In the wake of NAFTA, U.S. retail firms begin to see Mexico as an attractive market for international expansion. This case examines the structure of Mexico's volume retail (grocery, discount, warehouse club, hypermarket) industry, the joint ventures between U.S. and Mexican firms, and the prospects for the future.
Authors :: David B. Yoffie, Charles M. La Follette
Swot Analysis of "Retail in Mexico--1993" written by David B. Yoffie, Charles M. La Follette includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Retail Mexico facing as an external strategic factors. Some of the topics covered in Retail in Mexico--1993 case study are - Strategic Management Strategies, International business, Joint ventures and Global Business.
Some of the macro environment factors that can be used to understand the Retail in Mexico--1993 casestudy better are - – increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, increasing commodity prices, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%,
wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Retail in Mexico--1993
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Retail in Mexico--1993 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Retail Mexico, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Retail Mexico 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 Retail in Mexico--1993 can be done for the following purposes –
1. Strategic planning using facts provided in Retail in Mexico--1993 case study
2. Improving business portfolio management of Retail Mexico
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Retail Mexico
Strengths Retail in Mexico--1993 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Retail Mexico in Retail in Mexico--1993 Harvard Business Review case study are -
Highly skilled collaborators
– Retail Mexico 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 Retail in Mexico--1993 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Retail in Mexico--1993 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.
Diverse revenue streams
– Retail Mexico is present in almost all the verticals within the industry. This has provided firm in Retail in Mexico--1993 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.
Sustainable margins compare to other players in Global Business industry
– Retail in Mexico--1993 firm has clearly differentiated products in the market place. This has enabled Retail Mexico to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Retail Mexico to invest into research and development (R&D) and innovation.
Innovation driven organization
– Retail Mexico is one of the most innovative firm in sector. Manager in Retail in Mexico--1993 Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Retail Mexico 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 Retail Mexico is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Retail in Mexico--1993 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Retail Mexico 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 David B. Yoffie, Charles M. La Follette 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.
Organizational Resilience of Retail Mexico
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Retail Mexico does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Retail Mexico has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Retail Mexico to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Retail Mexico has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Retail in Mexico--1993 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.
High switching costs
– The high switching costs that Retail Mexico 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.
Cross disciplinary teams
– Horizontal connected teams at the Retail Mexico 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 Retail in Mexico--1993 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Retail in Mexico--1993 are -
High bargaining power of channel partners
– Because of the regulatory requirements, David B. Yoffie, Charles M. La Follette suggests that, Retail Mexico 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.
Low market penetration in new markets
– Outside its home market of Retail Mexico, firm in the HBR case study Retail in Mexico--1993 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Retail Mexico is dominated by functional specialists. It is not different from other players in the Global Business segment. Retail Mexico needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Retail Mexico to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Retail Mexico 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.
No frontier risks strategy
– After analyzing the HBR case study Retail in Mexico--1993, it seems that company is thinking about the frontier risks that can impact Global Business 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Retail in Mexico--1993 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 Retail Mexico has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Retail Mexico 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.
High cash cycle compare to competitors
Retail Mexico 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, Retail Mexico 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.
Skills based hiring
– The stress on hiring functional specialists at Retail Mexico 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 strategic competitive environment developments
– As Retail in Mexico--1993 HBR case study mentions - Retail Mexico 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.
Opportunities Retail in Mexico--1993 | 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 Retail in Mexico--1993 are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Retail Mexico 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, Retail in Mexico--1993, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Retail Mexico can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Retail Mexico has opened avenues for new revenue streams for the organization in the industry. This can help Retail Mexico to build a more holistic ecosystem as suggested in the Retail in Mexico--1993 case study. Retail Mexico 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 Retail Mexico can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Retail Mexico 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 Global Business segment.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Retail Mexico 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 Retail Mexico to increase its market reach. Retail Mexico will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Retail Mexico can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Retail Mexico 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Retail Mexico can use these opportunities to build new business models that can help the communities that Retail Mexico operates in. Secondly it can use opportunities from government spending in Global Business sector.
Developing new processes and practices
– Retail Mexico can develop new processes and procedures in Global Business 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Retail Mexico in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Retail Mexico 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 Retail in Mexico--1993 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Retail Mexico to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Retail in Mexico--1993 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Retail in Mexico--1993 are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Retail Mexico in the Global Business industry. The Global Business 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.
Technology acceleration in Forth Industrial Revolution
– Retail Mexico has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Retail Mexico needs to keep up with the evolution of technology in the Global Business 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.
Increasing wage structure of Retail Mexico
– 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 Retail Mexico.
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. Retail Mexico 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.
Stagnating economy with rate increase
– Retail Mexico 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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Retail Mexico with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Retail Mexico 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 Retail in Mexico--1993 .
Environmental challenges
– Retail Mexico 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. Retail Mexico can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Shortening product life cycle
– it is one of the major threat that Retail Mexico is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Retail Mexico can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Retail in Mexico--1993, Retail Mexico may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
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. Retail Mexico needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Retail in Mexico--1993 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 Retail in Mexico--1993 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 Retail in Mexico--1993 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 Retail in Mexico--1993 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 Retail in Mexico--1993 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 Retail Mexico needs to make to build a sustainable competitive advantage.
