One of the founders of a small business owners' purchasing cooperative organized four months earlier, was reflecting on its successful performance. The members of the co-op were willing to share responsibilities in the management of the co-op's primary activities of obtaining price quotes, invoicing members, and making delivery arrangements. The members were currently considering the possibility of extending the types of materials purchased collaboratively to services such as photocopying and printing of brochures and business cards. She wondered how best to promote the growth of the purchasing co-op and therefore, needed to create an action and implementation plan, considering: membership size, types of products and services purchased, qualitative and quantitative benefits of co-op involvement, vendor management and allocation of resources.
Authors :: Larry Menor, James A. Erskine, Michiel R. Leenders
Swot Analysis of "Purchasing Co-op" written by Larry Menor, James A. Erskine, Michiel R. Leenders includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Op Purchasing facing as an external strategic factors. Some of the topics covered in Purchasing Co-op case study are - Strategic Management Strategies, Supply chain and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Purchasing Co-op casestudy better are - – there is increasing trade war between United States & China, increasing commodity prices, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google,
banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Purchasing Co-op case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Op Purchasing, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Op Purchasing 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 Purchasing Co-op can be done for the following purposes –
1. Strategic planning using facts provided in Purchasing Co-op case study
2. Improving business portfolio management of Op Purchasing
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 Op Purchasing
Strengths Purchasing Co-op | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Op Purchasing in Purchasing Co-op Harvard Business Review case study are -
Innovation driven organization
– Op Purchasing is one of the most innovative firm in sector. Manager in Purchasing Co-op Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Op Purchasing digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Op Purchasing 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.
Diverse revenue streams
– Op Purchasing is present in almost all the verticals within the industry. This has provided firm in Purchasing Co-op 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.
Learning organization
- Op Purchasing 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 Op Purchasing is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Purchasing Co-op Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Op Purchasing 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 Larry Menor, James A. Erskine, Michiel R. Leenders 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.
Operational resilience
– The operational resilience strategy in the Purchasing Co-op 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.
Low bargaining power of suppliers
– Suppliers of Op Purchasing in the sector have low bargaining power. Purchasing Co-op has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Op Purchasing to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Op Purchasing has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Op Purchasing 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.
Ability to lead change in Innovation & Entrepreneurship field
– Op Purchasing 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 Op Purchasing in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Op Purchasing in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Op Purchasing
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Op Purchasing does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Op Purchasing has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Op Purchasing to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Purchasing Co-op | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Purchasing Co-op are -
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 Op Purchasing supply chain. Even after few cautionary changes mentioned in the HBR case study - Purchasing Co-op, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Op Purchasing vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Op Purchasing 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.
Lack of clear differentiation of Op Purchasing products
– To increase the profitability and margins on the products, Op Purchasing needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Op Purchasing 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.
Increasing silos among functional specialists
– The organizational structure of Op Purchasing is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Op Purchasing needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Op Purchasing to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Purchasing Co-op HBR case study mentions - Op Purchasing 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.
Interest costs
– Compare to the competition, Op Purchasing 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Purchasing Co-op, in the dynamic environment Op Purchasing has struggled to respond to the nimble upstart competition. Op Purchasing has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Purchasing Co-op 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 Op Purchasing 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Op Purchasing 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.
Slow decision making process
– As mentioned earlier in the report, Op Purchasing 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. Op Purchasing 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.
Opportunities Purchasing Co-op | 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 Purchasing Co-op are -
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. Op Purchasing 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. Op Purchasing 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.
Creating value in data economy
– The success of analytics program of Op Purchasing has opened avenues for new revenue streams for the organization in the industry. This can help Op Purchasing to build a more holistic ecosystem as suggested in the Purchasing Co-op case study. Op Purchasing can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Op Purchasing can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Building a culture of innovation
– managers at Op Purchasing 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Op Purchasing 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 Op Purchasing to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Op Purchasing can use these opportunities to build new business models that can help the communities that Op Purchasing operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Using analytics as competitive advantage
– Op Purchasing 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 Purchasing Co-op - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Op Purchasing to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Op Purchasing to increase its market reach. Op Purchasing 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.
Developing new processes and practices
– Op Purchasing 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.
Buying journey improvements
– Op Purchasing can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Purchasing Co-op 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.
Manufacturing automation
– Op Purchasing 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Op Purchasing is facing challenges because of the dominance of functional experts in the organization. Purchasing Co-op 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Op Purchasing can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Purchasing Co-op External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Purchasing Co-op are -
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.
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. Op Purchasing 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.
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 Op Purchasing in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Op Purchasing is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Increasing wage structure of Op Purchasing
– 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 Op Purchasing.
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 Op Purchasing business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Purchasing Co-op, Op Purchasing 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 .
Environmental challenges
– Op Purchasing 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. Op Purchasing can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
High dependence on third party suppliers
– Op Purchasing 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.
Regulatory challenges
– Op Purchasing 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.
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. Op Purchasing can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Op Purchasing.
Weighted SWOT Analysis of Purchasing Co-op 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 Purchasing Co-op 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 Purchasing Co-op 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 Purchasing Co-op 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 Purchasing Co-op 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 Op Purchasing needs to make to build a sustainable competitive advantage.
