SWOT Analysis / TOWS Matrix for Esprit Holdings (United States)
Based on various researches at Oak Spring University , Esprit Holdings is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, there is backlash against globalization, supply chains are disrupted by pandemic , increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%,
there is increasing trade war between United States & China, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Esprit Holdings can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Esprit Holdings, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Esprit Holdings 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 Esprit Holdings can be done for the following purposes –
1. Strategic planning of Esprit Holdings
2. Improving business portfolio management of Esprit Holdings
3. Assessing feasibility of the new initiative in United States
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Esprit Holdings
Strengths of Esprit Holdings | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Esprit Holdings are -
Effective Research and Development (R&D)
– Esprit Holdings has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Esprit Holdings staying ahead in the 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 Esprit Holdings in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Esprit Holdings is one of the most innovative firm in sector.
Learning organization
- Esprit Holdings 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 Esprit Holdings is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Esprit Holdings emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Esprit Holdings 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.
Sustainable margins compare to other players in industry
– Esprit Holdings has clearly differentiated products in the market place. This has enabled Esprit Holdings to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Esprit Holdings to invest into research and development (R&D) and innovation.
Analytics focus
– Esprit Holdings 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 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.
Successful track record of launching new products
– Esprit Holdings has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Esprit Holdings 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.
Ability to recruit top talent
– Esprit Holdings is one of the leading players in the 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.
Strong track record of project management in the industry
– Esprit Holdings is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Esprit Holdings digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Esprit Holdings 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 Esprit Holdings in the sector have low bargaining power. Esprit Holdings has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Esprit Holdings to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Esprit Holdings | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Esprit Holdings are -
No frontier risks strategy
– From the 10K / annual statement of Esprit Holdings, it seems that company is thinking out the frontier risks that can impact 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.
Increasing silos among functional specialists
– The organizational structure of Esprit Holdings is dominated by functional specialists. It is not different from other players in the industry, but Esprit Holdings needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Esprit Holdings to focus more on services in the industry rather than just following the product oriented approach.
High dependence on Esprit Holdings ‘s star products
– The top 2 products and services of Esprit Holdings still accounts for major business revenue. This dependence on star products in industry has resulted into insufficient focus on developing new products, even though Esprit Holdings has relatively successful track record of launching new products.
Products dominated business model
– Even though Esprit Holdings has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Esprit Holdings should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– From the outside it seems that Esprit Holdings needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department at Esprit Holdings can leverage the sales team experience to cultivate customer relationships as Esprit Holdings is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Esprit Holdings is just above the 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 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 Esprit Holdings supply chain. Even after few cautionary changes, Esprit Holdings is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Esprit Holdings vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in industry
– because of the regulatory requirements in United States, Esprit Holdings 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 industry.
High operating costs
– Compare to the competitors, Esprit Holdings has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Esprit Holdings lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Esprit Holdings has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Esprit Holdings 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.
Ability to respond to the competition
– As the decision making is very deliberative at Esprit Holdings, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Esprit Holdings has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Esprit Holdings Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Esprit Holdings are -
Buying journey improvements
– Esprit Holdings can improve the customer journey of consumers in the 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 Esprit Holdings 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 industry.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Esprit Holdings 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 Esprit Holdings to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Esprit Holdings can develop new processes and procedures in 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.
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 Esprit Holdings 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 Esprit Holdings 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.
Creating value in data economy
– The success of analytics program of Esprit Holdings has opened avenues for new revenue streams for the organization in industry. This can help Esprit Holdings to build a more holistic ecosystem for Esprit Holdings products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Esprit Holdings in the industry. Now Esprit Holdings can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Esprit Holdings can use the latest technology developments to improve its manufacturing and designing process in 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.
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. Esprit Holdings can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Esprit Holdings has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Esprit Holdings to build a competitive advantage using analytics. The analytics driven competitive advantage can help Esprit Holdings to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Esprit Holdings can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Esprit Holdings can use these opportunities to build new business models that can help the communities that Esprit Holdings operates in. Secondly it can use opportunities from government spending in sector.
Threats Esprit Holdings External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Esprit Holdings are -
Shortening product life cycle
– it is one of the major threat that Esprit Holdings is facing in 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 Esprit Holdings.
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. Esprit Holdings needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Esprit Holdings can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Esprit Holdings 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. Esprit Holdings can take advantage of this fund but it will also bring new competitors in the industry.
Stagnating economy with rate increase
– Esprit Holdings 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 industry.
Increasing wage structure of Esprit Holdings
– 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 Esprit Holdings.
Technology acceleration in Forth Industrial Revolution
– Esprit Holdings has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Esprit Holdings needs to keep up with the evolution of technology in the 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.
Consumer confidence and its impact on Esprit Holdings 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 industry and other sectors.
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. Esprit Holdings 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.
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 Esprit Holdings in the sector and impact the bottomline of the organization.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Esprit Holdings 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 Esprit Holdings prominent markets.
Weighted SWOT Analysis of Esprit Holdings Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Esprit Holdings 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 Esprit Holdings 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 Esprit Holdings 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 Esprit Holdings 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 Esprit Holdings needs to make to build a sustainable competitive advantage.