Magazine Luiza: Building a Retail Model of "Courting the Poor" SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
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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 - – technology disruption, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models,
there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
Ability to recruit top talent
– Luiza Magazine is one of the leading recruiters in the industry. Managers in the Magazine Luiza: Building a Retail Model of "Courting the Poor" are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Luiza Magazine 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 Magazine Luiza: Building a Retail Model of "Courting the Poor" - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Luiza Magazine 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 Frances X. Frei 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.
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.
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.
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.
Sustainable margins compare to other players in Technology & Operations industry
– Magazine Luiza: Building a Retail Model of "Courting the Poor" firm has clearly differentiated products in the market place. This has enabled Luiza Magazine to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Luiza Magazine to invest into research and development (R&D) and innovation.
Training and development
– Luiza Magazine has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Magazine Luiza: Building a Retail Model of "Courting the Poor" 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.
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.
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.
Innovation driven organization
– Luiza Magazine is one of the most innovative firm in sector. Manager in Magazine Luiza: Building a Retail Model of "Courting the Poor" Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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 -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Luiza Magazine is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Magazine Luiza: Building a Retail Model of "Courting the Poor" can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Luiza Magazine 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 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.
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.
Products dominated business model
– Even though Luiza Magazine 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 - Magazine Luiza: Building a Retail Model of "Courting the Poor" should strive to include more intangible value offerings along with its core products and services.
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.
Interest costs
– Compare to the competition, Luiza Magazine 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.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Luiza Magazine 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.
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 -
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.
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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Luiza Magazine to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Luiza Magazine 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. Luiza Magazine 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Luiza Magazine 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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Luiza Magazine can use these opportunities to build new business models that can help the communities that Luiza Magazine operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Luiza Magazine to increase its market reach. Luiza Magazine 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.
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 -
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Luiza Magazine has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Luiza Magazine 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.
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Luiza Magazine in the Technology & Operations sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Luiza Magazine with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
Consumer confidence and its impact on Luiza Magazine 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.
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.
Shortening product life cycle
– it is one of the major threat that Luiza Magazine is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.