Zappos.com: Developing a Supply Chain to Deliver WOW! SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Zappos.com: Developing a Supply Chain to Deliver WOW!
Zappos was founded in 1999, during the Internet boom, to sell shoes online. The company's founding premise was to provide the ultimate in selection to its customers-all brands, styles, sizes, and colors. Zappos organized all aspects of its business (including recruiting, culture, call center, inventory, website, and supply chain) to provide the best possible service-it wanted to "wow" everyone who interacted with the company, from customers to employees to corporate partners. Zappos grew rapidly, and by 2008 was profitable with net sales (after returns) of about $650 million. The company faced a number of issues as it looked forward. While it had penetrated only about 3 percent of the U.S. market for shoes, Zappos had expanded its product lines to items such as camping gear and video games. It needed to determine those elements of its strategy had contributed to its success in shoes, and whether it would be able to duplicate that success in other product lines. It also needed to determine how it could scale its business-much of the effort it had made to "wow" its customers was labor intensive and expensive-could this be scaled to a company with revenues of tens of billions? Finally, the economic landscape changed dramatically in late 2008, with the financial market collapse and recession. The service-intensive Zappos.com business was based on sales at little to no discount, unlike many websites that relied on selling at the lowest possible price. Would the company need to make changes to respond to the changed economic environment, and if so, what were those changes? The case provides an opportunity to evaluate the core competences of an Internet retailer that has experienced rapid, initial success. The case enables students to consider supply chain issues, which are critical to the company's success, in the broader context of the business: the bases of Zappos' success, its core competencies, culture, and competitive environment.
Swot Analysis of "Zappos.com: Developing a Supply Chain to Deliver WOW!" written by Michael Marks, Hau Lee, David W. Hoyt includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Zappos Wow facing as an external strategic factors. Some of the topics covered in Zappos.com: Developing a Supply Chain to Deliver WOW! case study are - Strategic Management Strategies, Manufacturing, Marketing, Organizational culture, Supply chain and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Zappos.com: Developing a Supply Chain to Deliver WOW! casestudy better are - – central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, technology disruption,
challanges to central banks by blockchain based private currencies, wage bills are increasing, etc
Introduction to SWOT Analysis of Zappos.com: Developing a Supply Chain to Deliver WOW!
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Zappos.com: Developing a Supply Chain to Deliver WOW! case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Zappos Wow, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Zappos Wow 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 Zappos.com: Developing a Supply Chain to Deliver WOW! can be done for the following purposes –
1. Strategic planning using facts provided in Zappos.com: Developing a Supply Chain to Deliver WOW! case study
2. Improving business portfolio management of Zappos Wow
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 Zappos Wow
Strengths Zappos.com: Developing a Supply Chain to Deliver WOW! | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Zappos Wow in Zappos.com: Developing a Supply Chain to Deliver WOW! Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Zappos Wow in the sector have low bargaining power. Zappos.com: Developing a Supply Chain to Deliver WOW! has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Zappos Wow to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Zappos Wow 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.
Operational resilience
– The operational resilience strategy in the Zappos.com: Developing a Supply Chain to Deliver WOW! 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.
Learning organization
- Zappos Wow 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 Zappos Wow is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Zappos.com: Developing a Supply Chain to Deliver WOW! Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Leadership & Managing People field
– Zappos Wow 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 Zappos Wow in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Zappos Wow 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 Zappos.com: Developing a Supply Chain to Deliver WOW! HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Zappos Wow is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Zappos Wow has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Zappos.com: Developing a Supply Chain to Deliver WOW! 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.
High brand equity
– Zappos Wow has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Zappos Wow to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Zappos Wow in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Zappos Wow is present in almost all the verticals within the industry. This has provided firm in Zappos.com: Developing a Supply Chain to Deliver WOW! case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Zappos Wow digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Zappos Wow 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.
Weaknesses Zappos.com: Developing a Supply Chain to Deliver WOW! | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Zappos.com: Developing a Supply Chain to Deliver WOW! are -
Increasing silos among functional specialists
– The organizational structure of Zappos Wow is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Zappos Wow needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Zappos Wow to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael Marks, Hau Lee, David W. Hoyt suggests that, Zappos Wow 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.
High cash cycle compare to competitors
Zappos Wow 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.
Interest costs
– Compare to the competition, Zappos Wow 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Zappos.com: Developing a Supply Chain to Deliver WOW! 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 Zappos Wow has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Zappos Wow 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.
Lack of clear differentiation of Zappos Wow products
– To increase the profitability and margins on the products, Zappos Wow needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Zappos Wow 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 - Zappos.com: Developing a Supply Chain to Deliver WOW! should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Zappos Wow, firm in the HBR case study Zappos.com: Developing a Supply Chain to Deliver WOW! needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Zappos Wow 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. Zappos Wow 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Zappos.com: Developing a Supply Chain to Deliver WOW! 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 Zappos Wow 's lucrative customers.
Opportunities Zappos.com: Developing a Supply Chain to Deliver WOW! | 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 Zappos.com: Developing a Supply Chain to Deliver WOW! are -
Using analytics as competitive advantage
– Zappos Wow 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 Zappos.com: Developing a Supply Chain to Deliver WOW! - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Zappos Wow to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Zappos Wow 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Zappos Wow can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Zappos Wow can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Zappos Wow is facing challenges because of the dominance of functional experts in the organization. Zappos.com: Developing a Supply Chain to Deliver WOW! 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.
Loyalty marketing
– Zappos Wow 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.
Building a culture of innovation
– managers at Zappos Wow 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.
Manufacturing automation
– Zappos Wow 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.
Better consumer reach
– The expansion of the 5G network will help Zappos Wow to increase its market reach. Zappos Wow 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.
Creating value in data economy
– The success of analytics program of Zappos Wow has opened avenues for new revenue streams for the organization in the industry. This can help Zappos Wow to build a more holistic ecosystem as suggested in the Zappos.com: Developing a Supply Chain to Deliver WOW! case study. Zappos Wow can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Zappos Wow 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Zappos Wow 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, Zappos.com: Developing a Supply Chain to Deliver WOW!, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Zappos Wow in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Threats Zappos.com: Developing a Supply Chain to Deliver WOW! External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Zappos.com: Developing a Supply Chain to Deliver WOW! are -
High dependence on third party suppliers
– Zappos Wow 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Zappos Wow 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 Zappos.com: Developing a Supply Chain to Deliver WOW! .
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. Zappos Wow can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Shortening product life cycle
– it is one of the major threat that Zappos Wow is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Zappos Wow 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.
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 Zappos Wow.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Zappos Wow with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Zappos Wow 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.
Technology acceleration in Forth Industrial Revolution
– Zappos Wow has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Zappos Wow 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.
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. Zappos Wow needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Zappos.com: Developing a Supply Chain to Deliver WOW!, Zappos Wow 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 .
Consumer confidence and its impact on Zappos Wow 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.
Weighted SWOT Analysis of Zappos.com: Developing a Supply Chain to Deliver WOW! 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 Zappos.com: Developing a Supply Chain to Deliver WOW! 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 Zappos.com: Developing a Supply Chain to Deliver WOW! 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 Zappos.com: Developing a Supply Chain to Deliver WOW! 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 Zappos.com: Developing a Supply Chain to Deliver WOW! 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 Zappos Wow needs to make to build a sustainable competitive advantage.