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 - – increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing commodity prices, geopolitical disruptions, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation,
challanges to central banks by blockchain based private currencies, wage bills are increasing, 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 -
High brand equity
– Department Stores has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Department Stores to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Department Stores in the sector have low bargaining power. When Strategy Pales: Lessons from the Department Store Industry has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Department Stores to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Department Stores 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 Homer H. Johnson, Sung Min Kim 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.
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.
Effective Research and Development (R&D)
– Department Stores 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 When Strategy Pales: Lessons from the Department Store Industry - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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.
Diverse revenue streams
– Department Stores is present in almost all the verticals within the industry. This has provided firm in When Strategy Pales: Lessons from the Department Store Industry 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.
Organizational Resilience of Department Stores
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Department Stores does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Department Stores 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.
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 -
Products dominated business model
– Even though Department Stores 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 - When Strategy Pales: Lessons from the Department Store Industry should strive to include more intangible value offerings along with its core products and services.
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.
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 strategic competitive environment developments
– As When Strategy Pales: Lessons from the Department Store Industry HBR case study mentions - Department Stores 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.
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.
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.
High cash cycle compare to competitors
Department Stores 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.
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.
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.
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.
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.
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 -
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.
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.
Manufacturing automation
– Department Stores can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
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.
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.
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.
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.
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. Department Stores 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. Department Stores can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in 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.
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. Department Stores 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, Department Stores is facing challenges because of the dominance of functional experts in the organization. When Strategy Pales: Lessons from the Department Store Industry 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.
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.
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 -
High dependence on third party suppliers
– Department Stores 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.
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.
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.
Regulatory challenges
– Department Stores 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 Strategy & Execution industry regulations.
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.
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.
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.
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.
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.
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.
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. Department Stores needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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.
