A credit analyst for a furniture manufacturer is confronted with two customers who have exceeded their credit limits. The financial performance of each has been weak, and one of the customers has a highly leveraged balance sheet. Industry conditions are weak; the manufacturer apparently has excess capacity; and the credit analyst is caught between the conflicting demands of the sales managers and the credit manager. The case provides an opportunity for ratio analysis.
Swot Analysis of "Premier Furniture Co." written by Thomas R. Piper includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Credit Furniture facing as an external strategic factors. Some of the topics covered in Premier Furniture Co. case study are - Strategic Management Strategies, Creativity, Financial analysis, Financial management, Product development and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Premier Furniture Co. casestudy better are - – 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, there is backlash against globalization, technology disruption, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, cloud computing is disrupting traditional business models,
there is increasing trade war between United States & China, wage bills are increasing, etc
Introduction to SWOT Analysis of Premier Furniture Co.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Premier Furniture Co. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Credit Furniture, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Credit 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 Premier Furniture Co. can be done for the following purposes –
1. Strategic planning using facts provided in Premier Furniture Co. case study
2. Improving business portfolio management of Credit 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 Credit Furniture
Strengths Premier Furniture Co. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Credit Furniture in Premier Furniture Co. Harvard Business Review case study are -
Innovation driven organization
– Credit Furniture is one of the most innovative firm in sector. Manager in Premier Furniture Co. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Finance & Accounting industry
– Premier Furniture Co. firm has clearly differentiated products in the market place. This has enabled Credit Furniture to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Credit Furniture to invest into research and development (R&D) and innovation.
Analytics focus
– Credit Furniture 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 Thomas R. Piper 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.
High switching costs
– The high switching costs that Credit 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Credit Furniture digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Credit 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.
Highly skilled collaborators
– Credit 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 Premier Furniture Co. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Credit Furniture has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Credit 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.
High brand equity
– Credit Furniture has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Credit Furniture to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Credit Furniture 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 Premier Furniture Co. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Credit Furniture has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Premier Furniture Co. 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.
Low bargaining power of suppliers
– Suppliers of Credit Furniture in the sector have low bargaining power. Premier Furniture Co. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Credit Furniture to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Credit Furniture
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Credit Furniture does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Premier Furniture Co. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Premier Furniture Co. are -
Skills based hiring
– The stress on hiring functional specialists at Credit 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Credit Furniture is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Premier Furniture Co. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Thomas R. Piper suggests that, Credit Furniture is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Premier Furniture Co., in the dynamic environment Credit Furniture has struggled to respond to the nimble upstart competition. Credit Furniture has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Credit Furniture 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 - Premier Furniture Co. should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Premier Furniture Co. HBR case study mentions - Credit 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.
No frontier risks strategy
– After analyzing the HBR case study Premier Furniture Co., 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.
Increasing silos among functional specialists
– The organizational structure of Credit Furniture is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Credit Furniture needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Credit Furniture to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Credit Furniture 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.
Capital Spending Reduction
– Even during the low interest decade, Credit 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Premier Furniture Co., is just above the industry average. Credit 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.
Opportunities Premier Furniture Co. | 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 Premier Furniture Co. are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Credit 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Credit 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 Credit Furniture to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Credit Furniture 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 Premier Furniture Co. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Credit Furniture to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Credit Furniture can use these opportunities to build new business models that can help the communities that Credit Furniture operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Creating value in data economy
– The success of analytics program of Credit Furniture has opened avenues for new revenue streams for the organization in the industry. This can help Credit Furniture to build a more holistic ecosystem as suggested in the Premier Furniture Co. case study. Credit Furniture can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Credit 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Credit Furniture 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, Premier Furniture Co., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Credit Furniture 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.
Manufacturing automation
– Credit Furniture 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.
Learning at scale
– Online learning technologies has now opened space for Credit Furniture 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Credit Furniture can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Credit Furniture can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Credit 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.
Threats Premier Furniture Co. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Premier Furniture Co. are -
Increasing wage structure of Credit 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 Credit Furniture.
Technology acceleration in Forth Industrial Revolution
– Credit Furniture has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Credit Furniture 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.
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. Credit 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 Credit 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.
Stagnating economy with rate increase
– Credit Furniture 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.
Shortening product life cycle
– it is one of the major threat that Credit Furniture is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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 Credit Furniture.
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.
High dependence on third party suppliers
– Credit 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Premier Furniture Co., Credit Furniture may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Credit Furniture 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 Premier Furniture Co. .
Consumer confidence and its impact on Credit Furniture 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.
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. Credit 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.
Weighted SWOT Analysis of Premier Furniture Co. 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 Premier Furniture Co. 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 Premier Furniture Co. 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 Premier Furniture Co. 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 Premier Furniture Co. 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 Credit Furniture needs to make to build a sustainable competitive advantage.
