K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants
Focuses on entrepreneurship--both in setting up a new business and in keeping the entrepreneurial spirit alive in large, established organizations--and on internationalization. Describes how toy manufacturer Hasbro and other large toy manufacturers turned down an American entrepreneur's idea and how he started to market the toy (K'NEX) himself. Despite the fact that LEGO (the powerful construction toy maker) dominated the market, K'NEX became a success in the United States. How can the American entrepreneur take his product international? Looks at the timing and different strategies for going international.
Swot Analysis of "K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants" written by Jacques Horovitz, Els Van Weering includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that K'nex Toy facing as an external strategic factors. Some of the topics covered in K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants case study are - Strategic Management Strategies, Product development and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants casestudy better are - – increasing energy prices, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, 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, geopolitical disruptions,
there is backlash against globalization, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the K'nex Toy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which K'nex Toy 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants can be done for the following purposes –
1. Strategic planning using facts provided in K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants case study
2. Improving business portfolio management of K'nex Toy
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 K'nex Toy
Strengths K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of K'nex Toy in K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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.
High switching costs
– The high switching costs that K'nex Toy 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.
Diverse revenue streams
– K'nex Toy is present in almost all the verticals within the industry. This has provided firm in K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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.
Cross disciplinary teams
– Horizontal connected teams at the K'nex Toy 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.
Training and development
– K'nex Toy has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For K'nex Toy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. K'nex Toy 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.
High brand equity
– K'nex Toy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled K'nex Toy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– K'nex Toy is one of the most innovative firm in sector. Manager in K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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
– K'nex Toy 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– K'nex Toy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. K'nex Toy 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.
Analytics focus
– K'nex Toy 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 Jacques Horovitz, Els Van Weering 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.
Effective Research and Development (R&D)
– K'nex Toy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants, it seems that the employees of K'nex Toy 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Jacques Horovitz, Els Van Weering suggests that, K'nex Toy 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.
Slow to strategic competitive environment developments
– As K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants HBR case study mentions - K'nex Toy 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants, is just above the industry average. K'nex Toy 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.
Aligning sales with marketing
– It come across in the case study K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants can leverage the sales team experience to cultivate customer relationships as K'nex Toy is planning to shift buying processes online.
High cash cycle compare to competitors
K'nex Toy 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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 K'nex Toy has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, K'nex Toy 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. K'nex Toy 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.
Workers concerns about automation
– As automation is fast increasing in the segment, K'nex Toy 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.
Increasing silos among functional specialists
– The organizational structure of K'nex Toy is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. K'nex Toy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help K'nex Toy to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at K'nex Toy 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.
Opportunities K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants | 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for K'nex Toy 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 K'nex Toy 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 K'nex Toy 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 K'nex Toy in the consumer business. Now K'nex Toy can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help K'nex Toy to increase its market reach. K'nex Toy 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 K'nex Toy 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for K'nex Toy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Loyalty marketing
– K'nex Toy 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, K'nex Toy can use these opportunities to build new business models that can help the communities that K'nex Toy operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Manufacturing automation
– K'nex Toy 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects K'nex Toy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. K'nex Toy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, K'nex Toy 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.
Learning at scale
– Online learning technologies has now opened space for K'nex Toy 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.
Threats K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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 K'nex Toy in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Environmental challenges
– K'nex Toy needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. K'nex Toy can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, K'nex Toy 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants .
Stagnating economy with rate increase
– K'nex Toy 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 dependence on third party suppliers
– K'nex Toy 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.
Technology acceleration in Forth Industrial Revolution
– K'nex Toy has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, K'nex Toy needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants, K'nex Toy 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 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents K'nex Toy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– K'nex Toy 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.
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 K'nex Toy.
Consumer confidence and its impact on K'nex Toy 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.
Increasing wage structure of K'nex Toy
– 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 K'nex Toy.
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. K'nex Toy 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.
Weighted SWOT Analysis of K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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 K'NEX (B): 1991-1994 USA, Entering a Market Dominated by Giants 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 K'nex Toy needs to make to build a sustainable competitive advantage.