Zappos.com, Inc., and the Warehouse Decision SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Zappos.com, Inc., and the Warehouse Decision
Amazon.com had purchased Zappos in 2009 and was making significant investments in warehouse infrastructure. By early summer 2012, Zappos, a dominant player in the crowded online retail apparel and footwear arena must decide whether to retain its warehouse complex in Kentucky, which it had maintained since 2002, or turn over the operations to Amazon. Should Zappos continue to operate as an entity external to its parent company? Or would advancements and changes in the market be disruptive enough to force Zappos to change in order to remain competitive?
Authors :: Mike Lenox, Elliott N. Weiss, Rebecca Goldberg
Swot Analysis of "Zappos.com, Inc., and the Warehouse Decision" written by Mike Lenox, Elliott N. Weiss, Rebecca Goldberg includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Zappos Warehouse facing as an external strategic factors. Some of the topics covered in Zappos.com, Inc., and the Warehouse Decision case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Zappos.com, Inc., and the Warehouse Decision casestudy better are - – increasing transportation and logistics costs, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation,
increasing government debt because of Covid-19 spendings, increasing commodity prices, etc
Introduction to SWOT Analysis of Zappos.com, Inc., and the Warehouse Decision
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Zappos.com, Inc., and the Warehouse Decision case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Zappos Warehouse, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Zappos Warehouse 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 Zappos.com, Inc., and the Warehouse Decision can be done for the following purposes –
1. Strategic planning using facts provided in Zappos.com, Inc., and the Warehouse Decision case study
2. Improving business portfolio management of Zappos Warehouse
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 Zappos Warehouse
Strengths Zappos.com, Inc., and the Warehouse Decision | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Zappos Warehouse in Zappos.com, Inc., and the Warehouse Decision Harvard Business Review case study are -
Training and development
– Zappos Warehouse has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Zappos.com, Inc., and the Warehouse Decision 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.
Operational resilience
– The operational resilience strategy in the Zappos.com, Inc., and the Warehouse Decision 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Zappos Warehouse digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Zappos Warehouse 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.
Diverse revenue streams
– Zappos Warehouse is present in almost all the verticals within the industry. This has provided firm in Zappos.com, Inc., and the Warehouse Decision 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 Zappos Warehouse
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Zappos Warehouse does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Zappos Warehouse 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 Zappos Warehouse is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Zappos.com, Inc., and the Warehouse Decision Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Zappos Warehouse 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 Zappos.com, Inc., and the Warehouse Decision 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
– Zappos.com, Inc., and the Warehouse Decision firm has clearly differentiated products in the market place. This has enabled Zappos Warehouse to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Zappos Warehouse to invest into research and development (R&D) and innovation.
Ability to lead change in Strategy & Execution field
– Zappos Warehouse 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 Zappos Warehouse in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Zappos Warehouse 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.
Cross disciplinary teams
– Horizontal connected teams at the Zappos Warehouse are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Zappos Warehouse has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Zappos Warehouse to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Zappos.com, Inc., and the Warehouse Decision | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Zappos.com, Inc., and the Warehouse Decision are -
High bargaining power of channel partners
– Because of the regulatory requirements, Mike Lenox, Elliott N. Weiss, Rebecca Goldberg suggests that, Zappos Warehouse 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Zappos.com, Inc., and the Warehouse Decision 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 Zappos Warehouse has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Zappos Warehouse 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 cash cycle compare to competitors
Zappos Warehouse 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Zappos.com, Inc., and the Warehouse Decision, it seems that the employees of Zappos Warehouse 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.
Aligning sales with marketing
– It come across in the case study Zappos.com, Inc., and the Warehouse Decision 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 Zappos.com, Inc., and the Warehouse Decision can leverage the sales team experience to cultivate customer relationships as Zappos Warehouse is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Zappos.com, Inc., and the Warehouse Decision, is just above the industry average. Zappos Warehouse needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Need for greater diversity
– Zappos Warehouse 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.
Products dominated business model
– Even though Zappos Warehouse 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 - Zappos.com, Inc., and the Warehouse Decision should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Zappos Warehouse is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Zappos.com, Inc., and the Warehouse Decision can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Zappos Warehouse, firm in the HBR case study Zappos.com, Inc., and the Warehouse Decision needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Zappos.com, Inc., and the Warehouse Decision | 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 Zappos.com, Inc., and the Warehouse Decision are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Zappos Warehouse 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.
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. Zappos Warehouse can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Zappos Warehouse 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Zappos Warehouse 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 Zappos Warehouse to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Zappos Warehouse 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 Zappos Warehouse to increase its market reach. Zappos Warehouse 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.
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 Zappos Warehouse in the consumer business. Now Zappos Warehouse can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Zappos Warehouse can use these opportunities to build new business models that can help the communities that Zappos Warehouse operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Developing new processes and practices
– Zappos Warehouse 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
– Zappos Warehouse 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.
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. Zappos Warehouse 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. Zappos Warehouse 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.
Leveraging digital technologies
– Zappos Warehouse 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
– Zappos Warehouse 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 Zappos.com, Inc., and the Warehouse Decision - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Zappos Warehouse to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Zappos.com, Inc., and the Warehouse Decision External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Zappos.com, Inc., and the Warehouse Decision are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Zappos Warehouse 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.
Consumer confidence and its impact on Zappos Warehouse 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 Zappos Warehouse.
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 Zappos Warehouse business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Zappos Warehouse with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Zappos Warehouse 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 Zappos.com, Inc., and the Warehouse Decision .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Zappos.com, Inc., and the Warehouse Decision, Zappos Warehouse 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 .
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.
Regulatory challenges
– Zappos Warehouse 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.
Technology acceleration in Forth Industrial Revolution
– Zappos Warehouse has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Zappos Warehouse 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.
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. Zappos Warehouse 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.
Increasing wage structure of Zappos Warehouse
– 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 Zappos Warehouse.
High dependence on third party suppliers
– Zappos Warehouse 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.
Weighted SWOT Analysis of Zappos.com, Inc., and the Warehouse Decision 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 Zappos.com, Inc., and the Warehouse Decision 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 Zappos.com, Inc., and the Warehouse Decision 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 Zappos.com, Inc., and the Warehouse Decision 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 Zappos.com, Inc., and the Warehouse Decision 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 Zappos Warehouse needs to make to build a sustainable competitive advantage.