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 – digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, increasing household debt because of falling income levels, increasing transportation and logistics costs, there is backlash against globalization, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, 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 -

Cross disciplinary teams

– Horizontal connected teams at the Safilo Group 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.

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.

Diverse revenue streams

– Safilo Group is present in almost all the verticals within the Recreational Products industry. This has provided Safilo 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.

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.

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.

Operational resilience

– The operational resilience strategy of Safilo Group comprises – understanding the underlying the factors in the Recreational Products 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.

Innovation driven organization

– Safilo Group is one of the most innovative firm in Recreational Products sector.

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.

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.

Analytics focus

– Safilo Group 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 Recreational Products 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.

Training and development

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

The weaknesses of Safilo Group are -

Aligning sales with marketing

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

High bargaining power of channel partners in Recreational Products industry

– because of the regulatory requirements in Italy, Safilo 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 Recreational Products industry.

Workers concerns about automation

– As automation is fast increasing in the Recreational Products industry, Safilo Group 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.

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.

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.

No frontier risks strategy

– From the 10K / annual statement of Safilo Group, it seems that company is thinking out the frontier risks that can impact Recreational Products 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.

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.

Ability to respond to the competition

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

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.

High operating costs

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

Products dominated business model

– Even though Safilo Group has some of the most successful models in the Recreational Products industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Safilo Group should strive to include more intangible value offerings along with its core products and services.

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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 -

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.

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.

Using analytics as competitive advantage

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

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.

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

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.

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.

Developing new processes and practices

– Safilo Group can develop new processes and procedures in Recreational Products 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.

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.

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.

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.

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.

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.

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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 -

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 Safilo Group business can come under increasing regulations regarding data privacy, data security, etc.

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 Safilo Group.

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.

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.

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.

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.

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.

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. Safilo Group needs to understand the core reasons impacting the Recreational Products industry. This will help it in building a better workplace.

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.

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.

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.

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 Safilo Group in the Recreational Products sector and impact the bottomline of the organization.

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.

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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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