SWOT Analysis / TOWS Matrix for Baozun Inc (United States)
Based on various researches at Oak Spring University , Baozun Inc is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China,
wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Baozun Inc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Baozun Inc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Baozun Inc 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 Baozun Inc can be done for the following purposes –
1. Strategic planning of Baozun Inc
2. Improving business portfolio management of Baozun Inc
3. Assessing feasibility of the new initiative in United States
4. Making a Computer Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Baozun Inc
Strengths of Baozun Inc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Baozun Inc are -
Operational resilience
– The operational resilience strategy of Baozun Inc comprises – understanding the underlying the factors in the Computer Services 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.
Superior customer experience
– The customer experience strategy of Baozun Inc in Computer Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Baozun Inc is one of the leading players in the Computer Services industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Baozun Inc has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Baozun Inc staying ahead in the Computer Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Baozun Inc 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 Baozun Inc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Baozun Inc emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Baozun Inc in the Technology sector have low bargaining power. Baozun Inc has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Baozun Inc to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Computer Services
– Baozun Inc is one of the leading players in the Computer Services industry in United States. Over the years it has not only transformed the business landscape in the Computer Services industry in United States but also across the existing markets. The ability to lead change has enabled Baozun Inc in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Baozun Inc is present in almost all the verticals within the Computer Services industry. This has provided Baozun Inc 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.
Organizational Resilience of Baozun Inc
– The covid-19 pandemic has put organizational resilience at the centre of everthing Baozun Inc 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 Computer Services industry
– Baozun Inc has clearly differentiated products in the market place. This has enabled Baozun Inc to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped Baozun Inc to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Baozun Inc 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
– Baozun Inc 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 Computer Services industry. The technology infrastructure of United States 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.
Weaknesses of Baozun Inc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Baozun Inc are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Baozun Inc is slow explore the new channels of communication. These new channels of communication can help Baozun Inc to provide better information regarding Computer Services products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative at Baozun Inc, in the dynamic environment of Computer Services industry it has struggled to respond to the nimble upstart competition. Baozun Inc has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners in Computer Services industry
– because of the regulatory requirements in United States, Baozun Inc 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 Computer Services industry.
Lack of clear differentiation of Baozun Inc products
– To increase the profitability and margins on the products, Baozun Inc needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of Baozun Inc strategy
– From the outside it seems that the employees of Baozun Inc 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 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 Baozun Inc supply chain. Even after few cautionary changes, Baozun Inc is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Baozun Inc vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Baozun Inc has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Computer Services industry over the last five years. Baozun Inc 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.
Increasing silos among functional specialists
– The organizational structure of Baozun Inc is dominated by functional specialists. It is not different from other players in the Computer Services industry, but Baozun Inc needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Baozun Inc to focus more on services in the Computer Services industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Baozun Inc 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.
Skills based hiring in Computer Services industry
– The stress on hiring functional specialists at Baozun Inc 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.
Capital Spending Reduction
– Even during the low interest decade, Baozun Inc 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 Computer Services industry using digital technology.
Baozun Inc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Baozun Inc are -
Developing new processes and practices
– Baozun Inc can develop new processes and procedures in Computer Services 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.
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. Baozun Inc can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Baozun Inc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Baozun Inc has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Computer Services sector. This continuous investment in analytics has enabled Baozun Inc to build a competitive advantage using analytics. The analytics driven competitive advantage can help Baozun Inc to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions in Computer Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Baozun Inc in the Computer Services industry. Now Baozun Inc can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Computer Services industry, but it has also influenced the consumer preferences. Baozun Inc can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Baozun Inc 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 Baozun Inc to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Baozun Inc is facing challenges because of the dominance of functional experts in the organization. Baozun Inc can utilize new technology in the field of Computer Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Baozun Inc has opened avenues for new revenue streams for the organization in Computer Services industry. This can help Baozun Inc to build a more holistic ecosystem for Baozun Inc products in the Computer Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Baozun Inc 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.
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 Baozun Inc 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.
Building a culture of innovation
– managers at Baozun Inc 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 Computer Services industry.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Computer Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Baozun Inc 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. Baozun Inc 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.
Threats Baozun Inc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Baozun Inc are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Baozun Inc in Computer Services industry. The Computer Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Environmental challenges
– Baozun Inc 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. Baozun Inc can take advantage of this fund but it will also bring new competitors in the Computer Services industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Baozun Inc 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 Baozun Inc prominent markets.
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. Baozun Inc 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.
Regulatory challenges
– Baozun Inc 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 Computer Services industry regulations.
Consumer confidence and its impact on Baozun Inc 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 Computer Services industry and other sectors.
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 Baozun Inc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Baozun Inc may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Computer Services sector.
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. Baozun Inc needs to understand the core reasons impacting the Computer Services industry. This will help it in building a better workplace.
Increasing wage structure of Baozun Inc
– 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 Baozun Inc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Computer Services industry are lowering. It can presents Baozun Inc with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Computer Services sector.
High dependence on third party suppliers
– Baozun Inc 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.
Easy access to finance
– Easy access to finance in Computer Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Baozun Inc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Baozun Inc Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Baozun Inc 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 Baozun Inc 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 Baozun Inc 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 Baozun Inc 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 Baozun Inc needs to make to build a sustainable competitive advantage.