Case Study Description of Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations
Michaels Craft Stores is the largest arts and crafts retailer in the United States and in the world. Its CEO, Michael Rouleau, wants to expand the chain to 1,000 stores by 2006. The key constraint is the lack of sophistication among Michaels' supplier base, which is made up of over 1,000 suppliers, many of which are small, creative companies with little computer or logistics knowledge. As a result, the cost of running Michaels' supply chain is high. Describes the company's efforts to build the sophistication of its suppliers through educational Vendor Flow Training courses that teach suppliers how to adopt state-of-the-art practices for improved efficiency in supplying their channel.
Swot Analysis of "Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations" written by Anne Coughlan, Lindsey M. Piegza includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Michaels Sophistication facing as an external strategic factors. Some of the topics covered in Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations case study are - Strategic Management Strategies, Marketing, Operations management and Technology & Operations.
Some of the macro environment factors that can be used to understand the Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations casestudy better are - – technology disruption, challanges to central banks by blockchain based private currencies, wage bills are increasing, there is increasing trade war between United States & China, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google,
central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Michaels Sophistication, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Michaels Sophistication 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations can be done for the following purposes –
1. Strategic planning using facts provided in Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations case study
2. Improving business portfolio management of Michaels Sophistication
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 Michaels Sophistication
Strengths Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Michaels Sophistication in Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations Harvard Business Review case study are -
High switching costs
– The high switching costs that Michaels Sophistication 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.
Strong track record of project management
– Michaels Sophistication is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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.
Training and development
– Michaels Sophistication has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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.
Ability to recruit top talent
– Michaels Sophistication is one of the leading recruiters in the industry. Managers in the Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Michaels Sophistication 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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 Technology & Operations industry
– Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations firm has clearly differentiated products in the market place. This has enabled Michaels Sophistication to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Michaels Sophistication to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Michaels Sophistication in the sector have low bargaining power. Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Michaels Sophistication to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Michaels Sophistication has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Michaels Sophistication to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Michaels Sophistication
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Michaels Sophistication does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Michaels Sophistication digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Michaels Sophistication 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.
Analytics focus
– Michaels Sophistication is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Anne Coughlan, Lindsey M. Piegza can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations are -
High cash cycle compare to competitors
Michaels Sophistication 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations, is just above the industry average. Michaels Sophistication 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.
Capital Spending Reduction
– Even during the low interest decade, Michaels Sophistication 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.
Low market penetration in new markets
– Outside its home market of Michaels Sophistication, firm in the HBR case study Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Michaels Sophistication is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Michaels Sophistication needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Michaels Sophistication to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Michaels Sophistication 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.
No frontier risks strategy
– After analyzing the HBR case study Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations, 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.
Interest costs
– Compare to the competition, Michaels Sophistication 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.
Aligning sales with marketing
– It come across in the case study Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations can leverage the sales team experience to cultivate customer relationships as Michaels Sophistication is planning to shift buying processes online.
High operating costs
– Compare to the competitors, firm in the HBR case study Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Michaels Sophistication 's lucrative customers.
Products dominated business model
– Even though Michaels Sophistication 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 - Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations should strive to include more intangible value offerings along with its core products and services.
Opportunities Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations | 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations are -
Better consumer reach
– The expansion of the 5G network will help Michaels Sophistication to increase its market reach. Michaels Sophistication will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Leveraging digital technologies
– Michaels Sophistication 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Michaels Sophistication is facing challenges because of the dominance of functional experts in the organization. Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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.
Creating value in data economy
– The success of analytics program of Michaels Sophistication has opened avenues for new revenue streams for the organization in the industry. This can help Michaels Sophistication to build a more holistic ecosystem as suggested in the Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations case study. Michaels Sophistication can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Michaels Sophistication in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Manufacturing automation
– Michaels Sophistication 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.
Using analytics as competitive advantage
– Michaels Sophistication 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Michaels Sophistication to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Michaels Sophistication 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Michaels Sophistication 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Michaels Sophistication 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 Michaels Sophistication to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Michaels Sophistication 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.
Buying journey improvements
– Michaels Sophistication can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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 Michaels Sophistication in the consumer business. Now Michaels Sophistication can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations are -
Shortening product life cycle
– it is one of the major threat that Michaels Sophistication is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Michaels Sophistication 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.
Environmental challenges
– Michaels Sophistication 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. Michaels Sophistication can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Regulatory challenges
– Michaels Sophistication 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.
Consumer confidence and its impact on Michaels Sophistication 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Michaels Sophistication with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Michaels Sophistication has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Michaels Sophistication 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.
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. Michaels Sophistication can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Michaels Sophistication.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations, Michaels Sophistication 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 .
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. Michaels Sophistication 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Michaels Sophistication 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations .
Weighted SWOT Analysis of Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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 Michaels Craft Stores: Integrated Channel Management and Vendor-Retailer Relations 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 Michaels Sophistication needs to make to build a sustainable competitive advantage.
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