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 – increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, central banks are concerned over increasing inflation, wage bills are increasing, increasing government debt because of Covid-19 spendings, geopolitical disruptions, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, 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 -

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.

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.

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.

Organizational Resilience of De Longhi

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

Training and development

– De Longhi 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.

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.

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.

Sustainable margins compare to other players in Appliance & Tool industry

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

Ability to recruit top talent

– De Longhi is one of the leading players in the Appliance & Tool industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.

Ability to lead change in Appliance & Tool

– De Longhi is one of the leading players in the Appliance & Tool industry in Italy. Over the years it has not only transformed the business landscape in the Appliance & Tool industry in Italy but also across the existing markets. The ability to lead change has enabled De Longhi in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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.

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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 -

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.

Ability to respond to the competition

– As the decision making is very deliberative at De Longhi, in the dynamic environment of Appliance & Tool industry it has struggled to respond to the nimble upstart competition. De Longhi has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Aligning sales with marketing

– From the outside it seems that De Longhi needs to have more collaboration between its sales team and marketing team. Sales professionals in the Appliance & Tool industry have deep experience in developing customer relationships. Marketing department at De Longhi can leverage the sales team experience to cultivate customer relationships as De Longhi is planning to shift buying processes online.

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.

Employees’ less understanding of De Longhi strategy

– From the outside it seems that the employees of De Longhi 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.

No frontier risks strategy

– From the 10K / annual statement of De Longhi, it seems that company is thinking out the frontier risks that can impact Appliance & Tool 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 dependence on De Longhi ‘s star products

– The top 2 products and services of De Longhi still accounts for major business revenue. This dependence on star products in Appliance & Tool industry has resulted into insufficient focus on developing new products, even though De Longhi has relatively successful track record of launching new products.

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.

Interest costs

– Compare to the competition, De Longhi 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.

Increasing silos among functional specialists

– The organizational structure of De Longhi is dominated by functional specialists. It is not different from other players in the Appliance & Tool industry, but De Longhi needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help De Longhi to focus more on services in the Appliance & Tool industry rather than just following the product oriented approach.

High operating costs

– Compare to the competitors, De Longhi has high operating costs in the Appliance & Tool industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract De Longhi lucrative customers.

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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 -

Finding new ways to collaborate

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

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.

Remote work and new talent hiring opportunities

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

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 De Longhi 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, De Longhi is facing challenges because of the dominance of functional experts in the organization. De Longhi can utilize new technology in the field of Appliance & Tool industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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.

Low interest rates

– Even though inflation is raising its head in most developed economies, De Longhi 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.

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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, De Longhi 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 De Longhi to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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.

Use of Bitcoin and other crypto currencies for transactions in Appliance & Tool industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for De Longhi in the Appliance & Tool industry. Now De Longhi can target international markets with far fewer capital restrictions requirements than the existing system.

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.

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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 -

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 De Longhi business can come under increasing regulations regarding data privacy, data security, etc.

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.

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.

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.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Appliance & Tool industry are lowering. It can presents De Longhi with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Appliance & Tool sector.

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.

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.

Stagnating economy with rate increase

– De Longhi 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 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.

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.

Shortening product life cycle

– it is one of the major threat that De Longhi is facing in Appliance & Tool sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

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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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