A direct-selling cosmetics company involved in emerging markets exhibits significant foreign exchange risk exposure and profitability swings in the wake of the 2008 financial crisis. Students must review the company's use of derivative instruments and other hedging techniques to establish whether it pursues the right FX risk mitigation strategy.
Authors :: David F. Hawkins, Karol Misztal, Daniela Beyersdorfer
Swot Analysis of "Oriflame S.A. (A)" written by David F. Hawkins, Karol Misztal, Daniela Beyersdorfer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Oriflame Mitigation facing as an external strategic factors. Some of the topics covered in Oriflame S.A. (A) case study are - Strategic Management Strategies, Currency, Financial markets, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Oriflame S.A. (A) casestudy better are - – technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, increasing commodity prices, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google,
geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Oriflame S.A. (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Oriflame S.A. (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Oriflame Mitigation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Oriflame Mitigation 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 Oriflame S.A. (A) can be done for the following purposes –
1. Strategic planning using facts provided in Oriflame S.A. (A) case study
2. Improving business portfolio management of Oriflame Mitigation
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Oriflame Mitigation
Strengths Oriflame S.A. (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Oriflame Mitigation in Oriflame S.A. (A) Harvard Business Review case study are -
Organizational Resilience of Oriflame Mitigation
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Oriflame Mitigation does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Oriflame Mitigation 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 Oriflame S.A. (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Oriflame Mitigation in the sector have low bargaining power. Oriflame S.A. (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Oriflame Mitigation to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Oriflame Mitigation has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Oriflame Mitigation 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.
Training and development
– Oriflame Mitigation has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Oriflame S.A. (A) 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 lead change in Finance & Accounting field
– Oriflame Mitigation 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 Oriflame Mitigation in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Finance & Accounting industry
– Oriflame S.A. (A) firm has clearly differentiated products in the market place. This has enabled Oriflame Mitigation to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Oriflame Mitigation to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Oriflame S.A. (A) 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Oriflame Mitigation digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Oriflame Mitigation 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.
Strong track record of project management
– Oriflame Mitigation is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Oriflame Mitigation is one of the most innovative firm in sector. Manager in Oriflame S.A. (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Oriflame Mitigation in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Oriflame S.A. (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Oriflame S.A. (A) are -
Lack of clear differentiation of Oriflame Mitigation products
– To increase the profitability and margins on the products, Oriflame Mitigation needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Oriflame Mitigation 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.
Low market penetration in new markets
– Outside its home market of Oriflame Mitigation, firm in the HBR case study Oriflame S.A. (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Oriflame Mitigation is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Oriflame Mitigation needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Oriflame Mitigation to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Oriflame Mitigation 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 - Oriflame S.A. (A) should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Oriflame S.A. (A) HBR case study mentions - Oriflame Mitigation 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Oriflame Mitigation is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Oriflame S.A. (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Oriflame Mitigation 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.
High cash cycle compare to competitors
Oriflame Mitigation 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.
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 Oriflame Mitigation supply chain. Even after few cautionary changes mentioned in the HBR case study - Oriflame S.A. (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Oriflame Mitigation vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Oriflame S.A. (A), it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
Opportunities Oriflame S.A. (A) | 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 Oriflame S.A. (A) are -
Leveraging digital technologies
– Oriflame Mitigation 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, Oriflame Mitigation is facing challenges because of the dominance of functional experts in the organization. Oriflame S.A. (A) 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.
Manufacturing automation
– Oriflame Mitigation can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Building a culture of innovation
– managers at Oriflame Mitigation 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 Finance & Accounting segment.
Developing new processes and practices
– Oriflame Mitigation can develop new processes and procedures in Finance & Accounting 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, Oriflame Mitigation 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.
Better consumer reach
– The expansion of the 5G network will help Oriflame Mitigation to increase its market reach. Oriflame Mitigation 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.
Learning at scale
– Online learning technologies has now opened space for Oriflame Mitigation 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Oriflame Mitigation in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Oriflame Mitigation 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. Oriflame Mitigation 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.
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 Oriflame Mitigation 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Oriflame Mitigation 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, Oriflame S.A. (A), 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 Oriflame Mitigation has opened avenues for new revenue streams for the organization in the industry. This can help Oriflame Mitigation to build a more holistic ecosystem as suggested in the Oriflame S.A. (A) case study. Oriflame Mitigation can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Oriflame S.A. (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Oriflame S.A. (A) are -
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. Oriflame Mitigation 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, Oriflame Mitigation 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 Oriflame S.A. (A) .
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Oriflame Mitigation in the Finance & Accounting industry. The Finance & Accounting 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
– Oriflame Mitigation has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Oriflame Mitigation needs to keep up with the evolution of technology in the Finance & Accounting 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.
Regulatory challenges
– Oriflame Mitigation 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 Finance & Accounting industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Oriflame S.A. (A), Oriflame Mitigation may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Increasing wage structure of Oriflame Mitigation
– 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 Oriflame Mitigation.
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 Oriflame Mitigation.
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 Oriflame Mitigation business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Oriflame Mitigation is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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 Oriflame Mitigation in the Finance & Accounting sector and impact the bottomline of the organization.
Environmental challenges
– Oriflame Mitigation 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. Oriflame Mitigation can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Weighted SWOT Analysis of Oriflame S.A. (A) 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 Oriflame S.A. (A) 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 Oriflame S.A. (A) 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 Oriflame S.A. (A) 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 Oriflame S.A. (A) 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 Oriflame Mitigation needs to make to build a sustainable competitive advantage.