When Strategy Pales: Lessons from the Department Store Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of When Strategy Pales: Lessons from the Department Store Industry
The traditional department store was clearly the center of retail activity in cities and small towns in the United States during the first half of the 20th century. However, by the late 1970s and beyond, the department store industry began experiencing financial problems, and serious questions were being raised as to whether their demise was eminent. This article traces the evolution of the industry, and explores some of the underlying dynamics for the changes in the retail trade sector, including the emergence of new alternative retail formats, such as discount stores and category killers. This study further explores the major strategies used by the leading traditional stores with reference to new industry life cycle models and a strategic positioning framework. Of particular interest is the discussion regarding: Were the traditional department stores were "locked in" to a declining trajectory? How effective were their strategies to counter the decline of the industry? And what were and are the repositioning options available to the traditional department stores?
Swot Analysis of "When Strategy Pales: Lessons from the Department Store Industry" written by Homer H. Johnson, Sung Min Kim includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Department Stores facing as an external strategic factors. Some of the topics covered in When Strategy Pales: Lessons from the Department Store Industry case study are - Strategic Management Strategies, Reorganization and Strategy & Execution.
Some of the macro environment factors that can be used to understand the When Strategy Pales: Lessons from the Department Store Industry casestudy better are - – central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, etc
Introduction to SWOT Analysis of When Strategy Pales: Lessons from the Department Store Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in When Strategy Pales: Lessons from the Department Store Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Department Stores, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Department Stores 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 When Strategy Pales: Lessons from the Department Store Industry can be done for the following purposes –
1. Strategic planning using facts provided in When Strategy Pales: Lessons from the Department Store Industry case study
2. Improving business portfolio management of Department Stores
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 Department Stores
Strengths When Strategy Pales: Lessons from the Department Store Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Department Stores in When Strategy Pales: Lessons from the Department Store Industry Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Department Stores 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
– Department Stores 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 When Strategy Pales: Lessons from the Department Store Industry HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Strategy & Execution industry
– When Strategy Pales: Lessons from the Department Store Industry firm has clearly differentiated products in the market place. This has enabled Department Stores to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Department Stores to invest into research and development (R&D) and innovation.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Department Stores digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Department Stores 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.
Training and development
– Department Stores has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in When Strategy Pales: Lessons from the Department Store Industry 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.
Ability to lead change in Strategy & Execution field
– Department Stores 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 Department Stores in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Department Stores is one of the most innovative firm in sector. Manager in When Strategy Pales: Lessons from the Department Store Industry Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Department Stores is one of the leading recruiters in the industry. Managers in the When Strategy Pales: Lessons from the Department Store Industry are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Department Stores 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 When Strategy Pales: Lessons from the Department Store Industry 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
– Department Stores has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Department Stores 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.
Superior customer experience
– The customer experience strategy of Department Stores in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses When Strategy Pales: Lessons from the Department Store Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of When Strategy Pales: Lessons from the Department Store Industry are -
Increasing silos among functional specialists
– The organizational structure of Department Stores is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Department Stores needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Department Stores 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 Department Stores supply chain. Even after few cautionary changes mentioned in the HBR case study - When Strategy Pales: Lessons from the Department Store Industry, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Department Stores vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Department Stores 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 bargaining power of channel partners
– Because of the regulatory requirements, Homer H. Johnson, Sung Min Kim suggests that, Department Stores 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.
Interest costs
– Compare to the competition, Department Stores 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study When Strategy Pales: Lessons from the Department Store Industry, in the dynamic environment Department Stores has struggled to respond to the nimble upstart competition. Department Stores has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Department Stores 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.
Slow decision making process
– As mentioned earlier in the report, Department Stores 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. Department Stores 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Department Stores is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study When Strategy Pales: Lessons from the Department Store Industry can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study When Strategy Pales: Lessons from the Department Store Industry, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Lack of clear differentiation of Department Stores products
– To increase the profitability and margins on the products, Department Stores needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities When Strategy Pales: Lessons from the Department Store Industry | 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 When Strategy Pales: Lessons from the Department Store Industry are -
Loyalty marketing
– Department Stores 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.
Developing new processes and practices
– Department Stores 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.
Better consumer reach
– The expansion of the 5G network will help Department Stores to increase its market reach. Department Stores 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.
Leveraging digital technologies
– Department Stores can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Using analytics as competitive advantage
– Department Stores 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 When Strategy Pales: Lessons from the Department Store Industry - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Department Stores to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Department Stores can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Department Stores 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.
Learning at scale
– Online learning technologies has now opened space for Department Stores 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Department Stores can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Department Stores to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Department Stores 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.
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 Department Stores in the consumer business. Now Department Stores can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Department Stores 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.
Threats When Strategy Pales: Lessons from the Department Store Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study When Strategy Pales: Lessons from the Department Store Industry 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. Department Stores 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.
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 Department Stores in the Strategy & Execution sector and impact the bottomline 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 Department Stores business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Department Stores 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. Department Stores can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Technology acceleration in Forth Industrial Revolution
– Department Stores has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Department Stores needs to keep up with the evolution of technology in the Strategy & Execution 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 Department Stores 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 Department Stores
– 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 Department Stores.
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. Department Stores can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Department Stores 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 When Strategy Pales: Lessons from the Department Store Industry .
Shortening product life cycle
– it is one of the major threat that Department Stores is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Department Stores with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Department Stores 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.
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 Department Stores.
Weighted SWOT Analysis of When Strategy Pales: Lessons from the Department Store Industry 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 When Strategy Pales: Lessons from the Department Store Industry 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 When Strategy Pales: Lessons from the Department Store Industry 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 When Strategy Pales: Lessons from the Department Store Industry 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 When Strategy Pales: Lessons from the Department Store Industry 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 Department Stores needs to make to build a sustainable competitive advantage.