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 - – wage bills are increasing, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies,
challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
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.
Training and development
– Karstadt Nster has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Karstadt Warenhaus GmbH: Do Department Stores Have a Future? 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.
Superior customer experience
– The customer experience strategy of Karstadt Nster in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Karstadt Warenhaus GmbH: Do Department Stores Have a Future?, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High 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 Karstadt Nster supply chain. Even after few cautionary changes mentioned in the HBR case study - Karstadt Warenhaus GmbH: Do Department Stores Have a Future?, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Karstadt Nster vulnerable to further global disruptions in South East Asia.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Loyalty marketing
– Karstadt Nster 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Karstadt Nster 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.
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.
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.
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.
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.
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 .
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.
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.
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? .
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 Karstadt Nster.
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.
Consumer confidence and its impact on Karstadt Nster 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.
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.
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.
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.