Red Flag Software Co. SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Red Flag Software Co.
In 2005, just five years after its formal launch, Beijing-based Red Flag Software was the world's second-largest distributor of the Linux operating system and was expecting its first annual profit. On a unit basis, Red Flag led the world in desktops (PCs) shipped with Linux and was No. 4 in installed servers. On a revenue basis, Red Flag was fourth overall. Within China, Red Flag held just over half of the Linux market and ran key applications for the postal system, large state-owned enterprises, and more than a million PCs. The Chinese government supported Linux as an alternative to Microsoft's Windows operating system to avoid royalty payments to foreign firms and dependence on foreign technology. Even so, Red Flag President Chris Zhao felt the same pressure many start-ups faced: How could Red Flag compete against a giant like Microsoft? And what competitive advantages could Zhao bring to bear against an experienced Linux veteran like Red Hat, a U.S.-based software company that had just announced its plan to invest to capture market share in China? Zhao worried that government support would evaporate if Red Flag performed poorly.
Authors :: Felix Oberholzer-Gee, Tarun Khanna, David Lane, Elizabeth A. Raabe
Swot Analysis of "Red Flag Software Co." written by Felix Oberholzer-Gee, Tarun Khanna, David Lane, Elizabeth A. Raabe includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Flag Red facing as an external strategic factors. Some of the topics covered in Red Flag Software Co. case study are - Strategic Management Strategies, Competitive strategy, Government, Technology and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Red Flag Software Co. casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, technology disruption, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic ,
wage bills are increasing, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Red Flag Software Co.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Red Flag Software Co. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Flag Red, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Flag Red 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 Red Flag Software Co. can be done for the following purposes –
1. Strategic planning using facts provided in Red Flag Software Co. case study
2. Improving business portfolio management of Flag Red
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 Flag Red
Strengths Red Flag Software Co. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Flag Red in Red Flag Software Co. Harvard Business Review case study are -
High switching costs
– The high switching costs that Flag Red 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.
Operational resilience
– The operational resilience strategy in the Red Flag Software Co. 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.
Learning organization
- Flag Red 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 Flag Red is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Red Flag Software Co. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Flag Red has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Flag Red to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Flag Red has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Red Flag Software Co. 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.
Highly skilled collaborators
– Flag Red 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 Red Flag Software Co. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Flag Red in the sector have low bargaining power. Red Flag Software Co. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Flag Red to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Flag Red is one of the leading recruiters in the industry. Managers in the Red Flag Software Co. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Flag Red is one of the most innovative firm in sector. Manager in Red Flag Software Co. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Flag Red is present in almost all the verticals within the industry. This has provided firm in Red Flag Software Co. 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.
Effective Research and Development (R&D)
– Flag Red 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 Red Flag Software Co. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Flag Red is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Red Flag Software Co. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Red Flag Software Co. are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Red Flag Software Co., in the dynamic environment Flag Red has struggled to respond to the nimble upstart competition. Flag Red has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Flag Red supply chain. Even after few cautionary changes mentioned in the HBR case study - Red Flag Software Co., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Flag Red vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Felix Oberholzer-Gee, Tarun Khanna, David Lane, Elizabeth A. Raabe suggests that, Flag Red 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.
Need for greater diversity
– Flag Red 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.
Interest costs
– Compare to the competition, Flag Red 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 to strategic competitive environment developments
– As Red Flag Software Co. HBR case study mentions - Flag Red 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Red Flag Software Co., it seems that the employees of Flag Red don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring
– The stress on hiring functional specialists at Flag Red 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Red Flag Software Co. 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 Flag Red has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Red Flag Software Co., is just above the industry average. Flag Red 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Flag Red is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Red Flag Software Co. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Red Flag Software Co. | 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 Red Flag Software Co. are -
Learning at scale
– Online learning technologies has now opened space for Flag Red 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Flag Red 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.
Buying journey improvements
– Flag Red can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Red Flag Software Co. 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Flag Red is facing challenges because of the dominance of functional experts in the organization. Red Flag Software Co. case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Flag Red 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.
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. Flag Red 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 Flag Red 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.
Developing new processes and practices
– Flag Red 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Flag Red 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, Red Flag Software Co., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Flag Red 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Flag Red can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Flag Red in the consumer business. Now Flag Red can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Flag Red has opened avenues for new revenue streams for the organization in the industry. This can help Flag Red to build a more holistic ecosystem as suggested in the Red Flag Software Co. case study. Flag Red can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Red Flag Software Co. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Red Flag Software Co. are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Flag Red with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Flag Red
– 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 Flag Red.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Flag Red 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 Red Flag Software Co. .
Environmental challenges
– Flag Red 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. Flag Red can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Technology acceleration in Forth Industrial Revolution
– Flag Red has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Flag Red 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.
High dependence on third party suppliers
– Flag Red 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.
Regulatory challenges
– Flag Red 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 Flag Red in the Strategy & Execution sector and impact the bottomline of the organization.
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. Flag Red needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Consumer confidence and its impact on Flag Red 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.
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.
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 Flag Red business can come under increasing regulations regarding data privacy, data security, etc.
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 Flag Red.
Weighted SWOT Analysis of Red Flag Software Co. 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 Red Flag Software Co. 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 Red Flag Software Co. 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 Red Flag Software Co. 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 Red Flag Software Co. 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 Flag Red needs to make to build a sustainable competitive advantage.
