The High Stakes of Low-Cost Competition SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The High Stakes of Low-Cost Competition
Low-cost competitors are on the offensive in many industries, from airlines to B2B capital equipment markets, eating away at the market share traditionally enjoyed by premium companies. Dealing with low-cost competition first requires understanding how radically the business model has changed: fewer companies are doing it all, but rather specializing in either product development or delivery or customer relationships. While there may be good reasons for adopting a more focused business strategy, companies need to realize how the interplay between premium and low-cost rivals is, in fact, fuelling the threat, which needs to be craftily managed. Using a multitude of real business examples, the author insists that companies today must learn how to take on low-cost competitors in the good-enough segment, develop hard-to-copy performance leadership products, and build deep and lasting relationships with their customers. A dual-pronged strategy - one that both challenges low-cost competitors in the good-enough segment, while also competing as a premium player using either performance leadership or relational value options - can serve to beat low-cost competitors at their own game.
Swot Analysis of "The High Stakes of Low-Cost Competition" written by Adrian Ryans includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Low Cost facing as an external strategic factors. Some of the topics covered in The High Stakes of Low-Cost Competition case study are - Strategic Management Strategies, Change management and Technology & Operations.
Some of the macro environment factors that can be used to understand the The High Stakes of Low-Cost Competition casestudy better are - – there is backlash against globalization, technology disruption, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels,
increasing commodity prices, wage bills are increasing, etc
Introduction to SWOT Analysis of The High Stakes of Low-Cost Competition
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The High Stakes of Low-Cost Competition case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Low Cost, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Low Cost 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 The High Stakes of Low-Cost Competition can be done for the following purposes –
1. Strategic planning using facts provided in The High Stakes of Low-Cost Competition case study
2. Improving business portfolio management of Low Cost
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 Low Cost
Strengths The High Stakes of Low-Cost Competition | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Low Cost in The High Stakes of Low-Cost Competition Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Low Cost in the sector have low bargaining power. The High Stakes of Low-Cost Competition has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Low Cost to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Low Cost 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 Adrian Ryans 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
– Low Cost has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Low Cost to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Low Cost 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 Low Cost is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The High Stakes of Low-Cost Competition Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Low Cost has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Low Cost 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.
Innovation driven organization
– Low Cost is one of the most innovative firm in sector. Manager in The High Stakes of Low-Cost Competition Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Low Cost
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Low Cost does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Technology & Operations industry
– The High Stakes of Low-Cost Competition firm has clearly differentiated products in the market place. This has enabled Low Cost to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Low Cost to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Low Cost is present in almost all the verticals within the industry. This has provided firm in The High Stakes of Low-Cost Competition 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.
Training and development
– Low Cost has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The High Stakes of Low-Cost Competition 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.
Strong track record of project management
– Low Cost is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Low Cost in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses The High Stakes of Low-Cost Competition | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The High Stakes of Low-Cost Competition are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the The High Stakes of Low-Cost Competition 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 Low Cost has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Adrian Ryans suggests that, Low Cost 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.
Slow decision making process
– As mentioned earlier in the report, Low Cost 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. Low Cost 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.
Products dominated business model
– Even though Low Cost 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 - The High Stakes of Low-Cost Competition should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Low Cost 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The High Stakes of Low-Cost Competition, in the dynamic environment Low Cost has struggled to respond to the nimble upstart competition. Low Cost has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study The High Stakes of Low-Cost Competition 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 The High Stakes of Low-Cost Competition can leverage the sales team experience to cultivate customer relationships as Low Cost is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Low Cost, firm in the HBR case study The High Stakes of Low-Cost Competition needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Low Cost products
– To increase the profitability and margins on the products, Low Cost needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Low Cost 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The High Stakes of Low-Cost Competition, it seems that the employees of Low Cost 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.
Opportunities The High Stakes of Low-Cost Competition | 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 The High Stakes of Low-Cost Competition are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Low Cost can use these opportunities to build new business models that can help the communities that Low Cost operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Loyalty marketing
– Low Cost 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.
Developing new processes and practices
– Low Cost 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Low Cost 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, The High Stakes of Low-Cost Competition, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Low Cost has opened avenues for new revenue streams for the organization in the industry. This can help Low Cost to build a more holistic ecosystem as suggested in the The High Stakes of Low-Cost Competition case study. Low Cost can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Low Cost 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. Low Cost 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Low Cost is facing challenges because of the dominance of functional experts in the organization. The High Stakes of Low-Cost Competition 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.
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 Low Cost in the consumer business. Now Low Cost can target international markets with far fewer capital restrictions requirements than the existing system.
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. Low Cost can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Low Cost to increase its market reach. Low Cost 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.
Using analytics as competitive advantage
– Low Cost 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 The High Stakes of Low-Cost Competition - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Low Cost to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Low Cost can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Low Cost 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.
Threats The High Stakes of Low-Cost Competition External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The High Stakes of Low-Cost Competition are -
High dependence on third party suppliers
– Low Cost 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 Low Cost 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 Low Cost 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 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. Low Cost needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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. Low Cost 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.
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 Low Cost.
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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Low Cost 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 The High Stakes of Low-Cost Competition .
Increasing wage structure of Low Cost
– 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 Low Cost.
Technology acceleration in Forth Industrial Revolution
– Low Cost has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Low Cost 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.
Environmental challenges
– Low Cost 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. Low Cost can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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.
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. Low Cost can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of The High Stakes of Low-Cost Competition 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 The High Stakes of Low-Cost Competition 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 The High Stakes of Low-Cost Competition 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 The High Stakes of Low-Cost Competition 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 The High Stakes of Low-Cost Competition 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 Low Cost needs to make to build a sustainable competitive advantage.