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 – challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, wage bills are increasing, 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 -

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.

Ability to lead change in Apparel/Accessories

– Sterling Group is one of the leading players in the Apparel/Accessories industry in Hong Kong. Over the years it has not only transformed the business landscape in the Apparel/Accessories industry in Hong Kong but also across the existing markets. The ability to lead change has enabled Sterling Group in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Innovation driven organization

– Sterling Group is one of the most innovative firm in Apparel/Accessories sector.

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.

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.

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.

Organizational Resilience of Sterling Group

– The covid-19 pandemic has put organizational resilience at the centre of everthing Sterling Group does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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.

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.

Strong track record of project management in the Apparel/Accessories industry

– Sterling Group is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

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.

Training and development

– Sterling Group has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

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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 -

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.

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.

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.

High cash cycle compare to competitors

Sterling Group has a high cash cycle compare to other players in the Apparel/Accessories industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

High operating costs

– Compare to the competitors, Sterling Group has high operating costs in the Apparel/Accessories industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sterling Group lucrative customers.

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.

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.

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.

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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sterling Group is slow explore the new channels of communication. These new channels of communication can help Sterling Group to provide better information regarding Apparel/Accessories products and services. It can also build an online community to further reach out to potential customers.

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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 -

Lowering marketing communication costs

– 5G expansion will open new opportunities for Sterling Group in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Apparel/Accessories industry, and it will provide faster access to the consumers.

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. Sterling Group can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

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.

Leveraging digital technologies

– Sterling Group 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.

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.

Loyalty marketing

– Sterling Group 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.

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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sterling Group 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 Sterling Group to hire the very best people irrespective of their geographical location.

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.

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.

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.

Using analytics as competitive advantage

– Sterling Group has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Apparel/Accessories sector. This continuous investment in analytics has enabled Sterling Group to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sterling Group to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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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 -

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.

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.

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.

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.

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.

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.

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.

Technology acceleration in Forth Industrial Revolution

– Sterling Group has witnessed rapid integration of technology during Covid-19 in the Apparel/Accessories industry. As one of the leading players in the industry, Sterling Group needs to keep up with the evolution of technology in the Apparel/Accessories 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Apparel/Accessories industry are lowering. It can presents Sterling Group with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Apparel/Accessories sector.

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.

Easy access to finance

– Easy access to finance in Apparel/Accessories industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sterling Group can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Increasing wage structure of Sterling Group

– 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 Sterling Group.

High dependence on third party suppliers

– Sterling Group 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.

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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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