WH Smith (SMWH) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for WH Smith (United Kingdom)

Based on various researches at Oak Spring University , WH Smith is operating in a macro-environment that has been destablized by – wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, geopolitical disruptions, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing commodity prices, etc

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Introduction to SWOT Analysis of WH Smith

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

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

The strengths of WH Smith are -

Innovation driven organization

– WH Smith is one of the most innovative firm in Retail (Specialty) sector.

Sustainable margins compare to other players in Retail (Specialty) industry

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

High switching costs

– The high switching costs that WH Smith 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.

Highly skilled collaborators

– WH Smith has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Specialty) industry. Secondly the value chain collaborators of WH Smith have helped the firm to develop new products and bring them quickly to the marketplace.

Ability to lead change in Retail (Specialty)

– WH Smith is one of the leading players in the Retail (Specialty) industry in United Kingdom. Over the years it has not only transformed the business landscape in the Retail (Specialty) industry in United Kingdom but also across the existing markets. The ability to lead change has enabled WH Smith in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Analytics focus

– WH Smith 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 Retail (Specialty) industry. The technology infrastructure of United Kingdom 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.

High brand equity

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

Superior customer experience

– The customer experience strategy of WH Smith in Retail (Specialty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Effective Research and Development (R&D)

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

Organizational Resilience of WH Smith

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

Diverse revenue streams

– WH Smith is present in almost all the verticals within the Retail (Specialty) industry. This has provided WH Smith 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 (Specialty) industry

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

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

The weaknesses of WH Smith are -

Skills based hiring in Retail (Specialty) industry

– The stress on hiring functional specialists at WH Smith 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.

Interest costs

– Compare to the competition, WH Smith 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 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 WH Smith supply chain. Even after few cautionary changes, WH Smith is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left WH Smith vulnerable to further global disruptions in South East Asia.

Need for greater diversity

– WH Smith 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.

Employees’ less understanding of WH Smith strategy

– From the outside it seems that the employees of WH Smith 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.

Aligning sales with marketing

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

Lack of clear differentiation of WH Smith products

– To increase the profitability and margins on the products, WH Smith needs to provide more differentiated products than what it is currently offering in the marketplace.

High cash cycle compare to competitors

WH Smith has a high cash cycle compare to other players in the Retail (Specialty) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Slow to harness new channels of communication

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

No frontier risks strategy

– From the 10K / annual statement of WH Smith, it seems that company is thinking out the frontier risks that can impact Retail (Specialty) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

High dependence on WH Smith ‘s star products

– The top 2 products and services of WH Smith still accounts for major business revenue. This dependence on star products in Retail (Specialty) industry has resulted into insufficient focus on developing new products, even though WH Smith has relatively successful track record of launching new products.

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

The opportunities of WH Smith are -

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Retail (Specialty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. WH Smith 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. WH Smith 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.

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 WH Smith 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.

Harnessing reconfiguration of the global supply chains

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

Use of Bitcoin and other crypto currencies for transactions in Retail (Specialty) industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for WH Smith in the Retail (Specialty) industry. Now WH Smith can target international markets with far fewer capital restrictions requirements than the existing system.

Building a culture of innovation

– managers at WH Smith 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 (Specialty) industry.

Reforming the budgeting process

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

Remote work and new talent hiring opportunities

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

Manufacturing automation

– WH Smith can use the latest technology developments to improve its manufacturing and designing process in Retail (Specialty) 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.

Leveraging digital technologies

– WH Smith 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.

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. WH Smith can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Low interest rates

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for WH Smith 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 (Specialty) industry, and it will provide faster access to the consumers.

Buying journey improvements

– WH Smith can improve the customer journey of consumers in the Retail (Specialty) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

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

The threats of WH Smith are -

Easy access to finance

– Easy access to finance in Retail (Specialty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. WH Smith can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, WH Smith 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 (Specialty) sector.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, WH Smith 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 WH Smith prominent markets.

High dependence on third party suppliers

– WH Smith high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

Increasing wage structure of WH Smith

– 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 WH Smith.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Retail (Specialty) industry are lowering. It can presents WH Smith with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Specialty) sector.

Aging population

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

Regulatory challenges

– WH Smith 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 (Specialty) industry regulations.

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 WH Smith business can come under increasing regulations regarding data privacy, data security, etc.

Consumer confidence and its impact on WH Smith 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 (Specialty) industry and other sectors.

Stagnating economy with rate increase

– WH Smith 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 (Specialty) industry.

Shortening product life cycle

– it is one of the major threat that WH Smith is facing in Retail (Specialty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

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Weighted SWOT Analysis of WH Smith Template, Example

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

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