is one of the leading recruiters in the industry. Managers in the The Fall of Circuit City Stores, Inc. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Circuit City has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The Fall of Circuit City Stores, Inc. Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Cross disciplinary teams
– Horizontal connected teams at the Circuit City 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.
Weaknesses The Fall of Circuit City Stores, Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Fall of Circuit City Stores, Inc. are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The Fall of Circuit City Stores, Inc., in the dynamic environment Circuit City has struggled to respond to the nimble upstart competition. Circuit City has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring
– The stress on hiring functional specialists at Circuit City 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.
Increasing silos among functional specialists
– The organizational structure of Circuit City is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Circuit City needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Circuit City to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Circuit City 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 - The Fall of Circuit City Stores, Inc. should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Circuit City, firm in the HBR case study The Fall of Circuit City Stores, Inc. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the The Fall of Circuit City Stores, Inc. 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 Circuit City has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Circuit City has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Circuit City even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– It come across in the case study The Fall of Circuit City Stores, Inc. 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 The Fall of Circuit City Stores, Inc. can leverage the sales team experience to cultivate customer relationships as Circuit City is planning to shift buying processes online.
Interest costs
– Compare to the competition, Circuit City 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The Fall of Circuit City Stores, Inc., is just above the industry average. Circuit City 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Circuit City 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.
Opportunities The Fall of Circuit City Stores, Inc. | 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 The Fall of Circuit City Stores, Inc. are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Circuit City 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Circuit City 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 Circuit City to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Circuit City 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Circuit City in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Circuit City can develop new processes and procedures in Strategy & Execution 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Circuit City can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Circuit City can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The Fall of Circuit City Stores, Inc. 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Circuit City in the consumer business. Now Circuit City can target international markets with far fewer capital restrictions requirements than the existing system.
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. Circuit City can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Circuit City is facing challenges because of the dominance of functional experts in the organization. The Fall of Circuit City Stores, Inc. 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.
Building a culture of innovation
– managers at Circuit City 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 Strategy & Execution segment.
Better consumer reach
– The expansion of the 5G network will help Circuit City to increase its market reach. Circuit City 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Circuit City 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. Circuit City 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.
Threats The Fall of Circuit City Stores, Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Fall of Circuit City Stores, Inc. are -
High dependence on third party suppliers
– Circuit City 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Circuit City 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 The Fall of Circuit City Stores, Inc. .
Increasing wage structure of Circuit City
– 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 Circuit City.
Consumer confidence and its impact on Circuit City 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.
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 Circuit City.
Environmental challenges
– Circuit City 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. Circuit City can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Stagnating economy with rate increase
– Circuit City 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.
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. Circuit City needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study The Fall of Circuit City Stores, Inc., Circuit City may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Circuit City in the Strategy & Execution industry. The Strategy & Execution 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.
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. Circuit City 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.
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 Circuit City business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Circuit City 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 The Fall of Circuit City Stores, Inc. 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 The Fall of Circuit City Stores, Inc. 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 The Fall of Circuit City Stores, Inc. 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 The Fall of Circuit City Stores, Inc. 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 The Fall of Circuit City Stores, Inc. 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 Circuit City needs to make to build a sustainable competitive advantage.