Darlarna is a manufacturer of high-end Swedish-style furniture. It has grown rapidly since its formation in 2005 and is currently attempting to expand into the U.S. market. In early 2009, after releasing the financial statements from the accountants, the owner became very concerned about a dramatic decrease in profits and all the bad news relating to the financial crisis in the United States. A chartered accountant was hired to conduct an analysis of Darlarna's operations and to make recommendations for future actions within the week.
Swot Analysis of "Darlarna Furniture Ltd." written by Dan Thompson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Darlarna Furniture facing as an external strategic factors. Some of the topics covered in Darlarna Furniture Ltd. case study are - Strategic Management Strategies, Recession and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Darlarna Furniture Ltd. casestudy better are - – there is backlash against globalization, there is increasing trade war between United States & China, wage bills are increasing, cloud computing is disrupting traditional business models, increasing energy prices, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Darlarna Furniture Ltd.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Darlarna Furniture Ltd. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Darlarna Furniture, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Darlarna Furniture 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 Darlarna Furniture Ltd. can be done for the following purposes –
1. Strategic planning using facts provided in Darlarna Furniture Ltd. case study
2. Improving business portfolio management of Darlarna Furniture
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 Darlarna Furniture
Strengths Darlarna Furniture Ltd. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Darlarna Furniture in Darlarna Furniture Ltd. Harvard Business Review case study are -
Successful track record of launching new products
– Darlarna Furniture has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Darlarna Furniture 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Darlarna Furniture digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Darlarna Furniture 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.
Superior customer experience
– The customer experience strategy of Darlarna Furniture in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Darlarna Furniture is present in almost all the verticals within the industry. This has provided firm in Darlarna Furniture Ltd. 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.
Operational resilience
– The operational resilience strategy in the Darlarna Furniture Ltd. 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.
Low bargaining power of suppliers
– Suppliers of Darlarna Furniture in the sector have low bargaining power. Darlarna Furniture Ltd. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Darlarna Furniture to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Darlarna Furniture 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Darlarna Furniture Ltd. firm has clearly differentiated products in the market place. This has enabled Darlarna Furniture to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Darlarna Furniture to invest into research and development (R&D) and innovation.
Strong track record of project management
– Darlarna Furniture is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Darlarna Furniture are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Darlarna Furniture has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Darlarna Furniture to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Darlarna Furniture 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 Darlarna Furniture Ltd. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Darlarna Furniture Ltd. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Darlarna Furniture Ltd. are -
Need for greater diversity
– Darlarna Furniture 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Darlarna Furniture Ltd. 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 Darlarna Furniture has relatively successful track record of launching new products.
High cash cycle compare to competitors
Darlarna Furniture 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Darlarna Furniture 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.
Slow to strategic competitive environment developments
– As Darlarna Furniture Ltd. HBR case study mentions - Darlarna Furniture 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Darlarna Furniture Ltd., is just above the industry average. Darlarna Furniture 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.
Skills based hiring
– The stress on hiring functional specialists at Darlarna Furniture 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.
Increasing silos among functional specialists
– The organizational structure of Darlarna Furniture is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Darlarna Furniture needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Darlarna Furniture to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Darlarna Furniture Ltd., in the dynamic environment Darlarna Furniture has struggled to respond to the nimble upstart competition. Darlarna Furniture has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Darlarna Furniture 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. Darlarna Furniture 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.
Capital Spending Reduction
– Even during the low interest decade, Darlarna Furniture 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 Darlarna Furniture Ltd. | 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 Darlarna Furniture Ltd. 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, Darlarna Furniture can use these opportunities to build new business models that can help the communities that Darlarna Furniture operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Darlarna Furniture 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 Darlarna Furniture to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Darlarna Furniture 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Darlarna Furniture 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.
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. Darlarna Furniture can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Darlarna Furniture has opened avenues for new revenue streams for the organization in the industry. This can help Darlarna Furniture to build a more holistic ecosystem as suggested in the Darlarna Furniture Ltd. case study. Darlarna Furniture can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Darlarna Furniture 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.
Loyalty marketing
– Darlarna Furniture 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Darlarna Furniture is facing challenges because of the dominance of functional experts in the organization. Darlarna Furniture Ltd. 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 Darlarna Furniture in the consumer business. Now Darlarna Furniture can target international markets with far fewer capital restrictions requirements than the existing system.
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 Darlarna Furniture 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.
Better consumer reach
– The expansion of the 5G network will help Darlarna Furniture to increase its market reach. Darlarna Furniture will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Leveraging digital technologies
– Darlarna Furniture 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.
Threats Darlarna Furniture Ltd. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Darlarna Furniture Ltd. are -
Increasing wage structure of Darlarna Furniture
– 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 Darlarna Furniture.
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 Darlarna Furniture in the Finance & Accounting sector and impact the bottomline of the organization.
Regulatory challenges
– Darlarna Furniture 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.
High dependence on third party suppliers
– Darlarna Furniture 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.
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 Darlarna Furniture business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Darlarna Furniture 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. Darlarna Furniture can take advantage of this fund but it will also bring new competitors in the Finance & Accounting 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.
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 Darlarna Furniture.
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. Darlarna Furniture 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.
Shortening product life cycle
– it is one of the major threat that Darlarna Furniture is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Darlarna Furniture needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Darlarna Furniture 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Darlarna Furniture 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 Darlarna Furniture Ltd. 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 Darlarna Furniture Ltd. 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 Darlarna Furniture Ltd. 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 Darlarna Furniture Ltd. 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 Darlarna Furniture Ltd. 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 Darlarna Furniture needs to make to build a sustainable competitive advantage.
