The three founders of a London-based, start-up smoothie company must decide between three growth options: expansion of the existing product line into Europe, extension of the brand into other product categories, or continued organic growth within the United Kingdom.
Swot Analysis of "Innocent Drinks" written by William A. Sahlman, Dan Heath includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Innocent Smoothie facing as an external strategic factors. Some of the topics covered in Innocent Drinks case study are - Strategic Management Strategies, Entrepreneurial management, Growth strategy and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Innocent Drinks casestudy better are - – geopolitical disruptions, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, there is backlash against globalization, talent flight as more people leaving formal jobs, technology disruption,
increasing household debt because of falling income levels, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Innocent Drinks case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Innocent Smoothie, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Innocent Smoothie 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 Innocent Drinks can be done for the following purposes –
1. Strategic planning using facts provided in Innocent Drinks case study
2. Improving business portfolio management of Innocent Smoothie
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Innocent Smoothie
Strengths Innocent Drinks | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Innocent Smoothie in Innocent Drinks Harvard Business Review case study are -
Ability to lead change in Innovation & Entrepreneurship field
– Innocent Smoothie 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 Innocent Smoothie in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Innocent Drinks firm has clearly differentiated products in the market place. This has enabled Innocent Smoothie to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Innocent Smoothie to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Innocent Smoothie is present in almost all the verticals within the industry. This has provided firm in Innocent Drinks 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.
Training and development
– Innocent Smoothie has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Innocent Drinks 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 Innocent Smoothie in the sector have low bargaining power. Innocent Drinks has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Innocent Smoothie to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Innocent Smoothie 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 Innocent Smoothie is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Innocent Drinks Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Innocent Smoothie
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Innocent Smoothie does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Innocent Smoothie is one of the most innovative firm in sector. Manager in Innocent Drinks Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Innocent Smoothie has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Innocent Smoothie 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
– Innocent Smoothie has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Innocent Smoothie to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Innocent Smoothie digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Innocent Smoothie 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.
Strong track record of project management
– Innocent Smoothie is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Innocent Drinks | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Innocent Drinks are -
Lack of clear differentiation of Innocent Smoothie products
– To increase the profitability and margins on the products, Innocent Smoothie needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Innocent Smoothie 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 bargaining power of channel partners
– Because of the regulatory requirements, William A. Sahlman, Dan Heath suggests that, Innocent Smoothie 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.
Interest costs
– Compare to the competition, Innocent Smoothie 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Innocent Smoothie needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High 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 Innocent Smoothie supply chain. Even after few cautionary changes mentioned in the HBR case study - Innocent Drinks, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Innocent Smoothie vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Innocent Drinks, in the dynamic environment Innocent Smoothie has struggled to respond to the nimble upstart competition. Innocent Smoothie has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study Innocent Drinks 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 Innocent Drinks can leverage the sales team experience to cultivate customer relationships as Innocent Smoothie is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Innocent Smoothie, firm in the HBR case study Innocent Drinks 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, Innocent Smoothie is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Innocent Drinks can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Innocent Drinks HBR case study mentions - Innocent Smoothie 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 Innocent Drinks | 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 Innocent Drinks are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Innocent Smoothie 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 Innocent Smoothie to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Innocent Smoothie has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Innocent Smoothie 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Innocent Smoothie can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Innocent Smoothie 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. Innocent Smoothie 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.
Learning at scale
– Online learning technologies has now opened space for Innocent Smoothie 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, Innocent Smoothie can use these opportunities to build new business models that can help the communities that Innocent Smoothie operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Manufacturing automation
– Innocent Smoothie can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Developing new processes and practices
– Innocent Smoothie can develop new processes and procedures in Innovation & Entrepreneurship 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Innocent Smoothie can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Innocent Smoothie in the consumer business. Now Innocent Smoothie can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Innocent Smoothie can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Innocent Drinks 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Innocent Smoothie is facing challenges because of the dominance of functional experts in the organization. Innocent Drinks 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.
Threats Innocent Drinks External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Innocent Drinks are -
Stagnating economy with rate increase
– Innocent Smoothie 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.
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. Innocent Smoothie needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Innocent Drinks, Innocent Smoothie may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
Increasing wage structure of Innocent Smoothie
– 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 Innocent Smoothie.
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.
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 Innocent Smoothie in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Innocent Smoothie in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Innocent Smoothie with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Innocent Smoothie 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Innocent Smoothie 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 Innocent Drinks .
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.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Innocent Smoothie can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Innocent Smoothie business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Innocent Drinks 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 Innocent Drinks 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 Innocent Drinks 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 Innocent Drinks 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 Innocent Drinks 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 Innocent Smoothie needs to make to build a sustainable competitive advantage.