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 - – digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy,
technology disruption, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
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.
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.
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.
Ability to recruit top talent
– Retail Mexico is one of the leading recruiters in the industry. Managers in the Retail in Mexico--1993 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Global Business field
– Retail Mexico 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 Retail Mexico in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Successful track record of launching new products
– Retail Mexico has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Retail Mexico 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.
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.
Superior customer experience
– The customer experience strategy of Retail Mexico in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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 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.
Slow decision making process
– As mentioned earlier in the report, Retail Mexico has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Retail Mexico even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– It come across in the case study Retail in Mexico--1993 that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Retail in Mexico--1993 can leverage the sales team experience to cultivate customer relationships as Retail Mexico is planning to shift buying processes online.
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.
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.
Need for greater diversity
– Retail Mexico has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on 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 Retail Mexico supply chain. Even after few cautionary changes mentioned in the HBR case study - Retail in Mexico--1993, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Retail Mexico vulnerable to further global disruptions in South East Asia.
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Retail Mexico is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Retail in Mexico--1993 can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Retail Mexico 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. Retail Mexico 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 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Retail Mexico 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 Retail Mexico to hire the very best people irrespective of their geographical location.
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.
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 Retail Mexico in the consumer business. Now Retail Mexico can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Retail Mexico 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Retail Mexico is facing challenges because of the dominance of functional experts in the organization. Retail in Mexico--1993 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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Retail Mexico 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.
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.
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.
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.
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 -
Regulatory challenges
– Retail Mexico 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 Global Business industry regulations.
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.
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 Retail Mexico.
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.
High dependence on third party suppliers
– Retail Mexico 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.
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.
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 .
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.
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 Retail Mexico business can come under increasing regulations regarding data privacy, data security, etc.
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 Retail Mexico in the Global Business sector and impact the bottomline of the organization.
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.
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.
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 .
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.