Safilo Group (SFLG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Safilo Group (Italy)

Based on various researches at Oak Spring University , Safilo Group is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, technology disruption, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, increasing energy prices, etc

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Introduction to SWOT Analysis of Safilo Group

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

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

The strengths of Safilo Group are -

Digital Transformation in Recreational Products industry

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

High brand equity

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

Strong track record of project management in the Recreational Products industry

– Safilo 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.

Ability to lead change in Recreational Products

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

Effective Research and Development (R&D)

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

Low bargaining power of suppliers

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

Highly skilled collaborators

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

Organizational Resilience of Safilo Group

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

Sustainable margins compare to other players in Recreational Products industry

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

Learning organization

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

Successful track record of launching new products

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

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

The weaknesses of Safilo Group are -

Interest costs

– Compare to the competition, Safilo 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.

High cash cycle compare to competitors

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

Employees’ less understanding of Safilo Group strategy

– From the outside it seems that the employees of Safilo 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 to harness new channels of communication

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

Need for greater diversity

– Safilo Group 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.

Skills based hiring in Recreational Products industry

– The stress on hiring functional specialists at Safilo Group 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.

Slow to strategic competitive environment developments

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

High dependence on Safilo Group ‘s star products

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

Low market penetration in new markets

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

Compensation and incentives

– The revenue per employee of Safilo Group is just above the Recreational Products 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.

Slow decision making process

– As mentioned earlier in the report, Safilo 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 Recreational Products industry over the last five years. Safilo 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.

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

The opportunities of Safilo Group are -

Redefining models of collaboration and team work

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

Loyalty marketing

– Safilo 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.

Leveraging digital technologies

– Safilo 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.

Use of Bitcoin and other crypto currencies for transactions in Recreational Products industry

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

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Recreational Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Safilo 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. Safilo 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.

Manufacturing automation

– Safilo Group can use the latest technology developments to improve its manufacturing and designing process in Recreational Products 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, Safilo 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.

Creating value in data economy

– The success of analytics program of Safilo Group has opened avenues for new revenue streams for the organization in Recreational Products industry. This can help Safilo Group to build a more holistic ecosystem for Safilo Group products in the Recreational Products industry by providing – data insight services, data privacy related products, data based consulting services, 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 Safilo 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.

Learning at scale

– Online learning technologies has now opened space for Safilo 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.

Building a culture of innovation

– managers at Safilo 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 Recreational Products industry.

Harnessing reconfiguration of the global supply chains

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Safilo 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 Recreational Products industry, and it will provide faster access to the consumers.

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

The threats of Safilo Group are -

Consumer confidence and its impact on Safilo 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 Recreational Products industry and other sectors.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Safilo 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 Recreational Products sector.

Increasing international competition and downward pressure on margins

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

Barriers of entry lowering

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

Technology acceleration in Forth Industrial Revolution

– Safilo Group has witnessed rapid integration of technology during Covid-19 in the Recreational Products industry. As one of the leading players in the industry, Safilo Group needs to keep up with the evolution of technology in the Recreational Products 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.

Regulatory challenges

– Safilo Group 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 Recreational Products industry regulations.

Stagnating economy with rate increase

– Safilo 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 Recreational Products industry.

Environmental challenges

– Safilo 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. Safilo Group can take advantage of this fund but it will also bring new competitors in the Recreational Products industry.

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. Safilo 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 wage structure of Safilo 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 Safilo Group.

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.

Easy access to finance

– Easy access to finance in Recreational Products industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Safilo Group 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

– Safilo 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 Safilo Group Template, Example

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

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