Magazine Luiza: Building a Retail Model of "Courting the Poor" SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Magazine Luiza: Building a Retail Model of "Courting the Poor"
To maximize their effectiveness, color cases should be printed in color.Describes the innovative retail model of the Brazilian firm Magazine Luiza. Magazine Luiza enables low-income consumer credit by applying a flexible and nuanced evaluation system. Additionally, its dedication to customer service, employee motivation, and progressive use of technology have driven its success and expansion.
Swot Analysis of "Magazine Luiza: Building a Retail Model of "Courting the Poor"" written by Frances X. Frei includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Luiza Magazine facing as an external strategic factors. Some of the topics covered in Magazine Luiza: Building a Retail Model of "Courting the Poor" case study are - Strategic Management Strategies, Collaboration, Customer service, Customers, Disruptive innovation, Growth strategy, IT, Labor, Motivating people, Operations management, Sales, Succession planning and Technology & Operations.
Some of the macro environment factors that can be used to understand the Magazine Luiza: Building a Retail Model of "Courting the Poor" casestudy better are - – geopolitical disruptions, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Magazine Luiza: Building a Retail Model of "Courting the Poor"
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Magazine Luiza: Building a Retail Model of "Courting the Poor" case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Luiza Magazine, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Luiza Magazine 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" can be done for the following purposes –
1. Strategic planning using facts provided in Magazine Luiza: Building a Retail Model of "Courting the Poor" case study
2. Improving business portfolio management of Luiza Magazine
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Luiza Magazine
Strengths Magazine Luiza: Building a Retail Model of "Courting the Poor" | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Luiza Magazine in Magazine Luiza: Building a Retail Model of "Courting the Poor" Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Luiza Magazine in the sector have low bargaining power. Magazine Luiza: Building a Retail Model of "Courting the Poor" has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Luiza Magazine to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Luiza Magazine 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.
Highly skilled collaborators
– Luiza Magazine 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Luiza Magazine is present in almost all the verticals within the industry. This has provided firm in Magazine Luiza: Building a Retail Model of "Courting the Poor" 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.
Ability to lead change in Technology & Operations field
– Luiza Magazine 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 Luiza Magazine in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Luiza Magazine is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Luiza Magazine has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Luiza Magazine to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Luiza Magazine has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Luiza Magazine 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.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Luiza Magazine digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Luiza Magazine 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.
Operational resilience
– The operational resilience strategy in the Magazine Luiza: Building a Retail Model of "Courting the Poor" 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.
Superior customer experience
– The customer experience strategy of Luiza Magazine in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Luiza Magazine 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 Luiza Magazine is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Magazine Luiza: Building a Retail Model of "Courting the Poor" Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Magazine Luiza: Building a Retail Model of "Courting the Poor" | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Magazine Luiza: Building a Retail Model of "Courting the Poor" are -
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 Luiza Magazine supply chain. Even after few cautionary changes mentioned in the HBR case study - Magazine Luiza: Building a Retail Model of "Courting the Poor", it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Luiza Magazine vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Magazine Luiza: Building a Retail Model of "Courting the Poor" 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" can leverage the sales team experience to cultivate customer relationships as Luiza Magazine is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Magazine Luiza: Building a Retail Model of "Courting the Poor" HBR case study mentions - Luiza Magazine 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.
Capital Spending Reduction
– Even during the low interest decade, Luiza Magazine has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
No frontier risks strategy
– After analyzing the HBR case study Magazine Luiza: Building a Retail Model of "Courting the Poor", it seems that company is thinking about the frontier risks that can impact Technology & Operations 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 Luiza Magazine products
– To increase the profitability and margins on the products, Luiza Magazine needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Luiza Magazine, firm in the HBR case study Magazine Luiza: Building a Retail Model of "Courting the Poor" needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Magazine Luiza: Building a Retail Model of "Courting the Poor", it seems that the employees of Luiza Magazine 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Magazine Luiza: Building a Retail Model of "Courting the Poor", is just above the industry average. Luiza Magazine 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Frances X. Frei suggests that, Luiza Magazine 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" 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 Luiza Magazine has relatively successful track record of launching new products.
Opportunities Magazine Luiza: Building a Retail Model of "Courting the Poor" | 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Luiza Magazine 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Luiza Magazine can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Luiza Magazine 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.
Learning at scale
– Online learning technologies has now opened space for Luiza Magazine 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Luiza Magazine 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 Luiza Magazine 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 Technology & Operations segment.
Creating value in data economy
– The success of analytics program of Luiza Magazine has opened avenues for new revenue streams for the organization in the industry. This can help Luiza Magazine to build a more holistic ecosystem as suggested in the Magazine Luiza: Building a Retail Model of "Courting the Poor" case study. Luiza Magazine can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Luiza Magazine 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 Luiza Magazine to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Luiza Magazine is facing challenges because of the dominance of functional experts in the organization. Magazine Luiza: Building a Retail Model of "Courting the Poor" 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.
Using analytics as competitive advantage
– Luiza Magazine 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Luiza Magazine to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Luiza Magazine can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Magazine Luiza: Building a Retail Model of "Courting the Poor" suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Luiza Magazine in the consumer business. Now Luiza Magazine can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Luiza Magazine can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
Threats Magazine Luiza: Building a Retail Model of "Courting the Poor" External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Magazine Luiza: Building a Retail Model of "Courting the Poor" are -
High dependence on third party suppliers
– Luiza Magazine 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.
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. Luiza Magazine 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.
Regulatory challenges
– Luiza Magazine 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 Technology & Operations industry regulations.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Luiza Magazine can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Luiza Magazine
– 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 Luiza Magazine.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Magazine Luiza: Building a Retail Model of "Courting the Poor", Luiza Magazine may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
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 Luiza Magazine.
Environmental challenges
– Luiza Magazine 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. Luiza Magazine can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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 Luiza Magazine business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Luiza Magazine in the Technology & Operations industry. The Technology & Operations 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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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. Luiza Magazine needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Magazine Luiza: Building a Retail Model of "Courting the Poor" 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" 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 Luiza Magazine needs to make to build a sustainable competitive advantage.
