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 - – there is backlash against globalization, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China,
digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, 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 -
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.
Organizational Resilience of Saks Sadove
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Saks Sadove does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Ability to lead change in Finance & Accounting field
– Saks Sadove 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 Saks Sadove in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Diverse revenue streams
– Saks Sadove is present in almost all the verticals within the industry. This has provided firm in Saks Incorporated 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 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Saks Sadove digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Saks Sadove 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.
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.
Highly skilled collaborators
– Saks Sadove 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 Saks Incorporated HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Saks Sadove 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.
Weaknesses Saks Incorporated | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Saks Incorporated are -
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.
Lack of clear differentiation of Saks Sadove products
– To increase the profitability and margins on the products, Saks Sadove needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Increasing silos among functional specialists
– The organizational structure of Saks Sadove is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Saks Sadove needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Saks Sadove to focus more on services rather than just following the product oriented approach.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Saks Incorporated, in the dynamic environment Saks Sadove has struggled to respond to the nimble upstart competition. Saks Sadove has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring
– The stress on hiring functional specialists at Saks Sadove 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Saks Incorporated, is just above the industry average. Saks Sadove 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Saks Sadove 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.
High cash cycle compare to competitors
Saks Sadove 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.
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 -
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.
Leveraging digital technologies
– Saks Sadove 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.
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.
Buying journey improvements
– Saks Sadove can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Saks Incorporated suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
Loyalty marketing
– Saks Sadove 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.
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.
Developing new processes and practices
– Saks Sadove 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Saks Sadove is facing challenges because of the dominance of functional experts in the organization. Saks Incorporated 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Saks Sadove 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, Saks Incorporated, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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 -
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 Saks Sadove business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Saks Sadove 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 Saks Incorporated .
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 .
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.
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. Saks Sadove 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.
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.
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.
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.
Consumer confidence and its impact on Saks Sadove demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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. Saks Sadove can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
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.