SWOT Analysis / TOWS Matrix for Darden Restaurants (United States)
Based on various researches at Oak Spring University , Darden Restaurants is operating in a macro-environment that has been destablized by – increasing energy prices, geopolitical disruptions, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing transportation and logistics costs, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%,
there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Darden Restaurants
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Darden Restaurants can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Darden Restaurants, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Darden Restaurants 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 Darden Restaurants can be done for the following purposes –
1. Strategic planning of Darden Restaurants
2. Improving business portfolio management of Darden Restaurants
3. Assessing feasibility of the new initiative in United States
4. Making a Restaurants sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Darden Restaurants
Strengths of Darden Restaurants | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Darden Restaurants are -
Successful track record of launching new products
– Darden Restaurants has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Darden Restaurants has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High brand equity
– Darden Restaurants has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Darden Restaurants to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Restaurants industry
– Darden Restaurants has clearly differentiated products in the market place. This has enabled Darden Restaurants to fetch slight price premium compare to the competitors in the Restaurants industry. The sustainable margins have also helped Darden Restaurants to invest into research and development (R&D) and innovation.
Analytics focus
– Darden Restaurants 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 Restaurants 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.
Learning organization
- Darden Restaurants 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 Darden Restaurants is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Darden Restaurants emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Darden Restaurants is present in almost all the verticals within the Restaurants industry. This has provided Darden Restaurants 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.
Low bargaining power of suppliers
– Suppliers of Darden Restaurants in the Services sector have low bargaining power. Darden Restaurants has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Darden Restaurants to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Darden Restaurants in Restaurants industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Darden Restaurants has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Restaurants industry. Secondly the value chain collaborators of Darden Restaurants have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Darden Restaurants 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.
Cross disciplinary teams
– Horizontal connected teams at the Darden Restaurants 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.
Innovation driven organization
– Darden Restaurants is one of the most innovative firm in Restaurants sector.
Weaknesses of Darden Restaurants | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Darden Restaurants are -
Capital Spending Reduction
– Even during the low interest decade, Darden Restaurants 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 Restaurants industry using digital technology.
Workers concerns about automation
– As automation is fast increasing in the Restaurants industry, Darden Restaurants 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.
High operating costs
– Compare to the competitors, Darden Restaurants has high operating costs in the Restaurants industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Darden Restaurants lucrative customers.
Compensation and incentives
– The revenue per employee of Darden Restaurants is just above the Restaurants 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.
High bargaining power of channel partners in Restaurants industry
– because of the regulatory requirements in United States, Darden Restaurants 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 Restaurants industry.
Slow to strategic competitive environment developments
– As Darden Restaurants is one of the leading players in the Restaurants industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Restaurants industry in last five years.
Increasing silos among functional specialists
– The organizational structure of Darden Restaurants is dominated by functional specialists. It is not different from other players in the Restaurants industry, but Darden Restaurants needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Darden Restaurants to focus more on services in the Restaurants industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Darden Restaurants has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Restaurants industry over the last five years. Darden Restaurants 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.
Interest costs
– Compare to the competition, Darden Restaurants 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 Darden Restaurants supply chain. Even after few cautionary changes, Darden Restaurants is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Darden Restaurants vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at Darden Restaurants, in the dynamic environment of Restaurants industry it has struggled to respond to the nimble upstart competition. Darden Restaurants has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Darden Restaurants Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Darden Restaurants are -
Loyalty marketing
– Darden Restaurants 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Darden Restaurants 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 Darden Restaurants to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Darden Restaurants in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Restaurants 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, Darden Restaurants can use these opportunities to build new business models that can help the communities that Darden Restaurants operates in. Secondly it can use opportunities from government spending in Restaurants sector.
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 Darden Restaurants 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.
Manufacturing automation
– Darden Restaurants can use the latest technology developments to improve its manufacturing and designing process in Restaurants 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Darden Restaurants 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
– Darden Restaurants can develop new processes and procedures in Restaurants 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Darden Restaurants 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 Darden Restaurants to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Darden Restaurants can improve the customer journey of consumers in the Restaurants 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.
Building a culture of innovation
– managers at Darden Restaurants 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 Restaurants industry.
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. Darden Restaurants can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Darden Restaurants has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Restaurants sector. This continuous investment in analytics has enabled Darden Restaurants to build a competitive advantage using analytics. The analytics driven competitive advantage can help Darden Restaurants to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Darden Restaurants External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Darden Restaurants are -
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 Darden Restaurants.
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 Darden Restaurants business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Darden Restaurants 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 Restaurants industry regulations.
Shortening product life cycle
– it is one of the major threat that Darden Restaurants is facing in Restaurants sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Darden Restaurants
– 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 Darden Restaurants.
Consumer confidence and its impact on Darden Restaurants 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 Restaurants industry and other sectors.
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. Darden Restaurants needs to understand the core reasons impacting the Restaurants industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Restaurants industry are lowering. It can presents Darden Restaurants with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Restaurants sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Darden Restaurants in Restaurants industry. The Restaurants 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
– Darden Restaurants 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. Darden Restaurants can take advantage of this fund but it will also bring new competitors in the Restaurants industry.
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 Darden Restaurants in the Restaurants sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Darden Restaurants 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 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.
Weighted SWOT Analysis of Darden Restaurants Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants needs to make to build a sustainable competitive advantage.