SWOT Analysis / TOWS Matrix for Estee Lauder (United States)
Based on various researches at Oak Spring University , Estee Lauder is operating in a macro-environment that has been destablized by – wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, increasing energy prices, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation,
digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Estee Lauder can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Estee Lauder, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Estee Lauder 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 Estee Lauder can be done for the following purposes –
1. Strategic planning of Estee Lauder
2. Improving business portfolio management of Estee Lauder
3. Assessing feasibility of the new initiative in United States
4. Making a Personal & Household Prods. sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Estee Lauder
Strengths of Estee Lauder | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Estee Lauder are -
Learning organization
- Estee Lauder 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 Estee Lauder is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Estee Lauder emphasize – knowledge, initiative, and innovation.
Digital Transformation in Personal & Household Prods. industry
- digital transformation varies from industry to industry. For Estee Lauder digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Estee Lauder 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.
Low bargaining power of suppliers
– Suppliers of Estee Lauder in the Consumer/Non-Cyclical sector have low bargaining power. Estee Lauder has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Estee Lauder to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Estee Lauder has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Estee Lauder to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Estee Lauder is present in almost all the verticals within the Personal & Household Prods. industry. This has provided Estee Lauder 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.
Training and development
– Estee Lauder has one of the best training and development program in Consumer/Non-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.
High switching costs
– The high switching costs that Estee Lauder 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
– Estee Lauder has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Personal & Household Prods. industry. Secondly the value chain collaborators of Estee Lauder have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Estee Lauder 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 Personal & Household Prods. 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.
Strong track record of project management in the Personal & Household Prods. industry
– Estee Lauder is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Estee Lauder has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Estee Lauder staying ahead in the Personal & Household Prods. industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Estee Lauder in Personal & Household Prods. industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Estee Lauder | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Estee Lauder are -
Capital Spending Reduction
– Even during the low interest decade, Estee Lauder 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 Personal & Household Prods. industry using digital technology.
Compensation and incentives
– The revenue per employee of Estee Lauder is just above the Personal & Household Prods. 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.
Products dominated business model
– Even though Estee Lauder has some of the most successful models in the Personal & Household Prods. industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Estee Lauder 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, Estee Lauder has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Personal & Household Prods. industry over the last five years. Estee Lauder 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.
Need for greater diversity
– Estee Lauder 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.
Workers concerns about automation
– As automation is fast increasing in the Personal & Household Prods. industry, Estee Lauder 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.
Ability to respond to the competition
– As the decision making is very deliberative at Estee Lauder, in the dynamic environment of Personal & Household Prods. industry it has struggled to respond to the nimble upstart competition. Estee Lauder has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Estee Lauder has a high cash cycle compare to other players in the Personal & Household Prods. industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in Personal & Household Prods. industry
– The stress on hiring functional specialists at Estee Lauder 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.
Aligning sales with marketing
– From the outside it seems that Estee Lauder needs to have more collaboration between its sales team and marketing team. Sales professionals in the Personal & Household Prods. industry have deep experience in developing customer relationships. Marketing department at Estee Lauder can leverage the sales team experience to cultivate customer relationships as Estee Lauder is planning to shift buying processes online.
No frontier risks strategy
– From the 10K / annual statement of Estee Lauder, it seems that company is thinking out the frontier risks that can impact Personal & Household Prods. 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.
Estee Lauder Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Estee Lauder are -
Learning at scale
– Online learning technologies has now opened space for Estee Lauder 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.
Leveraging digital technologies
– Estee Lauder 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Estee Lauder 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 Estee Lauder to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Estee Lauder 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. Estee Lauder can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Personal & Household Prods. industry, but it has also influenced the consumer preferences. Estee Lauder can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Estee Lauder can improve the customer journey of consumers in the Personal & Household Prods. 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.
Developing new processes and practices
– Estee Lauder can develop new processes and procedures in Personal & Household Prods. 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Estee Lauder in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Personal & Household Prods. 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, Estee Lauder can use these opportunities to build new business models that can help the communities that Estee Lauder operates in. Secondly it can use opportunities from government spending in Personal & Household Prods. sector.
Manufacturing automation
– Estee Lauder can use the latest technology developments to improve its manufacturing and designing process in Personal & Household Prods. 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.
Using analytics as competitive advantage
– Estee Lauder has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Personal & Household Prods. sector. This continuous investment in analytics has enabled Estee Lauder to build a competitive advantage using analytics. The analytics driven competitive advantage can help Estee Lauder to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Estee Lauder is facing challenges because of the dominance of functional experts in the organization. Estee Lauder can utilize new technology in the field of Personal & Household Prods. industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Estee Lauder External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Estee Lauder are -
Stagnating economy with rate increase
– Estee Lauder 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 Personal & Household Prods. industry.
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. Estee Lauder needs to understand the core reasons impacting the Personal & Household Prods. industry. This will help it in building a better workplace.
Regulatory challenges
– Estee Lauder 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 Personal & Household Prods. industry regulations.
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. Estee Lauder 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.
High dependence on third party suppliers
– Estee Lauder 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.
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 Personal & Household Prods. industry are lowering. It can presents Estee Lauder with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Personal & Household Prods. 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 Estee Lauder.
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.
Easy access to finance
– Easy access to finance in Personal & Household Prods. industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Estee Lauder can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Estee Lauder 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 Estee Lauder prominent markets.
Technology acceleration in Forth Industrial Revolution
– Estee Lauder has witnessed rapid integration of technology during Covid-19 in the Personal & Household Prods. industry. As one of the leading players in the industry, Estee Lauder needs to keep up with the evolution of technology in the Personal & Household Prods. 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Estee Lauder in Personal & Household Prods. industry. The Personal & Household Prods. 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.
Weighted SWOT Analysis of Estee Lauder Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Estee Lauder 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 Estee Lauder 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 Estee Lauder 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 Estee Lauder 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 Estee Lauder needs to make to build a sustainable competitive advantage.