X5 Retail Group (PJPq) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Department & Discount)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for X5 Retail Group (United Kingdom)
Based on various researches at Oak Spring University , X5 Retail Group is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, wage bills are increasing, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, there is backlash against globalization,
competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that X5 Retail Group can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the X5 Retail Group, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which X5 Retail 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.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of X5 Retail Group can be done for the following purposes –
1. Strategic planning of X5 Retail Group
2. Improving business portfolio management of X5 Retail Group
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Retail (Department & Discount) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of X5 Retail Group
Strengths of X5 Retail Group | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of X5 Retail Group are -
High switching costs
– The high switching costs that X5 Retail 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.
Organizational Resilience of X5 Retail Group
– The covid-19 pandemic has put organizational resilience at the centre of everthing X5 Retail Group does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of X5 Retail Group in the Services sector have low bargaining power. X5 Retail Group has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps X5 Retail Group to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– X5 Retail Group has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – X5 Retail Group staying ahead in the Retail (Department & Discount) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- X5 Retail 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 X5 Retail Group is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at X5 Retail Group emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of X5 Retail Group comprises – understanding the underlying the factors in the Retail (Department & Discount) 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.
Diverse revenue streams
– X5 Retail Group is present in almost all the verticals within the Retail (Department & Discount) industry. This has provided X5 Retail 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.
Digital Transformation in Retail (Department & Discount) industry
- digital transformation varies from industry to industry. For X5 Retail Group digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. X5 Retail 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.
Sustainable margins compare to other players in Retail (Department & Discount) industry
– X5 Retail Group has clearly differentiated products in the market place. This has enabled X5 Retail Group to fetch slight price premium compare to the competitors in the Retail (Department & Discount) industry. The sustainable margins have also helped X5 Retail Group to invest into research and development (R&D) and innovation.
Ability to lead change in Retail (Department & Discount)
– X5 Retail Group is one of the leading players in the Retail (Department & Discount) industry in United Kingdom. Over the years it has not only transformed the business landscape in the Retail (Department & Discount) industry in United Kingdom but also across the existing markets. The ability to lead change has enabled X5 Retail Group in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– X5 Retail Group has one of the best training and development program in Services 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.
Highly skilled collaborators
– X5 Retail Group has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Department & Discount) industry. Secondly the value chain collaborators of X5 Retail Group have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of X5 Retail Group | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of X5 Retail Group are -
High cash cycle compare to competitors
X5 Retail Group has a high cash cycle compare to other players in the Retail (Department & Discount) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on X5 Retail Group ‘s star products
– The top 2 products and services of X5 Retail Group still accounts for major business revenue. This dependence on star products in Retail (Department & Discount) industry has resulted into insufficient focus on developing new products, even though X5 Retail Group has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As X5 Retail Group is one of the leading players in the Retail (Department & Discount) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Department & Discount) industry in last five years.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, X5 Retail Group is slow explore the new channels of communication. These new channels of communication can help X5 Retail Group to provide better information regarding Retail (Department & Discount) products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, X5 Retail Group 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 Retail (Department & Discount) industry using digital technology.
High bargaining power of channel partners in Retail (Department & Discount) industry
– because of the regulatory requirements in United Kingdom, X5 Retail 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 Retail (Department & Discount) industry.
Need for greater diversity
– X5 Retail 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.
Products dominated business model
– Even though X5 Retail Group has some of the most successful models in the Retail (Department & Discount) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. X5 Retail Group should strive to include more intangible value offerings along with its core products and services.
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 X5 Retail Group supply chain. Even after few cautionary changes, X5 Retail Group is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left X5 Retail Group vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the Retail (Department & Discount) industry, X5 Retail 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.
Interest costs
– Compare to the competition, X5 Retail 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.
X5 Retail Group Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of X5 Retail Group are -
Low interest rates
– Even though inflation is raising its head in most developed economies, X5 Retail 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.
Developing new processes and practices
– X5 Retail Group can develop new processes and procedures in Retail (Department & Discount) 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.
Using analytics as competitive advantage
– X5 Retail Group has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Department & Discount) sector. This continuous investment in analytics has enabled X5 Retail Group to build a competitive advantage using analytics. The analytics driven competitive advantage can help X5 Retail Group to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at X5 Retail 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 Retail (Department & Discount) industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, X5 Retail Group is facing challenges because of the dominance of functional experts in the organization. X5 Retail Group can utilize new technology in the field of Retail (Department & Discount) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for X5 Retail 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Department & Discount) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. X5 Retail 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. X5 Retail 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for X5 Retail 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 Retail (Department & Discount) industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– X5 Retail 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.
Loyalty marketing
– X5 Retail 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.
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. X5 Retail Group can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Use of Bitcoin and other crypto currencies for transactions in Retail (Department & Discount) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for X5 Retail Group in the Retail (Department & Discount) industry. Now X5 Retail Group can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help X5 Retail Group to increase its market reach. X5 Retail Group 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.
Threats X5 Retail Group External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of X5 Retail Group 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.
High dependence on third party suppliers
– X5 Retail 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.
Consumer confidence and its impact on X5 Retail 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 Retail (Department & Discount) industry and other sectors.
Environmental challenges
– X5 Retail 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. X5 Retail Group can take advantage of this fund but it will also bring new competitors in the Retail (Department & Discount) industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, X5 Retail 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 Retail (Department & Discount) sector.
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 X5 Retail Group.
Regulatory challenges
– X5 Retail 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 Retail (Department & Discount) industry regulations.
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. X5 Retail Group needs to understand the core reasons impacting the Retail (Department & Discount) industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– X5 Retail 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 Retail (Department & Discount) industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Department & Discount) industry are lowering. It can presents X5 Retail Group with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Department & Discount) sector.
Technology acceleration in Forth Industrial Revolution
– X5 Retail Group has witnessed rapid integration of technology during Covid-19 in the Retail (Department & Discount) industry. As one of the leading players in the industry, X5 Retail Group needs to keep up with the evolution of technology in the Retail (Department & Discount) 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.
Increasing wage structure of X5 Retail 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 X5 Retail Group.
Weighted SWOT Analysis of X5 Retail Group Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at X5 Retail 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 X5 Retail 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 X5 Retail 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 X5 Retail 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 X5 Retail Group needs to make to build a sustainable competitive advantage.
