Aeffe (AEF) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Aeffe (Italy)

Based on various researches at Oak Spring University , Aeffe is operating in a macro-environment that has been destablized by – technology disruption, increasing energy prices, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, increasing commodity prices, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of Aeffe

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

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

The strengths of Aeffe are -

Successful track record of launching new products

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

Training and development

– Aeffe 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.

High switching costs

– The high switching costs that Aeffe 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.

Low bargaining power of suppliers

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

Diverse revenue streams

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

Cross disciplinary teams

– Horizontal connected teams at the Aeffe 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.

Highly skilled collaborators

– Aeffe 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 Aeffe have helped the firm to develop new products and bring them quickly to the marketplace.

Analytics focus

– Aeffe 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 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.

Digital Transformation in Apparel/Accessories industry

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

Organizational Resilience of Aeffe

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

Learning organization

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

Ability to lead change in Apparel/Accessories

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

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

The weaknesses of Aeffe are -

Aligning sales with marketing

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

High dependence on Aeffe ‘s star products

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

Interest costs

– Compare to the competition, Aeffe 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.

Workers concerns about automation

– As automation is fast increasing in the Apparel/Accessories industry, Aeffe 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.

Need for greater diversity

– Aeffe has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

Compensation and incentives

– The revenue per employee of Aeffe 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.

Increasing silos among functional specialists

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

Slow decision making process

– As mentioned earlier in the report, Aeffe 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. Aeffe 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.

Slow to harness new channels of communication

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

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 Aeffe supply chain. Even after few cautionary changes, Aeffe is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aeffe 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 Italy, Aeffe 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.

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

The opportunities of Aeffe are -

Reforming the budgeting process

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

Developing new processes and practices

– Aeffe 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.

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 Aeffe 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.

Low interest rates

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

Leveraging digital technologies

– Aeffe 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 Aeffe to increase its market reach. Aeffe 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Aeffe 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.

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. Aeffe can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Aeffe is facing challenges because of the dominance of functional experts in the organization. Aeffe 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.

Building a culture of innovation

– managers at Aeffe 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.

Using analytics as competitive advantage

– Aeffe 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 Aeffe to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aeffe to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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 Aeffe in the Apparel/Accessories industry. Now Aeffe can target international markets with far fewer capital restrictions requirements than the existing system.

Remote work and new talent hiring opportunities

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

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

The threats of Aeffe are -

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Environmental challenges

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

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.

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

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. Aeffe can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

High dependence on third party suppliers

– Aeffe 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Aeffe 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

– Aeffe 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.

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 Aeffe 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, Aeffe 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 Aeffe prominent markets.

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 Aeffe.

Shortening product life cycle

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

Technology acceleration in Forth Industrial Revolution

– Aeffe has witnessed rapid integration of technology during Covid-19 in the Apparel/Accessories industry. As one of the leading players in the industry, Aeffe 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.

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Weighted SWOT Analysis of Aeffe Template, Example

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

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