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 - – there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, increasing transportation and logistics costs, increasing commodity prices,
customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, 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 -
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.
Highly skilled collaborators
– Innocent Smoothie 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 Innocent Drinks HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Innocent Smoothie 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 William A. Sahlman, Dan Heath 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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Innocent Smoothie 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.
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.
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.
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.
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.
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.
High switching costs
– The high switching costs that Innocent Smoothie 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.
Weaknesses Innocent Drinks | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Innocent Drinks are -
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.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Innocent Smoothie 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.
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.
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.
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.
Products dominated business model
– Even though Innocent Smoothie 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 - Innocent Drinks should strive to include more intangible value offerings along with its core products and services.
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.
Capital Spending Reduction
– Even during the low interest decade, Innocent Smoothie 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.
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 -
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.
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.
Leveraging digital technologies
– Innocent Smoothie 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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Innocent Smoothie 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, Innocent Drinks, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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 Innocent Smoothie 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.
Creating value in data economy
– The success of analytics program of Innocent Smoothie has opened avenues for new revenue streams for the organization in the industry. This can help Innocent Smoothie to build a more holistic ecosystem as suggested in the Innocent Drinks case study. Innocent Smoothie can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Innocent Smoothie to increase its market reach. Innocent Smoothie 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.
Building a culture of innovation
– managers at Innocent Smoothie 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 Innovation & Entrepreneurship segment.
Using analytics as competitive advantage
– Innocent Smoothie 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 Innocent Drinks - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Innocent Smoothie to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 -
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.
Regulatory challenges
– Innocent Smoothie 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 Innovation & Entrepreneurship industry regulations.
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.
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 .
Shortening product life cycle
– it is one of the major threat that Innocent Smoothie is facing in Innovation & Entrepreneurship 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 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.
Consumer confidence and its impact on Innocent Smoothie 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.
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 .
High dependence on third party suppliers
– Innocent Smoothie 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.
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.
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.
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 Innocent Smoothie.
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.