SWOT Analysis / TOWS Matrix for ELF Beauty (United States)
Based on various researches at Oak Spring University , ELF Beauty is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, geopolitical disruptions, there is backlash against globalization, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%,
increasing energy prices, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that ELF Beauty can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the ELF Beauty, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which ELF Beauty 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 ELF Beauty can be done for the following purposes –
1. Strategic planning of ELF Beauty
2. Improving business portfolio management of ELF Beauty
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Specialty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of ELF Beauty
Strengths of ELF Beauty | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of ELF Beauty are -
Superior customer experience
– The customer experience strategy of ELF Beauty in Retail (Specialty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– ELF Beauty has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. ELF Beauty 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.
Sustainable margins compare to other players in Retail (Specialty) industry
– ELF Beauty has clearly differentiated products in the market place. This has enabled ELF Beauty to fetch slight price premium compare to the competitors in the Retail (Specialty) industry. The sustainable margins have also helped ELF Beauty to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– ELF Beauty has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – ELF Beauty 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.
Strong track record of project management in the Retail (Specialty) industry
– ELF Beauty is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– ELF Beauty 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 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
- ELF Beauty 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 ELF Beauty is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at ELF Beauty emphasize – knowledge, initiative, and innovation.
Organizational Resilience of ELF Beauty
– The covid-19 pandemic has put organizational resilience at the centre of everthing ELF Beauty does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– ELF Beauty is one of the leading players in the Retail (Specialty) 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.
Operational resilience
– The operational resilience strategy of ELF Beauty comprises – understanding the underlying the factors in the Retail (Specialty) 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.
Innovation driven organization
– ELF Beauty is one of the most innovative firm in Retail (Specialty) sector.
Low bargaining power of suppliers
– Suppliers of ELF Beauty in the Services sector have low bargaining power. ELF Beauty has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps ELF Beauty to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of ELF Beauty | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ELF Beauty are -
High dependence on ELF Beauty ‘s star products
– The top 2 products and services of ELF Beauty 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 ELF Beauty has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As ELF Beauty is one of the leading players in the Retail (Specialty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Specialty) industry in last five years.
Skills based hiring in Retail (Specialty) industry
– The stress on hiring functional specialists at ELF Beauty 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.
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 ELF Beauty supply chain. Even after few cautionary changes, ELF Beauty is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left ELF Beauty vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of ELF Beauty is dominated by functional specialists. It is not different from other players in the Retail (Specialty) industry, but ELF Beauty needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help ELF Beauty to focus more on services in the Retail (Specialty) industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of United States, ELF Beauty needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of ELF Beauty products
– To increase the profitability and margins on the products, ELF Beauty needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
ELF Beauty 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.
Interest costs
– Compare to the competition, ELF Beauty 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.
No frontier risks strategy
– From the 10K / annual statement of ELF Beauty, 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, ELF Beauty is slow explore the new channels of communication. These new channels of communication can help ELF Beauty to provide better information regarding Retail (Specialty) products and services. It can also build an online community to further reach out to potential customers.
ELF Beauty Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of ELF Beauty are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for ELF Beauty 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 ELF Beauty to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, ELF Beauty can use these opportunities to build new business models that can help the communities that ELF Beauty operates in. Secondly it can use opportunities from government spending in Retail (Specialty) sector.
Leveraging digital technologies
– ELF Beauty 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.
Manufacturing automation
– ELF Beauty 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects ELF Beauty can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. ELF Beauty can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at ELF Beauty 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.
Buying journey improvements
– ELF Beauty 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.
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 ELF Beauty 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for ELF Beauty 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.
Using analytics as competitive advantage
– ELF Beauty has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Specialty) sector. This continuous investment in analytics has enabled ELF Beauty to build a competitive advantage using analytics. The analytics driven competitive advantage can help ELF Beauty 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 Retail (Specialty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. ELF Beauty 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. ELF Beauty 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, ELF Beauty is facing challenges because of the dominance of functional experts in the organization. ELF Beauty can utilize new technology in the field of Retail (Specialty) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats ELF Beauty External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of ELF Beauty are -
Environmental challenges
– ELF Beauty 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. ELF Beauty can take advantage of this fund but it will also bring new competitors in the Retail (Specialty) industry.
High dependence on third party suppliers
– ELF Beauty 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.
Shortening product life cycle
– it is one of the major threat that ELF Beauty is facing in Retail (Specialty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 ELF Beauty.
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. ELF Beauty needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.
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. ELF Beauty can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Regulatory challenges
– ELF Beauty 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.
Technology acceleration in Forth Industrial Revolution
– ELF Beauty has witnessed rapid integration of technology during Covid-19 in the Retail (Specialty) industry. As one of the leading players in the industry, ELF Beauty needs to keep up with the evolution of technology in the Retail (Specialty) 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. ELF Beauty 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, ELF Beauty 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.
Consumer confidence and its impact on ELF Beauty 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Specialty) industry are lowering. It can presents ELF Beauty with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Specialty) sector.
Weighted SWOT Analysis of ELF Beauty Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at ELF Beauty 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 ELF Beauty 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 ELF Beauty 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 ELF Beauty 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 ELF Beauty needs to make to build a sustainable competitive advantage.