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 - – there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, technology disruption, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google,
increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, 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.
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.
Strong track record of project management
– Retail Mexico is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Low bargaining power of suppliers
– Suppliers of Retail Mexico in the sector have low bargaining power. Retail in Mexico--1993 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Retail Mexico to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
Products dominated business model
– Even though Retail Mexico 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 - Retail in Mexico--1993 should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Retail in Mexico--1993, is just above the industry average. Retail Mexico 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Retail in Mexico--1993, it seems that the employees of Retail Mexico don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
Lack of clear differentiation of Retail Mexico products
– To increase the profitability and margins on the products, Retail Mexico needs to provide more differentiated products than what it is currently offering in the marketplace.
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 -
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.
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.
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.
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.
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.
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.
Buying journey improvements
– Retail Mexico can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Retail in Mexico--1993 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.
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.
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.
Loyalty marketing
– Retail Mexico 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.
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.
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.
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.
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 -
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.
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.
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.
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 .
Consumer confidence and its impact on Retail Mexico 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.
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.
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.
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.
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.
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.
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.
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.
