Red Star Furniture Group Co. LTD. SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Red Star Furniture Group Co. LTD.
Founded in 1986, Red Star had become the leading department store in China for furniture and home equipment products (bathroom, lamps, textiles complements, etc.). The business model of Red Star was to provide adequate space for vendors (that rented the space) in good shopping mall facilities, well designed and equipped (parking, transportation, services) located in key developing zones of Chinese growing cities. In the first 27 years, Red Star had opened 115 shopping malls in 85 different cities. With capacity to launch up to 10 new malls per year, Red Star expected to reach 200 malls by 2020. By 2012, the company employed over 15,000 people. With increased competition, and the growing complexity of its operations, how should the company manage its ambitious growth strategy?
Swot Analysis of "Red Star Furniture Group Co. LTD." written by Krishna G. Palepu, Pedro Nueno includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Red Star facing as an external strategic factors. Some of the topics covered in Red Star Furniture Group Co. LTD. case study are - Strategic Management Strategies, Growth strategy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Red Star Furniture Group Co. LTD. casestudy better are - – challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing,
increasing household debt because of falling income levels, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Red Star Furniture Group Co. LTD.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Red Star Furniture Group Co. LTD. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Red Star, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Red Star 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 Red Star Furniture Group Co. LTD. can be done for the following purposes –
1. Strategic planning using facts provided in Red Star Furniture Group Co. LTD. case study
2. Improving business portfolio management of Red Star
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 Red Star
Strengths Red Star Furniture Group Co. LTD. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Red Star in Red Star Furniture Group Co. LTD. Harvard Business Review case study are -
Ability to recruit top talent
– Red Star is one of the leading recruiters in the industry. Managers in the Red Star Furniture Group Co. LTD. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Red Star is one of the most innovative firm in sector. Manager in Red Star Furniture Group Co. LTD. 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 Red Star in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Red Star Furniture Group Co. 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.
Successful track record of launching new products
– Red Star has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Red Star 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.
High brand equity
– Red Star has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Red Star to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Red Star 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.
Effective Research and Development (R&D)
– Red Star 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 Red Star Furniture Group Co. LTD. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Red Star 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 Red Star is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Red Star Furniture Group Co. LTD. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Red Star has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Red Star Furniture Group Co. LTD. 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.
Diverse revenue streams
– Red Star is present in almost all the verticals within the industry. This has provided firm in Red Star Furniture Group Co. 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.
Organizational Resilience of Red Star
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Red Star does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Red Star Furniture Group Co. LTD. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Red Star Furniture Group Co. LTD. are -
Need for greater diversity
– Red Star 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.
Capital Spending Reduction
– Even during the low interest decade, Red Star 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Red Star 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 Red Star Furniture Group Co. LTD. HBR case study mentions - Red Star 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.
Increasing silos among functional specialists
– The organizational structure of Red Star is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Red Star needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Red Star to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Red Star Furniture Group Co. LTD., 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 Red Star Furniture Group Co. LTD. 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 Red Star 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Red Star Furniture Group Co. 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 Red Star has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Red Star is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Red Star Furniture Group Co. LTD. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Red Star 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 Red Star, firm in the HBR case study Red Star Furniture Group Co. LTD. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Red Star Furniture Group Co. 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 Red Star Furniture Group Co. LTD. are -
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. Red Star can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Red Star can use these opportunities to build new business models that can help the communities that Red Star operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Developing new processes and practices
– Red Star 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.
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. Red Star 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. Red Star 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.
Creating value in data economy
– The success of analytics program of Red Star has opened avenues for new revenue streams for the organization in the industry. This can help Red Star to build a more holistic ecosystem as suggested in the Red Star Furniture Group Co. LTD. case study. Red Star 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 Red Star 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 Red Star 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.
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 Red Star 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, Red Star 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, Red Star Furniture Group Co. LTD., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Red Star is facing challenges because of the dominance of functional experts in the organization. Red Star Furniture Group Co. 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.
Better consumer reach
– The expansion of the 5G network will help Red Star to increase its market reach. Red Star 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.
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 Red Star in the consumer business. Now Red Star can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Red Star 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 Red Star Furniture Group Co. LTD. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Red Star Furniture Group Co. LTD. are -
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 Red Star business can come under increasing regulations regarding data privacy, data security, etc.
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 Red Star.
Stagnating economy with rate increase
– Red Star 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.
Increasing wage structure of Red Star
– 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 Red Star.
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. Red Star 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, Red Star 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 Red Star Furniture Group Co. LTD. .
Technology acceleration in Forth Industrial Revolution
– Red Star has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Red Star 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.
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.
Regulatory challenges
– Red Star 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 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. Red Star needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Red Star with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Red Star 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.
Shortening product life cycle
– it is one of the major threat that Red Star 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 Red Star Furniture Group Co. 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 Red Star Furniture Group Co. 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 Red Star Furniture Group Co. 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 Red Star Furniture Group Co. 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 Red Star Furniture Group Co. 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 Red Star needs to make to build a sustainable competitive advantage.