De Longhi (DLG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for De Longhi (Italy)

Based on various researches at Oak Spring University , De Longhi is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of De Longhi

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that De Longhi can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the De Longhi, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which De Longhi 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 De Longhi can be done for the following purposes –
1. Strategic planning of De Longhi
2. Improving business portfolio management of De Longhi
3. Assessing feasibility of the new initiative in Italy
4. Making a Appliance & Tool sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of De Longhi

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Strengths of De Longhi | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of De Longhi are -

High switching costs

– The high switching costs that De Longhi 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

– De Longhi 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 Appliance & Tool industry. The technology infrastructure of Italy 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.

Operational resilience

– The operational resilience strategy of De Longhi comprises – understanding the underlying the factors in the Appliance & Tool 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.

Effective Research and Development (R&D)

– De Longhi has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – De Longhi staying ahead in the Appliance & Tool industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Digital Transformation in Appliance & Tool industry

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

High brand equity

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

Learning organization

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

Cross disciplinary teams

– Horizontal connected teams at the De Longhi 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.

Diverse revenue streams

– De Longhi is present in almost all the verticals within the Appliance & Tool industry. This has provided De Longhi 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.

Superior customer experience

– The customer experience strategy of De Longhi in Appliance & Tool industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Successful track record of launching new products

– De Longhi has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. De Longhi 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.

Strong track record of project management in the Appliance & Tool industry

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

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Weaknesses of De Longhi | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of De Longhi are -

Slow to strategic competitive environment developments

– As De Longhi is one of the leading players in the Appliance & Tool industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Appliance & Tool industry in last five years.

Capital Spending Reduction

– Even during the low interest decade, De Longhi 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 Appliance & Tool industry using digital technology.

Workers concerns about automation

– As automation is fast increasing in the Appliance & Tool industry, De Longhi 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.

Slow to harness new channels of communication

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

High bargaining power of channel partners in Appliance & Tool industry

– because of the regulatory requirements in Italy, De Longhi 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 Appliance & Tool industry.

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

Lack of clear differentiation of De Longhi products

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

Slow decision making process

– As mentioned earlier in the report, De Longhi has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Appliance & Tool industry over the last five years. De Longhi 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 cash cycle compare to competitors

De Longhi has a high cash cycle compare to other players in the Appliance & Tool industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Skills based hiring in Appliance & Tool industry

– The stress on hiring functional specialists at De Longhi 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.

Compensation and incentives

– The revenue per employee of De Longhi is just above the Appliance & Tool 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.

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De Longhi Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of De Longhi are -

Learning at scale

– Online learning technologies has now opened space for De Longhi 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, De Longhi can use these opportunities to build new business models that can help the communities that De Longhi operates in. Secondly it can use opportunities from government spending in Appliance & Tool sector.

Creating value in data economy

– The success of analytics program of De Longhi has opened avenues for new revenue streams for the organization in Appliance & Tool industry. This can help De Longhi to build a more holistic ecosystem for De Longhi products in the Appliance & Tool industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Manufacturing automation

– De Longhi can use the latest technology developments to improve its manufacturing and designing process in Appliance & Tool 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.

Buying journey improvements

– De Longhi can improve the customer journey of consumers in the Appliance & Tool 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

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

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. De Longhi can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Leveraging digital technologies

– De Longhi 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.

Better consumer reach

– The expansion of the 5G network will help De Longhi to increase its market reach. De Longhi will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Building a culture of innovation

– managers at De Longhi 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 Appliance & Tool industry.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects De Longhi can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Lowering marketing communication costs

– 5G expansion will open new opportunities for De Longhi in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Appliance & Tool industry, and it will provide faster access to the consumers.

Developing new processes and practices

– De Longhi can develop new processes and procedures in Appliance & Tool 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.

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Threats De Longhi External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of De Longhi are -

Environmental challenges

– De Longhi 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. De Longhi can take advantage of this fund but it will also bring new competitors in the Appliance & Tool 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for De Longhi in Appliance & Tool industry. The Appliance & Tool 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 international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, De Longhi 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 De Longhi prominent markets.

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 De Longhi in the Appliance & Tool sector and impact the bottomline of the organization.

High dependence on third party suppliers

– De Longhi 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.

Regulatory challenges

– De Longhi 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 Appliance & Tool industry regulations.

Consumer confidence and its impact on De Longhi 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 Appliance & Tool industry and other sectors.

Technology acceleration in Forth Industrial Revolution

– De Longhi has witnessed rapid integration of technology during Covid-19 in the Appliance & Tool industry. As one of the leading players in the industry, De Longhi needs to keep up with the evolution of technology in the Appliance & Tool 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.

Easy access to finance

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

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 De Longhi.

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.

Increasing wage structure of De Longhi

– 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 De Longhi.

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Weighted SWOT Analysis of De Longhi Template, Example

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

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