Kirk Myers, REI's manager of corporate social responsibility (CSR), has been tasked with finding a way to optimize the organization's rental program while minimizing its environmental impacts. After looking at the data, he found that at times the rental program had major queuing problems - equipment was either not available or wait times were too long. He will have to take into consideration customer experience/service, inventory, revenue, waste, and usage implications when crafting his recommendations. Students are asked to apply the news vendor model and VUT equation to find the best solution.
Swot Analysis of "REI Rentals" written by Damian Beil, Wallace Hopp includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Rental Rei's facing as an external strategic factors. Some of the topics covered in REI Rentals case study are - Strategic Management Strategies, IT, Public relations and Technology & Operations.
Some of the macro environment factors that can be used to understand the REI Rentals casestudy better are - – increasing commodity prices, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, geopolitical disruptions, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google,
challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in REI Rentals case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rental Rei's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rental Rei's 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 REI Rentals can be done for the following purposes –
1. Strategic planning using facts provided in REI Rentals case study
2. Improving business portfolio management of Rental Rei's
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 Rental Rei's
Strengths REI Rentals | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rental Rei's in REI Rentals Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Rental Rei's 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.
Ability to recruit top talent
– Rental Rei's is one of the leading recruiters in the industry. Managers in the REI Rentals are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Rental Rei's in the sector have low bargaining power. REI Rentals has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rental Rei's to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Technology & Operations field
– Rental Rei's 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 Rental Rei's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Rental Rei's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rental Rei's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Rental Rei's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Rental Rei's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Rental Rei's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Rental Rei's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Rental Rei's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rental Rei's 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.
Learning organization
- Rental Rei's 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 Rental Rei's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in REI Rentals Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Rental Rei's 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 REI Rentals - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Rental Rei's 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 REI Rentals HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses REI Rentals | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of REI Rentals are -
Skills based hiring
– The stress on hiring functional specialists at Rental Rei's 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Rental Rei's 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.
Low market penetration in new markets
– Outside its home market of Rental Rei's, firm in the HBR case study REI Rentals needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Rental Rei's is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Rental Rei's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Rental Rei's to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study REI Rentals, it seems that the employees of Rental Rei's 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.
Slow decision making process
– As mentioned earlier in the report, Rental Rei's 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. Rental Rei's 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.
Capital Spending Reduction
– Even during the low interest decade, Rental Rei's 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study REI Rentals, is just above the industry average. Rental Rei's 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
– Rental Rei's 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.
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 Rental Rei's supply chain. Even after few cautionary changes mentioned in the HBR case study - REI Rentals, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Rental Rei's vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study REI Rentals, in the dynamic environment Rental Rei's has struggled to respond to the nimble upstart competition. Rental Rei's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities REI Rentals | 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 REI Rentals are -
Learning at scale
– Online learning technologies has now opened space for Rental Rei's 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Rental Rei's can use these opportunities to build new business models that can help the communities that Rental Rei's operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Creating value in data economy
– The success of analytics program of Rental Rei's has opened avenues for new revenue streams for the organization in the industry. This can help Rental Rei's to build a more holistic ecosystem as suggested in the REI Rentals case study. Rental Rei's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Rental Rei's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rental Rei's 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 Rental Rei's to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Rental Rei's is facing challenges because of the dominance of functional experts in the organization. REI Rentals 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.
Buying journey improvements
– Rental Rei's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. REI Rentals 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.
Better consumer reach
– The expansion of the 5G network will help Rental Rei's to increase its market reach. Rental Rei's 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.
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. Rental Rei's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Rental Rei's 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 REI Rentals - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Rental Rei's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rental Rei's 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, REI Rentals, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Rental Rei's can develop new processes and procedures in Technology & Operations 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
– Rental Rei's 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 REI Rentals External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study REI Rentals are -
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. Rental Rei's needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Rental Rei's 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.
High dependence on third party suppliers
– Rental Rei's 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.
Shortening product life cycle
– it is one of the major threat that Rental Rei's is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Rental Rei's 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.
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 Rental Rei's business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Rental Rei's 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. Rental Rei's can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study REI Rentals, Rental Rei's 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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Rental Rei's 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 REI Rentals .
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. Rental Rei's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Rental Rei's has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Rental Rei's needs to keep up with the evolution of technology in the Technology & Operations 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.
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.
Weighted SWOT Analysis of REI Rentals 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 REI Rentals 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 REI Rentals 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 REI Rentals 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 REI Rentals 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 Rental Rei's needs to make to build a sustainable competitive advantage.