SWOT Analysis / TOWS Matrix for Deckers Outdoor (United States)
Based on various researches at Oak Spring University , Deckers Outdoor is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, technology disruption, increasing commodity prices, increasing transportation and logistics costs,
increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Deckers Outdoor can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Deckers Outdoor, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Deckers Outdoor 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 Deckers Outdoor can be done for the following purposes –
1. Strategic planning of Deckers Outdoor
2. Improving business portfolio management of Deckers Outdoor
3. Assessing feasibility of the new initiative in United States
4. Making a Footwear sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Deckers Outdoor
Strengths of Deckers Outdoor | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Deckers Outdoor are -
Superior customer experience
– The customer experience strategy of Deckers Outdoor in Footwear industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Deckers Outdoor is one of the most innovative firm in Footwear sector.
Cross disciplinary teams
– Horizontal connected teams at the Deckers Outdoor 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.
Ability to recruit top talent
– Deckers Outdoor is one of the leading players in the Footwear 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.
Low bargaining power of suppliers
– Suppliers of Deckers Outdoor in the Consumer Cyclical sector have low bargaining power. Deckers Outdoor has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Deckers Outdoor to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Footwear industry
- digital transformation varies from industry to industry. For Deckers Outdoor digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Deckers Outdoor 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.
Ability to lead change in Footwear
– Deckers Outdoor is one of the leading players in the Footwear industry in United States. Over the years it has not only transformed the business landscape in the Footwear industry in United States but also across the existing markets. The ability to lead change has enabled Deckers Outdoor in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Deckers Outdoor is present in almost all the verticals within the Footwear industry. This has provided Deckers Outdoor 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 switching costs
– The high switching costs that Deckers Outdoor 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.
Effective Research and Development (R&D)
– Deckers Outdoor has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Deckers Outdoor staying ahead in the Footwear industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Deckers Outdoor 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.
Sustainable margins compare to other players in Footwear industry
– Deckers Outdoor has clearly differentiated products in the market place. This has enabled Deckers Outdoor to fetch slight price premium compare to the competitors in the Footwear industry. The sustainable margins have also helped Deckers Outdoor to invest into research and development (R&D) and innovation.
Weaknesses of Deckers Outdoor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Deckers Outdoor are -
High dependence on Deckers Outdoor ‘s star products
– The top 2 products and services of Deckers Outdoor still accounts for major business revenue. This dependence on star products in Footwear industry has resulted into insufficient focus on developing new products, even though Deckers Outdoor has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, Deckers Outdoor has high operating costs in the Footwear industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Deckers Outdoor lucrative customers.
Skills based hiring in Footwear industry
– The stress on hiring functional specialists at Deckers Outdoor 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, Deckers Outdoor 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 bargaining power of channel partners in Footwear industry
– because of the regulatory requirements in United States, Deckers Outdoor 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 Footwear industry.
No frontier risks strategy
– From the 10K / annual statement of Deckers Outdoor, it seems that company is thinking out the frontier risks that can impact Footwear 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.
Aligning sales with marketing
– From the outside it seems that Deckers Outdoor needs to have more collaboration between its sales team and marketing team. Sales professionals in the Footwear industry have deep experience in developing customer relationships. Marketing department at Deckers Outdoor can leverage the sales team experience to cultivate customer relationships as Deckers Outdoor is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Deckers Outdoor is one of the leading players in the Footwear industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Footwear industry in last five years.
High cash cycle compare to competitors
Deckers Outdoor has a high cash cycle compare to other players in the Footwear industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Products dominated business model
– Even though Deckers Outdoor has some of the most successful models in the Footwear industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Deckers Outdoor should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Deckers Outdoor has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Footwear industry over the last five years. Deckers Outdoor 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.
Deckers Outdoor Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Deckers Outdoor are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Footwear industry, but it has also influenced the consumer preferences. Deckers Outdoor can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Deckers Outdoor to increase its market reach. Deckers Outdoor 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.
Use of Bitcoin and other crypto currencies for transactions in Footwear industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Deckers Outdoor in the Footwear industry. Now Deckers Outdoor can target international markets with far fewer capital restrictions requirements than the existing system.
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 Deckers Outdoor to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Learning at scale
– Online learning technologies has now opened space for Deckers Outdoor to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Deckers Outdoor 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 Footwear industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Deckers Outdoor is facing challenges because of the dominance of functional experts in the organization. Deckers Outdoor can utilize new technology in the field of Footwear industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Deckers Outdoor can develop new processes and procedures in Footwear 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
– Deckers Outdoor has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Footwear sector. This continuous investment in analytics has enabled Deckers Outdoor to build a competitive advantage using analytics. The analytics driven competitive advantage can help Deckers Outdoor to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Footwear industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Deckers Outdoor 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. Deckers Outdoor 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 Deckers Outdoor in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Footwear industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Deckers Outdoor can use these opportunities to build new business models that can help the communities that Deckers Outdoor operates in. Secondly it can use opportunities from government spending in Footwear sector.
Buying journey improvements
– Deckers Outdoor can improve the customer journey of consumers in the Footwear 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.
Threats Deckers Outdoor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Deckers Outdoor are -
Easy access to finance
– Easy access to finance in Footwear industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Deckers Outdoor can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Deckers Outdoor in the Footwear sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Deckers Outdoor 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 Deckers Outdoor prominent markets.
Consumer confidence and its impact on Deckers Outdoor 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 Footwear industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Deckers Outdoor in Footwear industry. The Footwear 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.
Stagnating economy with rate increase
– Deckers Outdoor 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 Footwear industry.
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.
Technology acceleration in Forth Industrial Revolution
– Deckers Outdoor has witnessed rapid integration of technology during Covid-19 in the Footwear industry. As one of the leading players in the industry, Deckers Outdoor needs to keep up with the evolution of technology in the Footwear 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.
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. Deckers Outdoor 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.
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 Deckers Outdoor.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Footwear industry are lowering. It can presents Deckers Outdoor with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Footwear sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Deckers Outdoor may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Footwear sector.
Weighted SWOT Analysis of Deckers Outdoor Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Deckers Outdoor 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 Deckers Outdoor 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 Deckers Outdoor 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 Deckers Outdoor 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 Deckers Outdoor needs to make to build a sustainable competitive advantage.