Karstadt Warenhaus GmbH: Do Department Stores Have a Future? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Karstadt Warenhaus GmbH: Do Department Stores Have a Future?
At the end of 2013, Karstadt Warenhaus GmbH, the second-biggest German department store chain and one of the most traditional and well-known companies in Germany, was in a highly challenging strategic position. Following recent mismanagement, it had narrowly escaped insolvency. By the end of 2013, however, Karstadt was still struggling against competition in the retail sector. Could the newly appointed chief executive officer come up with a business model and strategic direction that would ensure the company's continued existence and sustainable profits in the near future? Challenges that she had to address included increasing competition (e.g. from online shops), low liquidity, delays in necessary investments, and rising concerns about job security among employees. What strategic options were best for turning around the performance of the iconic 130-year-old department store chain? Robin Dresenkamp is affiliated with University of MA?nster. Max MeinhA?vel is affiliated with University of MA?nster. Friedrich Sommer is affiliated with University of Muenster. Arnt WA?hrmann is affiliated with University of MA?nster.
Authors :: Robin Dresenkamp, Johannes Effenberger, Max Meinhovel, Friedrich Sommer
Swot Analysis of "Karstadt Warenhaus GmbH: Do Department Stores Have a Future?" written by Robin Dresenkamp, Johannes Effenberger, Max Meinhovel, Friedrich Sommer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Karstadt Nster facing as an external strategic factors. Some of the topics covered in Karstadt Warenhaus GmbH: Do Department Stores Have a Future? case study are - Strategic Management Strategies, Marketing, Reorganization and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Karstadt Warenhaus GmbH: Do Department Stores Have a Future? casestudy better are - – digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, wage bills are increasing, supply chains are disrupted by pandemic , increasing energy prices, talent flight as more people leaving formal jobs,
increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Karstadt Warenhaus GmbH: Do Department Stores Have a Future?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Karstadt Warenhaus GmbH: Do Department Stores Have a Future? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Karstadt Nster, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Karstadt Nster 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? can be done for the following purposes –
1. Strategic planning using facts provided in Karstadt Warenhaus GmbH: Do Department Stores Have a Future? case study
2. Improving business portfolio management of Karstadt Nster
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Karstadt Nster
Strengths Karstadt Warenhaus GmbH: Do Department Stores Have a Future? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Karstadt Nster in Karstadt Warenhaus GmbH: Do Department Stores Have a Future? Harvard Business Review case study are -
Effective Research and Development (R&D)
– Karstadt Nster 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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.
Strong track record of project management
– Karstadt Nster is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Karstadt Nster is one of the leading recruiters in the industry. Managers in the Karstadt Warenhaus GmbH: Do Department Stores Have a Future? are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Karstadt Nster 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
– Karstadt Nster is present in almost all the verticals within the industry. This has provided firm in Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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.
Low bargaining power of suppliers
– Suppliers of Karstadt Nster in the sector have low bargaining power. Karstadt Warenhaus GmbH: Do Department Stores Have a Future? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Karstadt Nster to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Karstadt Nster 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 Karstadt Nster is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Karstadt Warenhaus GmbH: Do Department Stores Have a Future? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Karstadt Nster
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Karstadt Nster does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Leadership & Managing People field
– Karstadt Nster 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 Karstadt Nster in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Karstadt Nster has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Karstadt Nster 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.
Cross disciplinary teams
– Horizontal connected teams at the Karstadt Nster 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.
Weaknesses Karstadt Warenhaus GmbH: Do Department Stores Have a Future? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Karstadt Warenhaus GmbH: Do Department Stores Have a Future? are -
Products dominated business model
– Even though Karstadt Nster 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 - Karstadt Warenhaus GmbH: Do Department Stores Have a Future? should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Karstadt Nster products
– To increase the profitability and margins on the products, Karstadt Nster needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Robin Dresenkamp, Johannes Effenberger, Max Meinhovel, Friedrich Sommer suggests that, Karstadt Nster is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, Karstadt Nster 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.
Need for greater diversity
– Karstadt Nster has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Karstadt Nster 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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 Karstadt Nster 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Karstadt Nster, firm in the HBR case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future? needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Karstadt Nster is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future? can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Karstadt Nster 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future?, is just above the industry average. Karstadt Nster 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.
Opportunities Karstadt Warenhaus GmbH: Do Department Stores Have a Future? | 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? are -
Learning at scale
– Online learning technologies has now opened space for Karstadt Nster 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.
Developing new processes and practices
– Karstadt Nster can develop new processes and procedures in Leadership & Managing People 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.
Leveraging digital technologies
– Karstadt Nster 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.
Using analytics as competitive advantage
– Karstadt Nster 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Karstadt Nster to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Karstadt Nster can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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.
Better consumer reach
– The expansion of the 5G network will help Karstadt Nster to increase its market reach. Karstadt Nster 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 Karstadt Nster 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 Leadership & Managing People segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Karstadt Nster can use these opportunities to build new business models that can help the communities that Karstadt Nster operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Karstadt Nster can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Karstadt Nster can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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 Karstadt Nster can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Karstadt Nster 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Karstadt Nster 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.
Threats Karstadt Warenhaus GmbH: Do Department Stores Have a Future? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future? are -
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 Karstadt Nster business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Karstadt Nster in the Leadership & Managing People industry. The Leadership & Managing People 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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Karstadt Nster can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Karstadt Nster has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Karstadt Nster needs to keep up with the evolution of technology in the Leadership & Managing People 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Karstadt Nster 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? .
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. Karstadt Nster 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Karstadt Nster with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future?, Karstadt Nster may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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 Karstadt Nster in the Leadership & Managing People sector and impact the bottomline of the organization.
Increasing wage structure of Karstadt Nster
– 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 Karstadt Nster.
Stagnating economy with rate increase
– Karstadt Nster 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.
Weighted SWOT Analysis of Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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 Karstadt Nster needs to make to build a sustainable competitive advantage.
