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 – technology disruption, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, increasing household debt because of falling income levels, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, 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 -
Diverse revenue streams
– Esprit Holdings is present in almost all the verticals within the industry. This has provided Esprit Holdings 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.
Highly skilled collaborators
– Esprit Holdings has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of Esprit Holdings have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Cross disciplinary teams
– Horizontal connected teams at the Esprit Holdings 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.
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.
Innovation driven organization
– Esprit Holdings is one of the most innovative firm in sector.
High brand equity
– Esprit Holdings has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Esprit Holdings to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
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.
Training and development
– Esprit Holdings has one of the best training and development program in 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.
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.
Weaknesses of Esprit Holdings | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Esprit Holdings are -
Interest costs
– Compare to the competition, Esprit Holdings 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.
Lack of clear differentiation of Esprit Holdings products
– To increase the profitability and margins on the products, Esprit Holdings needs to provide more differentiated products than what it is currently offering in the marketplace.
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 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Esprit Holdings is slow explore the new channels of communication. These new channels of communication can help Esprit Holdings to provide better information regarding products and services. It can also build an online community to further reach out to potential 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.
Low market penetration in new markets
– Outside its home market of United States, Esprit Holdings needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Need for greater diversity
– Esprit Holdings 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.
High cash cycle compare to competitors
Esprit Holdings has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of Esprit Holdings strategy
– From the outside it seems that the employees of Esprit Holdings don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Esprit Holdings Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Esprit Holdings are -
Leveraging digital technologies
– Esprit Holdings 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
– 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.
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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Esprit Holdings can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Esprit Holdings 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. Esprit Holdings 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Esprit Holdings 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 Esprit Holdings to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Esprit Holdings 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.
Threats Esprit Holdings External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Esprit Holdings 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 Esprit Holdings.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Esprit Holdings may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Esprit Holdings in industry. The 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents Esprit Holdings with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
High dependence on third party suppliers
– Esprit Holdings 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.
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.
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.
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.
