Swot Analysis of "El Sistema" written by Tarun Khanna, Maria Fernanda Miguel, Laura Urdapilleta includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sistema El facing as an external strategic factors. Some of the topics covered in El Sistema case study are - Strategic Management Strategies, and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the El Sistema casestudy better are - – there is backlash against globalization, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in El Sistema case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sistema El, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sistema El 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 El Sistema can be done for the following purposes –
1. Strategic planning using facts provided in El Sistema case study
2. Improving business portfolio management of Sistema El
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 Sistema El
Strengths El Sistema | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sistema El in El Sistema Harvard Business Review case study are -
Innovation driven organization
– Sistema El is one of the most innovative firm in sector. Manager in El Sistema 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
– Sistema El has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sistema El 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.
Superior customer experience
– The customer experience strategy of Sistema El in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Sistema El has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in El Sistema 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.
Effective Research and Development (R&D)
– Sistema El 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 El Sistema - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Sistema El 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 El Sistema HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Sistema El digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sistema El 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.
Cross disciplinary teams
– Horizontal connected teams at the Sistema El 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.
Strong track record of project management
– Sistema El is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Sistema El 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.
Organizational Resilience of Sistema El
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sistema El does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Sistema El is present in almost all the verticals within the industry. This has provided firm in El Sistema 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.
Weaknesses El Sistema | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of El Sistema are -
High cash cycle compare to competitors
Sistema El 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.
No frontier risks strategy
– After analyzing the HBR case study El Sistema, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High operating costs
– Compare to the competitors, firm in the HBR case study El Sistema has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sistema El 's lucrative customers.
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 Sistema El supply chain. Even after few cautionary changes mentioned in the HBR case study - El Sistema, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sistema El vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Sistema El 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study El Sistema, it seems that the employees of Sistema El 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.
Capital Spending Reduction
– Even during the low interest decade, Sistema El 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.
Products dominated business model
– Even though Sistema El 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 - El Sistema should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Sistema El 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 star products
– The top 2 products and services of the firm as mentioned in the El Sistema 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 Sistema El has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sistema El is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study El Sistema can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities El Sistema | 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 El Sistema are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sistema El 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 Sistema El to hire the very best people irrespective of their geographical location.
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. Sistema El 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. Sistema El 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.
Developing new processes and practices
– Sistema El 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.
Creating value in data economy
– The success of analytics program of Sistema El has opened avenues for new revenue streams for the organization in the industry. This can help Sistema El to build a more holistic ecosystem as suggested in the El Sistema case study. Sistema El can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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, Sistema El can use these opportunities to build new business models that can help the communities that Sistema El operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sistema El is facing challenges because of the dominance of functional experts in the organization. El Sistema 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.
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 Sistema El 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sistema El 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, El Sistema, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Sistema El in the consumer business. Now Sistema El can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Sistema El 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sistema El 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sistema El 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.
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. Sistema El can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats El Sistema External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study El Sistema are -
Environmental challenges
– Sistema El 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. Sistema El can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Regulatory challenges
– Sistema El 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.
Stagnating economy with rate increase
– Sistema El 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.
Increasing wage structure of Sistema El
– 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 Sistema El.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sistema El 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.
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. Sistema El needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sistema El 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 El Sistema .
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 Sistema El business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Sistema El 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.
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. Sistema El 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study El Sistema, Sistema El 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 .
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.
High dependence on third party suppliers
– Sistema El 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.
Weighted SWOT Analysis of El Sistema 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 El Sistema 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 El Sistema 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 El Sistema 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 El Sistema 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 Sistema El needs to make to build a sustainable competitive advantage.