Sterling Group (1825) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Sterling Group (Hong Kong)

Based on various researches at Oak Spring University , Sterling Group is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, technology disruption, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, wage bills are increasing, central banks are concerned over increasing inflation, etc

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Introduction to SWOT Analysis of Sterling Group

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sterling Group can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sterling Group, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sterling Group 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Sterling Group can be done for the following purposes –
1. Strategic planning of Sterling Group
2. Improving business portfolio management of Sterling Group
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Apparel/Accessories sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sterling Group

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Strengths of Sterling Group | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Sterling Group are -

Superior customer experience

– The customer experience strategy of Sterling Group in Apparel/Accessories industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High switching costs

– The high switching costs that Sterling Group 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

– Sterling Group 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 Apparel/Accessories industry. The technology infrastructure of Hong Kong is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Ability to recruit top talent

– Sterling Group is one of the leading players in the Apparel/Accessories industry in Hong Kong. It is in a position to attract the best talent available in Hong Kong. The firm has a robust talent identification program that helps in identifying the brightest.

High brand equity

– Sterling Group has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sterling Group to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Sustainable margins compare to other players in Apparel/Accessories industry

– Sterling Group has clearly differentiated products in the market place. This has enabled Sterling Group to fetch slight price premium compare to the competitors in the Apparel/Accessories industry. The sustainable margins have also helped Sterling Group to invest into research and development (R&D) and innovation.

Low bargaining power of suppliers

– Suppliers of Sterling Group in the Consumer Cyclical sector have low bargaining power. Sterling Group has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sterling Group to manage not only supply disruptions but also source products at highly competitive prices.

Highly skilled collaborators

– Sterling Group has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Apparel/Accessories industry. Secondly the value chain collaborators of Sterling Group have helped the firm to develop new products and bring them quickly to the marketplace.

Learning organization

- Sterling Group 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 Sterling Group is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sterling Group emphasize – knowledge, initiative, and innovation.

Diverse revenue streams

– Sterling Group is present in almost all the verticals within the Apparel/Accessories industry. This has provided Sterling Group 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 Apparel/Accessories industry

- digital transformation varies from industry to industry. For Sterling Group digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sterling Group 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.

Operational resilience

– The operational resilience strategy of Sterling Group comprises – understanding the underlying the factors in the Apparel/Accessories 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.

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Weaknesses of Sterling Group | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Sterling Group are -

No frontier risks strategy

– From the 10K / annual statement of Sterling Group, it seems that company is thinking out the frontier risks that can impact Apparel/Accessories industry. 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.

Interest costs

– Compare to the competition, Sterling Group 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.

Slow to strategic competitive environment developments

– As Sterling Group is one of the leading players in the Apparel/Accessories industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Apparel/Accessories industry in last five years.

Low market penetration in new markets

– Outside its home market of Hong Kong, Sterling Group needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow decision making process

– As mentioned earlier in the report, Sterling Group has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Apparel/Accessories industry over the last five years. Sterling Group 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.

Workers concerns about automation

– As automation is fast increasing in the Apparel/Accessories industry, Sterling Group needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Lack of clear differentiation of Sterling Group products

– To increase the profitability and margins on the products, Sterling Group needs to provide more differentiated products than what it is currently offering in the marketplace.

Compensation and incentives

– The revenue per employee of Sterling Group is just above the Apparel/Accessories industry average. It 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.

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 Sterling Group supply chain. Even after few cautionary changes, Sterling Group is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sterling Group vulnerable to further global disruptions in South East Asia.

High bargaining power of channel partners in Apparel/Accessories industry

– because of the regulatory requirements in Hong Kong, Sterling Group 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 Apparel/Accessories industry.

Employees’ less understanding of Sterling Group strategy

– From the outside it seems that the employees of Sterling Group 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.

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Sterling Group Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Sterling Group are -

Developing new processes and practices

– Sterling Group can develop new processes and procedures in Apparel/Accessories 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Apparel/Accessories industry, but it has also influenced the consumer preferences. Sterling Group can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Low interest rates

– Even though inflation is raising its head in most developed economies, Sterling Group 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.

Building a culture of innovation

– managers at Sterling Group 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 Apparel/Accessories industry.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Apparel/Accessories industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sterling Group 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. Sterling Group 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.

Use of Bitcoin and other crypto currencies for transactions in Apparel/Accessories industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sterling Group in the Apparel/Accessories industry. Now Sterling Group can target international markets with far fewer capital restrictions requirements than the existing system.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sterling Group can use these opportunities to build new business models that can help the communities that Sterling Group operates in. Secondly it can use opportunities from government spending in Apparel/Accessories 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 Sterling Group 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.

Manufacturing automation

– Sterling Group can use the latest technology developments to improve its manufacturing and designing process in Apparel/Accessories sector. 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.

Learning at scale

– Online learning technologies has now opened space for Sterling Group 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.

Buying journey improvements

– Sterling Group can improve the customer journey of consumers in the Apparel/Accessories industry by using analytics and artificial intelligence. It 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Sterling Group 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, Sterling Group is facing challenges because of the dominance of functional experts in the organization. Sterling Group can utilize new technology in the field of Apparel/Accessories industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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Threats Sterling Group External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Sterling Group are -

Consumer confidence and its impact on Sterling Group 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 Apparel/Accessories 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.

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. Sterling Group needs to understand the core reasons impacting the Apparel/Accessories industry. This will help it in building a better workplace.

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 Sterling Group business can come under increasing regulations regarding data privacy, data security, etc.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Sterling Group 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 Sterling Group prominent markets.

Environmental challenges

– Sterling Group 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. Sterling Group can take advantage of this fund but it will also bring new competitors in the Apparel/Accessories industry.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Sterling Group in Apparel/Accessories industry. The Apparel/Accessories 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.

Stagnating economy with rate increase

– Sterling Group 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 Apparel/Accessories industry.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Sterling Group may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Apparel/Accessories sector.

Shortening product life cycle

– it is one of the major threat that Sterling Group is facing in Apparel/Accessories sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Sterling Group.

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. Sterling Group 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.

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.

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Weighted SWOT Analysis of Sterling Group Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sterling Group 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 Sterling Group 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 Sterling Group 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 Sterling Group 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 Sterling Group needs to make to build a sustainable competitive advantage.

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