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 - – there is backlash against globalization, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, supply chains are disrupted by pandemic , increasing energy prices, increasing household debt because of falling income levels,
increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, 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 -
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.
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.
High brand equity
– Karstadt Nster has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Karstadt Nster to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Analytics focus
– Karstadt Nster 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 Robin Dresenkamp, Johannes Effenberger, Max Meinhovel, Friedrich Sommer 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.
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.
Highly skilled collaborators
– Karstadt Nster 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 Karstadt Warenhaus GmbH: Do Department Stores Have a Future? HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Karstadt Warenhaus GmbH: Do Department Stores Have a Future? firm has clearly differentiated products in the market place. This has enabled Karstadt Nster to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Karstadt Nster to invest into research and development (R&D) and innovation.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Karstadt Nster digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Karstadt Nster 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 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 -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future?, it seems that the employees of Karstadt Nster 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.
Aligning sales with marketing
– It come across in the case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future? that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Karstadt Warenhaus GmbH: Do Department Stores Have a Future? can leverage the sales team experience to cultivate customer relationships as Karstadt Nster is planning to shift buying processes online.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future?, in the dynamic environment Karstadt Nster has struggled to respond to the nimble upstart competition. Karstadt Nster 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 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.
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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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 Karstadt Nster has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Karstadt Nster 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.
Slow to strategic competitive environment developments
– As Karstadt Warenhaus GmbH: Do Department Stores Have a Future? HBR case study mentions - Karstadt Nster 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, 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.
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 -
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Karstadt Nster 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, Karstadt Warenhaus GmbH: Do Department Stores Have a Future?, 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 Karstadt Nster in the consumer business. Now Karstadt Nster can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Karstadt Nster is facing challenges because of the dominance of functional experts in the organization. Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Karstadt Nster 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 Karstadt Nster 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, 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.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Karstadt Nster 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. Karstadt Nster 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.
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 -
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 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. Karstadt Nster needs to understand the core reasons impacting the Leadership & Managing People 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, 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? .
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.
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.
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.
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 .
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.
Environmental challenges
– Karstadt Nster 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. Karstadt Nster can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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.
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.
Shortening product life cycle
– it is one of the major threat that Karstadt Nster is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Karstadt Nster 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 Leadership & Managing People industry regulations.
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.
