Saks Fifth Avenue, a luxury department store chain, has been hard hit by the 2008 financial crisis and stock market crash. Speculation about impending bankruptcy is rampant in the press. The CEO, Stephen Sadove, must decide how to respond.
Swot Analysis of "Saks Incorporated" written by Carliss Y. Baldwin, Stefon Burns includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Saks Sadove facing as an external strategic factors. Some of the topics covered in Saks Incorporated case study are - Strategic Management Strategies, Financial markets, Recession, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Saks Incorporated casestudy better are - – cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, geopolitical disruptions,
technology disruption, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Saks Incorporated
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Saks Incorporated case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Saks Sadove, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Saks Sadove 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 Saks Incorporated can be done for the following purposes –
1. Strategic planning using facts provided in Saks Incorporated case study
2. Improving business portfolio management of Saks Sadove
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 Saks Sadove
Strengths Saks Incorporated | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Saks Sadove in Saks Incorporated Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Saks Sadove in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Saks Sadove is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Saks Sadove is one of the leading recruiters in the industry. Managers in the Saks Incorporated are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Finance & Accounting industry
– Saks Incorporated firm has clearly differentiated products in the market place. This has enabled Saks Sadove to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Saks Sadove to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Saks Incorporated 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.
Learning organization
- Saks Sadove 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 Saks Sadove is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Saks Incorporated Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Saks Sadove in the sector have low bargaining power. Saks Incorporated has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Saks Sadove to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Saks Sadove 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 Carliss Y. Baldwin, Stefon Burns 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.
Effective Research and Development (R&D)
– Saks Sadove 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 Saks Incorporated - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Saks Sadove 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.
Innovation driven organization
– Saks Sadove is one of the most innovative firm in sector. Manager in Saks Incorporated Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Saks Sadove has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Saks Incorporated 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.
Weaknesses Saks Incorporated | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Saks Incorporated are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Saks Incorporated 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 Saks Sadove has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Saks Sadove, firm in the HBR case study Saks Incorporated needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Saks Sadove 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 - Saks Incorporated should strive to include more intangible value offerings along with its core products and services.
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 Saks Sadove supply chain. Even after few cautionary changes mentioned in the HBR case study - Saks Incorporated, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Saks Sadove vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Saks Incorporated, 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Saks Incorporated 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 Saks Sadove 's lucrative customers.
Need for greater diversity
– Saks Sadove has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As Saks Incorporated HBR case study mentions - Saks Sadove 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 decision making process
– As mentioned earlier in the report, Saks Sadove 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. Saks Sadove 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Saks Sadove is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Saks Incorporated 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, Saks Sadove 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.
Opportunities Saks Incorporated | 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 Saks Incorporated are -
Creating value in data economy
– The success of analytics program of Saks Sadove has opened avenues for new revenue streams for the organization in the industry. This can help Saks Sadove to build a more holistic ecosystem as suggested in the Saks Incorporated case study. Saks Sadove can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Saks Sadove can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Saks Sadove 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.
Manufacturing automation
– Saks Sadove 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Saks Sadove 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.
Building a culture of innovation
– managers at Saks Sadove 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.
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 Saks Sadove 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 Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Saks Sadove 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. Saks Sadove 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.
Using analytics as competitive advantage
– Saks Sadove 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 Saks Incorporated - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Saks Sadove to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Saks Sadove 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 Saks Sadove to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Saks Sadove 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 Saks Sadove to increase its market reach. Saks Sadove 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.
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. Saks Sadove can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Saks Incorporated External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Saks Incorporated 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.
Regulatory challenges
– Saks Sadove 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Saks Sadove 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
– Saks Sadove has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Saks Sadove 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.
Stagnating economy with rate increase
– Saks Sadove can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Saks Incorporated, Saks Sadove 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 .
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 Saks Sadove in the Finance & Accounting sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Saks Sadove 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.
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. Saks Sadove needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Saks Sadove.
Increasing wage structure of Saks Sadove
– 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 Saks Sadove.
Shortening product life cycle
– it is one of the major threat that Saks Sadove is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Saks Incorporated 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 Saks Incorporated 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 Saks Incorporated 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 Saks Incorporated 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 Saks Incorporated 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 Saks Sadove needs to make to build a sustainable competitive advantage.
